by David Widmar
Fixed farm expenses play an important but often overlooked role in crop budgets and producer returns. A look at Purdue University crop budgets from 1990 to 2014 found that, on average, variable expenses accounted for 40% of total budgeted expenses while fixed expenses (family labor, land, and machinery) accounted for 60%.
Lowering costs of production are a critical step for managing in the current environment of low commodity prices and tight-margins. Fixed expenses, as we noted last year, have been slow to adjust. This week’s post takes an updated look at fixed expenses. Continue reading
David A. Widmar
As farm incomes jumped in recent years, so did the interest in newer farm equipment. While the reasons producers update their equipment line can vary from increasing efficiency to managing taxable income, it’s important to understand how these changes may impact the underlying cost of production.
For a high-level look at changes in the machinery cost structure across agricultural operations, data from the Kansas Farm Management Association (KFMA) and the Illinois Farm Business Farm Management Association (Illinois FBFM Association) were used. Three components of machinery ownership were considered; depreciation, machinery investment, and machinery expense.