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May 2008

MACHINERY COST ESTIMATES: FIELD OPERATIONS

This publication shows estimated costs of performing agricultural field operations. These estimates are useful for determining custom rates and for analyzing machinery costs on farms. Costs include overhead (depreciation, interest, insurance, housing and repairs), fuel and labor charges. Not included are allowances for profit. Charging custom rates at estimated costs should cover all costs, but will not generate a profit. Adding 5 to 15 percent to estimated costs may be appropriate for determining custom rates. Per acre costs for different field operations are shown in Table 1.

Cost Estimates

Formulas published by the American Society of Agricultural Engineers are used to calculate costs. All costs are based on buying new machinery and owning machinery for 10 years. Variables used in calculating costs are shown in Table 2.

Costs in Table 1 are divided into four categories:

Tractor overhead includes depreciation, interest, insurance, housing, and repair charges for the tractor used to pull the implement.

Implement overhead includes depreciation, interest, insurance, housing, and repair charges for the implement.

Fuel charges are based on diesel fuel priced at $3.75 per gallon. Lubrication cost is calculated as 10 percent of fuel cost.

Labor costs are based on a $14.50 per hour labor charge. Labor time is 10 percent more than hours for the tractor or self-propelled machine.

Costs shown in Table 1 are estimated for a specific implement size generally associated with a 1,200 acre grain farm. Estimated costs for these and other sized implements are shown in Appendix Table 1. Usually, but not always, total per acre costs decrease slightly as implement size increase. However, total costs for different sized implements do not differ greatly when acres covered are matched to the size of the implement.

Use and Costs

The majority of costs associated with machinery are overhead, including costs for depreciation, interest, insurance, housing, and repair. On an annual basis, depreciation and interest are relatively constant no matter how many acres are covered. As acres increase, yearly depreciation and interest costs are spread over more acres for a given implement size. Therefore, costs per acre decline as acres of use increase for a given implement size.

Appendix Table 1 lists acres used to calculate total costs per acre. On average, acreage decreases of 50 percent result in 80% increases in costs. Acreage increases of 50 percent result in cost decreases of 25 percent. Fuel and labor costs per acre are constant regardless of acres covered.

Prepared by: Gary Schnitkey and Dale Lattz, Department of Agricultural and Consumer Economics, University of Illinois


  

Department of Agricultural and Consumer Economics    College of Agricultural, Consumer and Environmental Sciences
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