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central ND/SD border | I’ve been wondering about this for a while; what do all of you use to figure machinery expense for COP? 2 examples
1) Farmer X decides to hire his neighbor to plant (no-til) and harvest his crop and local coop to spray. Neighbor charges standard custom rates, say $16 to plant and $35 to harvest and haul to elevator, coop sprays twice for $7 each, so when farmer X figures his COP he uses $65 for his machine part, easy.
2) Now the next year, crop prices drop and farmer X wants to save money so he decides to use his old(er) equipment that is all paid for and do it himself. Assume he gets everything done on time and does as good of a job. When he wants to figure his COP, what does he put for machinery part of COP?
Someone tells him, “Use the standard custom rates, that’s what you could have got if you did it for someone else.” So farmer X does that and it turns out he lost $10/acre. BUT WAIT, the people who do custom work don’t do it for free, they are making money (which they should). So crop-grower-farmer X “lost” $10 but custom-operator-farmer X, made money. His fuel expense was $12 for the all operations, repairs came to $7 (this year) and depreciation of his stuff was $1. So custom-operator-farmer X had expenses of $20, which means he made $45.
And that means Farmer X overall really made $35/acre.
What I’m also thinking about is for us crop-cattle guys. To figure cost of feeding cows my own feed, someone will say “use what your corn and hay is worth on the market.” BUT WAIT, it didn’t cost me $3.30 to grow that corn, only $3; and my alfalfa didn’t cost $60/bale to make. So again, if cattle-farmer me uses $3.30 corn price I makes less but then crop-farmer me makes more; and same for the hay.
Calculating COP gets tough when we "do it ourselves" and have many sides of our overall operation.
Thanks for reading, thoughts?
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COP- machinery expense (long post)
