In recent years, the agricultural sector has witnessed a significant increase in the size of tractors, combines, and other farm equipment. This trend has allowed farms to manage larger areas while reducing labor costs per acre. However, it also underscores the importance of evaluating machinery efficiency. A recent analysis delves into machinery cost trends for grain farms in Illinois, providing valuable insights. This article explores the computation of crop machinery costs and investments for a specific farm in west central Indiana, using data from the University of Minnesota's FINBIN database to benchmark performance.

Exploring Machinery Benchmarks and Trends

The study focuses on a farm in west central Indiana that cultivates 1,500 acres of corn and 1,500 acres of soybeans. The analysis computes machinery costs by summing depreciation, interest, taxes, insurance, repairs, fuel, and lubricants, then dividing by the total crop acres. Interest calculations include both paid interest and opportunity costs for owned equipment. For this case farm, the machinery cost per acre was $152.45. The investment per acre, calculated by dividing total machinery investment by crop acres, stood at $546.

Data from the FINBIN database reveals that average machinery costs per acre for corn and soybean farms fluctuated between 2014 and 2023. Costs declined initially but saw significant increases in 2021 and 2022, aligning with rising breakeven prices for these crops. In 2023, the average machinery cost per acre was $151, closely matching the case farm’s figure. Machinery investment per acre showed a similar trend, with an average of $713 in 2023, compared to the case farm's $546, indicating lower investment levels for the latter.

To understand variability, the study compared machinery costs and investments across different profit groups. Farms with higher net returns generally had lower machinery costs and investments. For instance, the low-profit group had machinery costs 21.8% higher than the average, translating to a $0.37 per bushel difference in breakeven costs for corn. Similar disparities were observed for soybeans.

Implications for Farm Management

This analysis provides critical insights for farm managers aiming to optimize their operations. Farms with higher machinery costs and investments should carefully evaluate their long-term strategies, especially if these expenses are driven by factors like tax mitigation or operational constraints. Comparing labor and machinery benchmarks can help identify inefficiencies and guide decision-making. For instance, the case farm demonstrated strong labor efficiency, with a gross revenue per worker of nearly $982,387 and labor expenses accounting for only 8.4% of production value.

In conclusion, benchmarking crop machinery costs and investments is essential for gauging farm efficiency. Farms should regularly compare their metrics against industry standards and similar-sized operations to ensure sustainable profitability. By doing so, they can make informed decisions about machinery purchases, labor allocation, and overall financial management.