Machinery Cost Estimates 2013

7/27/2019 Machinery Cost Estimates 2013

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A related spreadsheet, MACHDATA.XLS, is available at:http://z.umn.edu/machdata.

MACHINERY COST ESTIMATES

by

William F. Lazarus

June 2013

The tables in this publication contain estimates of farm machinery operation costs calculated via aneconomic engineering approach. The data are intended to show a representative farming industry cost forspecified machines and operations.

Machine costs are separated into time-related and use-related categories. Use-related costs are incurredonly when a machine is used. They include fuel, lubrication, use-related repairs and labor. Time-relatedcosts, also often referred to as overhead costs, accrue to the owner whether or not a machine is used.Overhead includes time-related economic costs: interest, insurance, personal property taxes, and housing.There are no personal property taxes in Minnesota. Depreciation is both a use- and a time-related cost.

Depreciation will be related to use to the extent that increased annual usage shortens years of life and/orreduces salvage value. While not entirely use-related, depreciation is included along with operatingexpenses and labor costs in the columns labeled "use-related cost/acre".

OVERHEAD COSTS: Time-related costs are prorated over a 12 year economic life except whereotherwise indicated. Trade-in values are estimated based on American Society of Agricultural Engineersformulas. Income tax implications are ignored. A housing charge of 67 cents per square foot of shelterspace needed per year is made.

A four percent real (inflation-adjusted) interest rate is used in the cost estimates. This real rate iscalculated by taking a nominal rate charged by lenders, minus a measure of the inflation rate per yearexpected over the years of ownership. Insurance is charged at 0.85 percent of the undepreciated value.

The interest and insurance cost formulas have one year's depreciation added to the numerator in effectbases the costs on the value at the beginning of each year owned. This gives a slightly more accuratecalculation of the actual costs over the years owned. Salvage value are also adjusted for inflation so thatdepreciation is also on an inflation-adjusted basis. In states where farm machinery is taxed as personalproperty, property tax could be calculated in a similar manner, depending on how taxes are assessed.

Formulas used to compute machinery overhead costs:

purchase cost + salvage value + depreciation ($/year)Interest, $/year =-------------------------------------------------------------------- x real interest rate

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purchase cost + salvage value + depreciation ($/year)Insurance, $/year =--------------------------------------------------------------------- x insurance rate

2

Housing, $/year = price per sq. foot x sq. feet shelter space required

Taxes per year = 0 (no taxes on personal property in Minnesota)


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USE-RELATED COSTS: Fuel cost is calculated by multiplying the fuel consumption by the price of fuel,with fuel consumption assumed to be 0.044 gallons of diesel fuel per PTO horsepower-hour on averagefor each implement type. Fuel consumption per acre is averaged across sizes within a given implementtype. The price of farm diesel fuel is projected at $3.60 per gallon. All power units, tractors, combines,trucks, etc., use diesel fuel. Lubrication cost is assumed to be 10 percent of fuel cost.

The formulas for repair and maintenance costs estimate total accumulated repair costs based onaccumulated hours of lifetime use. Repair and maintenance calculations are based on American Societyof Agricultural Engineers formulas. The total cost is then divided by accumulated hours to arrive at anaverage per hour cost estimate. The amount of annual use of a machine is an estimate of the number ofhours a commercial farmer would use that particular machine in one year.

Labor is charged at hourly rates that include 30 percent benefits. The charge rates are $15.00 per hour forunskilled labor and $20.00 per hour for skilled labor. The skilled labor rate is generally used with theplanting and harvesting equipment and sprayers. Labor per acre for an operation such as plowing ordisking is calculated by using the work rate on the implement. Less labor per acre is used in a diskingoperation that covers more acres per hour than in a plowing operation. A small amount of extra labor isadded over and above machine time to allow for downtime for tasks such as making adjustments and

filling sprayers and planters. The labor adjustment ranges from 2 percent additional time for tillage to 33percent for spraying.

Economic depreciation is included in use-related costs, calculated using the straight-line formula:

purchase cost - salvage valueDepreciation, $/year = ------------------------------------

years you will use machine

These estimates will not represent any given individual's cost. Differences in buying power, repairprograms, average annual use, and overall replacement programs should be considered when makingadjustments. It may be useful to record actual expenses for at least a few of your implements andcompare your costs to these estimates. These estimates will differ from records because they are

estimates, but also because they are averaged over the use period and are expressed in today's dollars. Ifthese estimates are compared to recorded costs that include repairs or depreciation based on historicalcosts, one adjustment that would be required for comparability would be to index the historical cost tocurrent prices.

