Press Release (for immediate release) December 6, 2004
Contact: Kevin Misek, Farm Bus. Management Instructor,
701-256-258
email: Kevin.W.Misek@lrsc.nodak.edu
Machinery Ownership Costs Revealed
Kevin Misek,
North Dakota Farm Business Management Program
LANGDON, N.D. - Farm
profitability is directly related to machinery investment.
Machinery investment is the second largest investment on most farms after
real estate.
Selection of the optimum machine size to own should involve
consideration of both total costs and the effects of timeliness in completing
operations. Rental, leasing and
custom hire are often viable alternatives over direct ownership of farm
machinery.
North Dakota Farm Business Management (NDFBM) program
analysis of 431 farms across the state show lender friendly ratios for liquidity
and solvency but are somewhat vulnerable for profitability.
Beef and dairy farms are the most vulnerable followed by diversified
farms. Crop farms are the most
profitable of farm businesses.
Determination of what a machine costs to own is a five step
process to determine cost per acre. Step
one includes listing of basic data such as list price, purchase cost, salvage
value, ownership life, estimated annual use, and interest rate on the capital
investment. From this data, total
ownership costs are calculated and converted to average ownership cost per hour
or per acre of use. Ownership costs
include depreciation, interest, taxes, insurance, and housing.
Operating expenses can be calculated by including repairs, fuel, oil, and
labor. Determination of costs per
hour simply includes ownership and operating costs.
The cost per acre can be obtained by dividing total costs by acres
covered.
The NDFBM program offers analysis of farm enterprise units to assist farm business owners in making decisions on replacement options for major investments. Programs are in place across the state and offer confidential and individualized instruction as well as group instruction in business planning and marketing.
To evaluate your farm versus regional or state average farms or for further information on the NDFBM program please visit our website at www.ndfarmmanagement.com or contact Steve Zimmerman, State Supervisor for Agricultural Education at the state capitol, at 701-328-3162. The Farm Business Management program is sponsored by the State Department of Career and Technical Education.
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