A very simple and instructive first step is to calculate total machinery investment. Divide this by the number of acres farmed and you arrive at a measure of machinery investment/acre.

It starts with creating a list of all the machinery used in grain growing activities. An estimate of the current value is needed for each piece of machinery. If you don’t know, you can ask your machinery dealership or scan online equipment sales sites to find something similar.

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Enter your machinery list and values here to calculate investment cost/acre:

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Making Improvements

In general terms, machinery costs per acre have been rising steadily for grain producers across North America since the mid 2000’s. It can be an easy to overlook margin robber because larger and better equipment is often needed when farms expand, but finding the sweet spot where machinery investment is optimized can be challenging. Especially with the increasing cost of farm equipment.

There are numerous tools to help with machinery purchase decisions. (see resources below). The true cost of a new tractor or sprayer can be calculated to understand the implications of the purchase over time.

If your equipment investment per acre goes up 30% over the course of a couple of years without any increases in revenue, it’s notable and requires scrutiny. Manage machinery costs by leasing instead of buying, hiring custom work instead of owning the machine, sharing some equipment with a neighbour, or buying used instead of new.

The primary value in determining this number is to understand where you are at and keeping track of it as you go forward. What does a new purchase do to this number? If your equipment investment per acre goes up 30% over the course of a couple of years without any increases in revenue, it’s notable and requires scrutiny. Manage machinery costs by leasing instead of buying, hiring custom work instead of owning the machine, sharing some equipment with a neighbour, or buying used instead of new. All these options have pros and cons but there are tools available to help work through it. Keeping older equipment lowers the investment cost per acre, but if repair and maintenance costs double, it might not be a viable solution. It’s a balancing act.

The ultimate benchmark cost for a specific piece of machinery is custom work rates for the corresponding task. If your combined investment and maintenance costs for a combine or sprayer are well above the custom rates, it’s a red flag. Hiring a custom harvester or spray applicator may be a legitimate option.

Goal Setting

Set a Goal for machinery/equipment costs/acre: