Dakota Farmer

Find out how machinery operating costs affect your operation, and how to find that cost.

September 14, 2022

3 Min Read
Combine and grain wagon in field
THE TRUE COST: With many producers working to get as high a profit as possible, calculating the true operating cost for machinery is vital.Don Farrall/Getty Images

With the current trend in higher inputs and farm equipment costs, producers cannot overlook what they are spending to raise and harvest each crop that they plant. Although all the crops are tied together by a common equipment line and the same or closely related tillage practices, producers need to know what their machinery operating costs are, and how they compare to other producers in their area.

A good way to get started on understanding machinery operating costs, on a per-crop and per-acre basis, is to view the information provided, by region and state totals, on the website ndfarmmanagement.com. As the official website of the North Dakota Farm Management Education Program, it contains detailed annual farm production data on more than 300 farms, annually encompassing more than 800,000 acres of crop and rangeland in North Dakota. Producers can view the average machinery operating costs for various crops, as well as those in the 20% high-profit and 20% low-profit groups. What is important is then to compare those numbers to the producer’s own individual numbers. Will the producer find that they are doing better than the average, or that they are spending more money to raise the same crops for similar yields and prices?

Regions of the state impact operating costs

For example, in Region 3, the south-central region of North Dakota, the average machinery cost for an acre of soybeans on cash-rented land is listed at $76.96 per acre. The 20% low-profit fields posted a machinery operating cost of $80.42, while the high-profit fields came in at $74.03 per acre. For a producer with 1,000 acres of soybeans, this could mean a difference of $6.39 per acre, or a total cost difference of $6,390 for this one crop. While soybeans showed this smaller difference, spring wheat reflected a difference of only $11.31 per acre, with the high-profit fields being more efficient at a cost of $59.65 per acre. This machinery cost per acre includes fuel, repairs, custom costs, leasing costs, interest on machinery debt and depreciation. Depreciation is usually in the area of 9% to 10% per year and does not reflect the quick write-down of equipment that is often taken strictly for income tax computation purposes.

In the area of corn production, the high-profit fields, with net profits of $309.03 per acre, actually created larger machinery costs per acre than did the average-profit fields. While the average fields produced a per-acre machinery cost of $126.15, the high-profit fields came in at the higher cost of $146.40 per acre. This is important to note, because it shows how just being low in one area of costs does not guarantee that the overall net profit picture will be as one might desire.

Find all actual costs

As producers work to earn the greatest net profit possible, they must be careful not to overlook what their actual costs are in all areas, including those of machinery ownership and operation. Each producer’s individual costs will reflect their own desires to lease or own equipment, to carry out field operations in a timely manner, and the ability of each producer to carry the debt load that might be associated with more equipment ownership. Each producer must find the correct combination of ownership and operating costs that will allow them to be successful and to enhance their own balance sheets during this time of higher crop prices and unprecedented market demand.

To learn more about farm succession planning and other financial questions about farms and ranches, visit with an instructor near you. The North Dakota Farm Management Education Program provides lifelong learning opportunities in economic and financial management for individuals involved in the farming and ranching business. Visit ndfarmmanagement.com; Facebook @ndfarmmanagementeducation; or contact Craig Kleven, state supervisor for agricultural education, at [email protected] or 701-328-3162 for more information. The North Dakota Farm Management Education Program is sponsored by the North Dakota Department of Career and Technical Education.

Hoffmann is a North Dakota Farm Management Education Program instructor. She writes from Fargo. N.D.

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