True Cost of Farm Machinery

Department of Agriculture and Food, Western Australia - Tamara Alexander, James Hagan

Type: Conference Paper
Knowledge level: Advanced

Farm Table says:

When considering machinery options, growers should not only consider the capital cost of the equipment but also consider their seasons, the risk of delays to seeding, spraying or harvest and the associated penalties and then assess the overall financial impact of each machinery option.

Understanding the true cost and getting the best value

This fact sheet is a summary of the presentation ‘Farm machinery – understanding the true cost and getting the best value out of machinery’ delivered by Department of Agriculture and Food, Western Australia economists James Hagan and Tamara Alexander at the 2015 Grains Research and Development Corporation Farm Business Updates in Geraldton, Merredin and Katanning.

The key topics covered include:

  • making the decision  – should a grower always own their own gear? What are the alternatives? What factors should growers consider when deciding their investment in harvesting, seeding and spraying machinery and the capacity that they require?
  • supporting your success – an upgrade or new equipment may have some benefits (for example, time) but may not create sufficient new income or cost savings to justify the higher machinery cost
  • owning versus operating costs
  • what benchmarks can be aimed for in respect to machinery investment
  • machinery expansion – Expanding machinery capacity needs careful consideration

In conclusion, the suggest being aware of the often high fixed costs of buying a new machine, match it with the ability of the farm enterprise to absorb this overhead and also consider the opportunity cost of alternative uses of the capital

2015 - Australia - Department of Agriculture and Food, Western Australia - Tamara Alexander, James Hagan
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