[Originally published March 14, 2016]
Here in Illinois, we are all fairly familiar with the big farm machinery in the fields during spring and fall, but have you ever wondered what kind of financial investment a farmer undertakes?
It’s mid-March, the weather is getting more pleasant, and all farmers seem to have one thing on their mind: planting.
The first field of corn was planted near Pearl, Illinois last Tuesday and it is expected that many farmers from all over the state will soon be following suit to start the long process of getting food to your dinner table. However, for farmers to get the food from farm to table, they need machinery to do it, and machinery costs money. Lots of it. But what exactly is the financial investment a farmer undertakes when it comes to their machinery?
Chad Braden, President and Chief Operating Officer of Arends Hogan Walker (AHW), one of the largest John Deere dealerships on the continent, says that the image created by the media about the cost of farm equipment is a negative one, but in reality, it is a necessary part of the production cycle. In order “to sustain a long-term farm operation, you must be able to invest in, and support, a reasonable amount of equipment to maintain the farming operation.” He also suggests that the general rule of thumb should be spending “$95-$100 per acre on machinery costs. This gives a 1,000-acre farm about $100,000 of cash flow to cover annual machinery payments and maintenance, insurance, fuel, etc. Only $70 per acre of this is direct machinery costs.“ Braden closes by adding, “$70 per acre is about 10% of the total costs of production in 2016 for an acre of corn.”
So, it costs $95-$100 per acre for machinery costs, but what about the expense of the actual machinery itself? John Spangler, my uncle, as well as a grain and livestock farmer from Western Illinois, states that this all depends on the size of your operation. A small farmer, who may have around 350 acres, needs nothing more than a $50,000 tractor, $20,000 planter, and a $50,000 combine. But, that is about as “minimum” as you can get. “A 1000 acre farmer is going to need a couple of tractors around $150,000, a $50,000 planter, and $100,000 combine.”
This may seem like lots of money, but Spangler mentions that it is better to keep the combine, planter, and sprayer up to date. “A lot of dollars flow through those machines and a breakdown at the wrong time can be expensive.”
If buying new isn’t something you want to do or can afford to do right now, have no fear. Leasing has become more popular in recent months. Also, there is a company called Machinery Link who connects farmers from all over the U.S. who need different types of equipment at various times. Some farmers even share equipment over two or more farm families. In reality, there are tons of other options to make machinery more affordable. “Everyone has their own philosophies on machinery,” says Spangler. “It basically comes down to what fits best in your operation.”
University of Illinois