| Introduction | How to use the farm machinery cost guide | Other information sources | Farm machinery costs
Introduction
Since 1975, Alberta Agriculture, Food and Rural Development has annually surveyed the cost of new farm machinery to provide information to farmers and custom operators.
This guide provides information on the cost of owning and operating farm machinery. Technical information such as current machinery prices, repair rates, performance, capacity, fuel consumption and fuel price are used to calculate fixed and variable costs. These calculations are intended to be used as approximate costs based on new machinery prices (fall of 2006).
The "Years of Life and Salvage Value" calculate using average numbers, so we recommend that you use your specific information and the worksheets or the online Machinery Cost Calculator wherever possible.
If you require further assistance please contact a Business Management Specialist at the Alberta Ag-Info Centre, Alberta Agriculture Food and Rural Development at 310-FARM (3276).
How to Use the Farm Machinery Cost Guide
If you are a full-time custom operator, then use the Total Machine Cost + Labor + Profit for estimating a charge. Be sure to adjust fixed costs if your annual hours of use differ much from those quoted.
Note: Labor and profit margin are not included in the tables.
If you are doing custom work on a good neighbor payment basis, then it may not be necessary to recover all the fixed costs of owning the machine since these costs represent an annual cost incurred whether or not custom work is done. However, the rate should cover all variable costs that include an allowance for repairs. Labor and profit margin can be adjusted to meet each situation.
If you plan to do custom work in addition to your own work, so as to partly justify the ownership of a larger machine, then the custom charge should cover variable costs, labor, a profit margin plus a proportion of fixed costs calculated as follows:
| Proportion of Fixed Costs | = | Hours of Custom Work | x | Total fixed costs
Total annual hours of use |
If you are renting out machinery, then you will wish to cover fixed costs at least and those variable costs such as lubrication and repairs that may not be already covered by the renter.
If you wish to assess a rate for a full operation such as silage making, which requires several machines, then add the hourly costs of each activity, making sure there is neither omission nor duplication. Use the worksheets provided in this book. The purchase cost estimates are based on average cash prices as of November 2006 for each class of machine. These estimates represent current replacement costs that should be budgeted and charged for, even if you do custom work with older machines, unless the older machine will not do a comparable job.
Key assumptions
Estimated years of life, annual hours of use and annual repair rates are specified for each type of machine. The salvage value of each machine is listed as a per cent of the new price.
Diesel fuel is charged at $0.75 per litre and propane at $0.50 per litre. Fuel costs vary throughout the year with supply and demand.
Return on investment is calculated using a Bank of Canada 60 day T-bill rate of 3.77 per cent with an additional allowance for risk of 5 per cent. Inflation was included at 3.0 per cent rate. Income tax considerations have not been included in the calculations.
Other considerations
Favorable or unfavorable working conditions, such as size of job, distance, access, topography, soil type and possible downtime, may modify the guide figures. Per hour charges allow for some of these situations.
Different soils and topography may require power units of a different size than those shown here.
Charges per unit of output such as per acre, per bushel or per bale defined on work rates per hour may be quite different from those quoted. Per hour charging overcomes some of these uncertainties.
You can adjust the labor charge according to your actual cost of hired work or the opportunity cost of your own labor.
If your experience and farm records suggest that other costs and assumptions would suit your situation, then use the worksheets to recalculate (see links below) or use the online Machinery Cost Calculator.
Earlier and faster may be cheaper. There are costs attached to late completion of operations. The rewards for timely, quality work quickly completed by large machines are only earned if the support system, including seed and fertilizer supplies as well as grain trucking, is well organized.
Other Information Sources
Custom Rates Survey Summary 2008
Saskatchewan Agriculture and Food - Navigate to: Farm Machinery Custom and Rental Rate Guide
Manitoba Agriculture - Navigate to: Farm Machinery Rental and Custom Rate Guide
IRON Search - a source of used equipment values, offers online appraisals and publishes the Farm Equipment Official Guide.
Farm Machinery Costs (see below) |