THE BOTTOM LINE: Machinery costs are substantial; control of them is important. Custom chargesare often based upon them. No one should do custom work unless the charge will cover operating costsand use-related depreciation plus a return for one's risk and time. Ideally, all allocated per acre or houroverhead costs should also be covered by anyone offering to do custom work. The market for customwork usually does not cover all costs. The market is usually somewhere in between the Use-related costsand total costs.

ACCESS TO EDUCATIONAL PROGRAMS AND MATERIALS:The University, including the University of Minnesota Extension Service, is committed to the policy that all personsshall have equal access to its programs, facilities, and employment without regard to race, color, creed, religion,national origin, sex, age, marital status, disability, public assistance status, veteran status, or sexual orientation.


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Summary of Per Acre Use-Related Costs and Total Cost for Implements with Associated Power Units,Averaged Over All Sizes by Implement Type

Use-Related Total

Cost/Acre1

Cost/Acre

Chisel Plow $8.24 $10.41

Chisel Plow, Front Disk$11.59 $14.48

Moldboard Plow $18.78 $22.70

Field Cultivator $4.85 $6.08

Tandem Disk $8.90 $11.06

Offset Disk $10.82 $13.02

V-Ripper $11.38 $13.94

Comb Disk & V-Ripper $17.32 $21.60

Row Crop Planter $8.96 $11.92

Min-Til Planter $11.36 $14.39

Presswheel Drill $10.25 $12.80

Air Seeder Drill w/Cart $13.74 $18.50

No-Till Drill $18.97 $24.29

Prairie Grass Drill $14.69 $20.12

Row Cultivator $5.99 $7.39

Rotary Hoe $2.20 $2.62

Boom Sprayer, Self-Prop

$5.32 $6.58

Boom Sprayer, Pull-Type

$2.73 $3.70

Stalk Shredder $10.70 $13.13

Mower-Conditioner $10.79 $13.50

Rotary Mow/Conditioner $7.27 $9.28

Hay Rake $5.13 $6.04

Use-Related Total

Cost/Acre1 Cost/Acre

Hay Swather-Cond $8.70 $11.31

Swather-Cond, Self-Prop

$16.04 $24.37

Grain Swather, Self-Prop

$11.69 $18.05

Hay Baler PTO Twine $12.37 $13.95

Rd Baler/Wrap $8.25 $9.18

Rd Baler/Wrap CornStover

$11.63 $13.00

Large Rectangular Baler $10.30 $12.37

Forage Harvester, Pull-type (Corn Head)

$51.94 $60.27

Forage Harvester, Pull-type (Pickup Head)

$21.56 $25.00

Forage Harvester, Self-Propelled (Corn Head)

$38.12 $47.61

Forage Harvester, Self-Propelled (Pickup Head)

$27.26 $33.45

Combine Corn Hd $30.43 $36.30

Combine Grain Head $22.81 $26.89

Combine Soybean Hd $30.12 $35.56

Combine Belt Pickup Hd $28.42 $33.90

Grain Cart $17.62 $21.34

Manure spreader, slurryw/15 ft. injection bar

$54.44 $68.11

Manure spreader, solid $33.28 $38.66

1 Use-related cost/acre includes fuel, lubricants, repairs and maintenance, labor, and power and implementdepreciation (depreciation is both time-related and use-related). The difference between use-related cost and totalcost is that total cost also includes overhead costs (interest, insurance, and housing).


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1Netcostofanewunitassumes

notrade-in.Farmmachineryisexemptfr

omsalestaxinMinnesotasonosalestax

isincluded.

2Powercostperacreforthepow

erunitassignedtoeachimplementmultip

liedtimesthatimplementsacres/hourequ

alsthatpowerunitstotalcostperhoursh

ownintheTractors,

Combines,andSelf-PropelledF

orageHarvesters(WithoutHeads)tablea

bove.

3Overheadperacrewillvarywithannualuse.

4Totalcost/acreistotalcostper

hourdividedbyacresperhour.Includesf

uel,lubricants,powerandequipmentrepa

irsandmaintenance,labor,andoverhead

costsincludingdepreciation.

Fuelisincludedinpowercost.

5Use-relatedcost/acreisinclude

dinthetotalcost/acreamount.Use-relatedcost/acreincludeseverythingintotalcost/acreEXCEPTthatnon-depreciationove

rheadcosts(interest,

insurance,andhousing)areomitted.Depreciationisincludedinuse-relatedcostundertheassumptionthatextraus

ereducestrade-invaluewhichincreasesannualdepreciation.Inother

words,depreciationisconsidere

dheretobeatleastpartiallyuse-relatede

venthoughitiscommonlythoughtofasbeingmainlytime-related.

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Machinery Cost Estimates 2013