Buy The Right Sized Equipment

“We’d like to see producers put at least 300 hours a year on high clearance sprayers and combines.”

—Dallas Pike

Producers love iron, but the cost of owning equipment can drag down your bottom line. Profitable farms have low per-acre machinery costs. Probably the biggest mistake a producer can make is owning a 60-foot drill for 2,500 acres. The drill may look good in the yard, but it’s just not economical.

Often farmers buy more equipment thinking they’ll rent more land. A bigger piece of equipment will make that possible and make life just that much easier. But that’s putting the cart before the horse.

“Sometimes the farmer ends up with a three-to five-year equipment lease,” says PMG’s Dallas Pike. “Whether you buy or lease equipment, if you really don’t need it, you’ll spend more dollars and assume more debt than is really necessary.”

To keep your debt in line with your economics, make sure the scale of the equipment is correct. Producers often don’t separate equipment debt from land debt. What happens is equipment values surpass the value of a quarter or half section of land. Use benchmarks to help you determine what acceptable debt is.

“Make sure your debt stays within a predetermined range,” says Dallas. “Producers may know their numbers, but they may not know where those numbers should be in relation to assuming equipment debt.”

To improve your equipment economics, increase the acres per foot of equipment. You may also need to make some changes in your cropping rotations, such as growing fewer crops and fewer varieties. Fewer crops mean you’re not cleaning out the equipment as often, and you’re not playing around while you’re shifting to another crop.

“You have a nurse vehicle that supplies the seed and fertilizer, so if you have seven crops versus three, it doesn’t matter what you do, you’ll still put yourself behind several days just because of all the switching — cleaning out and filling — that you have to do,” says Dallas.

The more land you farm in different regions, the greater the need to increase your efficiency. Even the size of your fields makes a difference. To make the best use of your equipment, increase the number of acres per hour that you use it. “Improving per-foot equipment efficiencies will go a long way toward reducing equipment costs,” says Dallas.

Farmers love their high clearance sprayers, but ask yourself how much you really need one and if you can justify the cost. “There are some cheaper high clearance sprayers out there. The price range is as wide as it is with cars,” Dallas points out. “A lot of farmers want a self-propelled sprayer, but they don’t use them that often. The decision also depends on the kind of crops you’re growing. A lot of farmers are starting to desiccate their wheat. High clearance minimizes the trample issue, whereas a tractor pulling a sprayer boom will flatten a lot of crop.”

Keeping any piece of machinery in good mechanical shape involves time and money. Plan ahead before you jump into an equipment purchase. How are you going to handle repairs? Machines are very sophisticated now, so if you’re going to do any engine work, you’ll need all the right tools and materials.

“Across entire machinery lines, it’s a good idea to evaluate your own mechanical competency,” says Dallas. “If you’re buying new, check out the service agreement. A day lost is dollars lost. A lot of farmers know their strengths and weaknesses. If your strengths are not on the mechanical side, line up a mechanic before it comes down to the crunch. We have PMG members who repair and members who call in a mechanic.”

Reliability has definitely improved. Most machines have a long life now. They’re not that problematic. Some of our members buy used, but the equipment really isn’t very used. We’re no longer seeing 10-to 15-year-old combines. A used combine might be five years old. When you think about it, most combines only get 300 hours

put on them each year, so a five-year-old combine might only have 1,500 hours on it. In the U. S. they might put 10,000 hours on it.

“We’d like to see producers put at least 300 hours a year on high clearance sprayers and combines,” says Dallas. “You can put 3,500 acres on the new machines. We’re seeing some producers take them up to 5,000 acres. Depending on their location, they could get 3,500 to 5,000 acres per machine. We’re thinking it’s possible to take a high clearance sprayer up to 25,000 to 30,000 acres.”

With commodity prices sliding around, you might be wondering if it’s a good year to buy. We’d say it’s probably not a bad year to consider buying — if you need to. The trick is a lot of new equipment is still sold out. “From an economic point of view, before your buy, know your numbers and your cost of production,” Dallas says. “Buying any piece of equipment should be driven by those figures.”

Gary Pike is president of PMG. PMG provides management, marketing, business planning advice and coaching to members who represent 2.5 million acres in Western Canada. To find out more about PMG and how to become a member, visit www.agcoach.caor call us toll free at 1-877-410-7595.

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