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| I would probably agree that most guys underestimate machinery expense, but the numbers from the business association should be pretty solid, but they are also tax based so could be skewed. The hardest part about figuring real machinery expense is it requires a lot more accounting than is required for tax purposes. In college I worked for a farm. At the end of the day, you clocked out on a computer and had to account for your time. It was all coded. Every powered unit had a number and some of the implements also did. If you spent shop time working on it, it was accounted for. You also entered and enterprise code. i.e. Crop, dairy, turkey, general farm. It was impossible to account for everything, but at least it was better than nothing. If I spent 4 hours hauling manure, two hours working on a silage truck, and 3 hours cleaning out calf huts, it was accounted for.
The big question to ask yourself is "How I cut my costs 5%?" Don't worry about the other guy. Focus within. Ask that question every few years.
When I was a banker (in much leaner farming times), one of the first things I usually looked at was machinery investment per acre. You had to account for custom hire also, but it gave you a good general rule of thumb for which operations were profitable. Also, those that watched machinery cost probably also watched other costs more closely. Not a rule written in stone, but just a general barometer.
Brandon | |
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