The young farmer asks: "I can invest $10,000 and fix up my 6-year-old chopper to run another season on 300 acres of hay and 850 acres of corn, including some custom work. Or, would I be smarter to trade up for a newer used machine?"
Mike Evanish: The decision usually ends up being a decision between the devil you know and the devil you don't know, responds this farm business consultant and business services manager of Pennsylvania Farm Bureau's Members' Service Corporation.
Not all the information needed to make a good decision is present. For your owned machine, I'd like to know:
* How many hours are on it?
* What's its reliability/repair history?
* Would $10,000 bring it to "like new" condition or simple get it ready for harvest season?
Then there's the net cost after trade of that "newer used" machine. Even if the net cost is "only" $10,000, it's not automatically a good idea. For that newer machine, I'd like to know:
* How many hours are on it and where was it used?
* Is the repair history available?
* Is there any written warrantee available?
Dale Johnson: You're right on the tipping point, depending on how many acres you plan to custom harvest with the newer machine. If that average annual DIRTI 5 (depreciation, interest, repairs, taxes and insurance) of your older chopper is higher than the newer machine, trade it in, advises the Extension farm management specialist at University of Maryland. Reliability usually slants your decision towards a newer machine. If it's bigger than the older one, it may improve timeliness of harvest and feed quality.
You can probably cash flow the $10,000 for old chopper repairs. But you'll likely need to finance the balance for the newer chopper. Would it strain on your borrowing capacity. Cash flow impact often slants the decision towards the older machine.
One more thing: Consider getting your 1,150 acres custom harvested. A large custom operator may be able to harvest your crops cheaper that you can.
George Mueller: There's no right or wrong way in many decisions we have to make – especially on when to trade in a machine. With 850 acres of corn to chop, including custom work, you need a dependable chopper. Trading up isn't a bad idea at all.
At Willow Bend, we've always done our best to avoid the steep depreciation of a new machine. When we were a small farm, we got along just fine with used choppers.
But now, six trucks, two pushing tractors two packing tractors and some labor sit around when our chopper goes down. That's why we purchase new when it comes to choppers. We pay the steep depreciation and avoid the down time. With a newer used machine, you'll avoid that brand new machine's steep depreciation.
Glenn Rogers: Mike is right: The devil's in the details, says the University of Vermont Extension professor emeritus and ag consultant. If it's time to replace the chopper and other cropping machines, it also may be time to switch to custom-hiring your own harvest
We don't know your chopper's equity, depreciated value, your available cash or the potential replacement cost. When repair costs are just maintenance, it's not something to worry about. These days, though, with the big machinery, it doesn't take long to invest $10,000. Tires, knives, belts, filters, oil, gears and maybe a bearing or two can add up quickly.
But I get nervous if it comes to replacing engine heads, or other costly items. While they may substantially increase machine life, the cost of required expertise and "down time" may not make sense to repair the old chopper.
If the rest of the cropping machinery also needs repair/replacement, you're short of help, and a custom operator is available, and they can get part or all your feed cut on time, and at an appropriate price, it might be time to switch to custom cropping.
Watch for their complete responses in your soon-to-arrive May issue.
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