|
"Machinery Cost Estimates for 2006" was prepared by Gary
Schnitkey and Dale Lattz, U of I Extension specialists in farm
financial management. The
report is available on Extension's Farmdoc site. Lattz
noted that more important than the estimates is the fact that
they can serve as useful guidelines to assist farm operators in
determining what to charge for custom farming operations.
Farm operators should, when possible, calculate their own
costs, based on their set of equipment and factors influencing
their costs, such as repairs, acres farmed and so on.
"Estimated costs for most operations are higher in 2006 than
in 2005, the last time machinery costs were estimated," said
Lattz. "Three factors contributed to the increase.
"First, the diesel fuel price was estimated at $1.50 per
gallon in 2005. For 2006, a $2.50-per-gallon price was used, a
67 percent increase over the 2005 price."
For planting, that means the fuel price increase caused a
60-cent-per-acre increase in total machinery costs. For corn
combining, the fuel price increase added 40 cents to costs per
acre.
"New, larger equipment is more fuel-efficient and requires
less fuel per acre than smaller, older equipment," said Lattz.
"Thus, increases or decreases in the cost of diesel fuel have
less effect on machinery costs per acre than they did several
years ago. But, it is still a significant factor when
calculating machinery costs."
[to top of second column] |
A second factor driving up the estimated costs was higher priced new
equipment. "For example, the list price of the planter used to
estimate 2006 costs was 9 percent higher than the 2005 price; the
tandem disk price was up 15 percent; and the combine price was up 11
percent," said Lattz. "Machinery costs are calculated assuming that
new equipment is purchased and held for 10 years -- seven years for
combines. Higher equipment prices contribute to higher depreciation
and interest costs."
Finally, the interest rate used in calculating costs was
increased from 7 percent in 2005 to 7.5 percent in 2006.
"A higher interest rate increases the cost of equipment
ownership," said Lattz. "While the interest rate was not increased
substantially, it resulted in a minor increase in costs."
Lattz noted that combining is the single machinery operation that
contributes the most to machinery costs per acre.
"Combining costs can vary significantly based on the number of
acres per year the combine is used on," he said.
[University
of Illinois Extension news release]
 |
