<p>Key Questions About Farm Machinery --Chapter 22</p><p> What are the alternatives for acquiring machinery</p><p>2. What are the advantages of new versus used?</p><p>3. What factors influence the best size of machinery?</p><p>Machinery Costs per Acre by farm profit groups High 1/3 Mid 1/3 Low 1/3  Total cost / acre $97 $101 $123  Investment /acre $338 $336 $385</p><p>Acquiring Farm Machinery  Ownership  Rental (short-term)  Leasing  Rollover  Custom Hire  Joint Ownership  Trade Labor</p><p>Advantages of Owning  More control over use  More convenient  Less expensive for high use or long life machines  Tax benefits from depreciation and interest  Build up equity value</p><p>Short-Term Rental  Pay only for time machine is actually used  Pay by the hour or day  No investment  Cheaper for low use or specialized machines Long Term Leasing  Make annual lease payments (20-25% of new price)  First payment when lease begins  Leases usually run 3-5 years  Option to purchase at end of lease  Operator pays for repairs, insurance, etc.  Example on page 433</p><p>Leasing Machinery Advantages  Lower initial investment  Can trade frequently  Payments usually lower than loan payments  Know machine before purchasing  Payments tax deductible</p><p>Disadvantages  More expensive if you plan to own it  Do not build equity  Locked into lease period  No tax depreciation deduction</p><p>Custom Hire  No long term investment  No repairs or maintenance  Cheaper for low use items  Get operator labor  Pay only for acres actually farmed</p><p>Own vs. Custom Hire $ per acre</p><p>Rollover Purchase  New machine is purchased , usually by company credit plan  Used one season, then traded for a new model  Difference paid depends on hours of use on old unit</p><p>Joint Machinery Ownership  Spread ownership costs over more acres  Increase labor supply  Owner/operators can specialize  Less investment for each owner  Must be able to schedule use  Must adjust costs if use is not proportional to ownership  Some farmers form machinery co-ops.</p><p>Trade Labor for Machinery  No investment or debt  No cash costs  Use excess labor  Takes about 5-8 acres of labor to equal the value of one acre of machinery use</p><p>Machinery Costs Decrease</p><p>Machinery Capacity  Small machinery causes timeliness losses  Late planting and harvesting => lower yields  Large machinery has excess ownership costs  Bottleneck is suitable field days  Least-cost machinery set can complete:  tillage and planting in 20-25 days  harvesting in 25-30 days</p><p>Some days you just can’t farm!</p><p>Least-cost Machinery Set Machinery Capacity (Acres covered per hour) Acres per hour = width (ft.) x speed x field efficiency % 8.25 Field efficiency allows for time to turn around, make adjustments, and overlap. 30-ft. field cultivator x 5 mph x 85% = 15 a/hr 8.25 Matching Tractor and Implement  Horsepower needed depends on:  Width of implement  Draft requirement—pounds of force)  Type of soil (firm or tilled)  Speed</p><p> HP = width x speed x draft x soil factor 375 Example: Chisel Plow Width: 20 feet Draft: 500 lb/foot Soil factor (corn stalks): 1.5 Speed: 5 mph HP = 20 ft . X 500 lb/ft x 5 mph x 1.5 / 375 = 200 hp</p><p>When to Trade Machinery  Repair costs are high  Machine is unreliable  Machine is obsolete  Need more capacity  Cash flow is favorable  Need tax deductions</p><p>Used Machinery  Lower investment and ownership costs  Higher repair costs  Lower reliability  Must trade more often  Requires more mechanical skills</p>