Con­sider a cus­tom har­vester

Successful Farming - - MARKETPLACE - BY ROBERT FEARS FOR USCHI

Con­trol­ling in­put costs in farm­ing op­er­a­tions is one way to man­age risk caused by com­mod­ity price vari­ances. A suc­cess­ful farmer con­stantly looks for op­tions that re­duce pro­duc­tion costs and in­crease mar­gins.

A com­mon ail­ment among farm­ers is hard­ware dis­ease. But does it make eco­nomic sense to own large har­vest equip­ment?

FIG­URE THE COSTS

Wide vari­abil­ity of ma­chin­ery op­er­a­tion costs is seen in state sur­veys. In some sur­veys, as many as 70 per­cent of farm­ers who re­sponded could im­prove prof­its by hir­ing cus­tom har­vesters in­stead of do­ing the work them­selves.

Cus­tom rates are of­ten lower than ac­tual farm ma­chin­ery costs be­cause cus­tom har­vesters use equip­ment spe­cial­ized for a spe­cific op­er­a­tion over more acres per year than most farm­ers. Some op­er­a­tors may pur­chase ma­chin­ery at a lower cost than most farm­ers could be­cause of vol­ume dis­counts. These fac­tors re­duce fixed ma­chin­ery cost per acre.

PEEL BACK THE LAY­ERS

It is im­por­tant to in­clude all costs in­curred in own­ing equip­ment: re­pairs; fuel and oil; equip­ment de­pre­ci­a­tion; ma­chin­ery in­sur­ance; ma­chin­ery shel­ter; op­por­tu­nity in­ter­est; and har­vest la­bor.

Mar­ket de­pre­ci­a­tion — not de­pre­ci­a­tion for tax pur­poses — can be de­ter­mined by look­ing through lo­cal clas­si­fied ads, area auc­tion re­sults or web­site clas­si­fied ads. Es­ti­mate costs of own­ing and op­er­at­ing all har­vest equip­ment, in­clud­ing pick­ups or other light ve­hi­cles used to travel to and from the field and to de­liver fuel and sup­plies.

THE RIGHT DE­CI­SION

Con­tract with cus­tom har­vesters who have good rep­u­ta­tions for meet­ing time com­mit­ments and har­vest ef­fi­ciency. Ob­tain rec­om­men­da­tions from other pro­duc­ers who use cus­tom har­vesters.

Ab­sence of debt on har­vest equip­ment can have a pro­foundly pos­i­tive ef­fect on the bal­ance sheet. The right de­ci­sion de­pends on the na­ture of the in­di­vid­ual farm; but hir­ing a cus­tom har­vester is worth con­sid­er­ing.

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