'Iron 'question

How many acres,how many bushels of crop do you have to raise just to pay for all that new big iron?How much of your crop just makes payments?I've asked this question to many farmers. So far,NO ONE has answered. One guy even walked off.....I say one reason guys farm so much ground is to pay for all the new big iron.And maybe 'prestige'.I farm with older'smaller stuff.Nothing 'prestigeous' here. LOL Dont need a lot of acres to pay for it. I sleep easier knowing I dont have big payments. I still make a liveing.Thoughts?

Sounds like a family reunion one year. A guy out east of town had bought a big new 4 wheel drive Deere. I said I didn't know why he needed a tractor like that. My cousin said "To farm all that ground.".
I asked why he needed to farm all that ground? He said "To pay for that new tractor.".

Your right sizing and continued use of what I call classic hardware is an example of what a competent mechanically industrious farmer should be. Chasing bright shiny new equipment is OK but I admire your approach far more. It is environmentally reasonable and economically more secure. Jim

You guys seem to think the every large tractor or farmer is purchased with credit. There are many older established farmers that farm on a large scale that have little or no credit. I haven,t financed anything on this farm in several years unless it was some kind of promotion where there was no interest. I agree that there are farmers that are over equipped but certainly not all. I am not taking side with the BTO but they are some out there that are pretty good operators.

One of my neighbor owns about 2000 acres and farms another 2000, all cash.

He has been frugal all his life.

My father summed it up this way "When you get large enough that you do not have time for repairing equipment you will be buying new". He farmed 240 acres with hogs,dairy,beef,sheep and barely had time to change oil and do regular maintenance. When something broke down too often it was replaced with new. Of course buying good used at auctions was a favorite too. He did very well and had everything paid for long before he died, passing the farm on to my brother. This is harder to do now with the high cost of land etc.

I call it veteran equipment.

My take is this:

Some new iron pays it's own way, and offers a dividend on top. For me that is planting technology, forage harvesting equipment, irrigation equipment etc. Example: our corn planter has a lot of updates and precision plant technology. And that stuff pays a quick dividend.

Other stuff, like tractors here, is "least cost". Example: the corn planter tender got pulled with a JD 70. We have several tractors with 30k plus hours. They do what they are supposed to. But for peak demand, something newer is sometimes better. I leased something this spring... first time. It powers our forage choppers. And the cost of that lease? About 1/3rd of what I spent on repairs on our big horse (JD 4850) last year. And when I look back over the last 10, not much more than the average. In that case, I get the same or lower cost per year or hour, more comfort, and hopefully more dependability (or at least warranty). And I have at least one neighbor who is probably shaking his head... despite the fact the old horse was 30 years old with 13000 hours.

To each their own. What matters is your own numbers. If you are profitable that is what counts. But I don't expect everyone to do what I do. For some, that is a lot of acres. For some, that is not much.

Sometimes I think the bank or financier is making most the profit...

Exactly rrlund. It's like keeping the horse to haul the horse manure.

Good question. I've wondered the same thing. We had several years of good crops and great prices, and I did something different- I bought some new equipment! And several newer used pieces. All with cash. It was that or lose it. The unknown to me is figuring the life of the equipment. I did scare myself and add up my corn seed, fert. and chem. this year. $263/acre

Being big didn't help the dinosaurs!

Know a farmer that had a farm sale,(just machinery) lest then 30 days ago. Is a single guy, good farmer and had very little new machinery. Last few years two new tractors, a new big grain bin, new skid loader with attachments, new four wheeler and other new machinery. Heard today his banker was at the sale also. Didn't think he was old enough to retire. Still guessing as why the sale.

The real important figure is the cost per acre for equipment use. Equipment use is figured by the true cost per year of operating said equipment. That would be cost of repairs, fuel, capitol cost for the equipment.

I got to see lots of farmer's financial information when selling. The surprising thing was many smaller farmers had a MUCH higher per acre cost for equipment use then the larger farmers. Smaller livestock farmer has some of the highest because of the need for grain and hay equipment.

Steve your cost per acre is low BUT even a $300 dollar repair raises your cost per acre on 30 acres of corn $10 per acre. So for a fellow that has 1500 acres out he could spend $15,000 and still be even with your cost.

So small or large/new or used is not always the "cheapest" when looking at costs.

A very good friend farms 3500 acres of ground. He runs NEW equipment period. He only has three tractors and one combine. His cost per acre on equipment is one of the lowest I have ever seen. He has nothing setting in sheds that is not used on a lot of acres. If it does not get used on many acres it is GONE. He will either rent the item or hire it done. Looking at his equipment cost his capitol cost are high but his repair cost is low. His equipment is also worth more so the "net" capitol cost is not as high as you would think. His trade difference many times turns into a low cost per acre.

Another thing not mentioned is marketing the end product and purchasing inputs. As a general rule smaller farmers do a much WORST job selling their crops and livestock/purchasing inputs. It is many times the amount of time and effort that is invested in marketing/purchasing. The larger farms many times are grossing hundreds of dollars per acre more than the smaller farms. An extra $.40 on a 250 bushel corn crop is $100. That can be done with better marketing and volume purchasing. So spread that over several thousand acres and there is real financial difference.

Truthfully the BEST marketers and cost managers win every time. Size is secondary.

I have always said that the farm economy has been hurt by big equipment and chemicals. I don't think my dad ever had a new piece of equipment. We survived, sometimes not to well. My son is trying to get started farming with older equipment. I am sorry to say that I do not have to many positive things to tell him. I need you guys to buy new JD equipment. Just sold half my JD stock. Getting worried about the farm economy again.

The biggest variable is land ownership, if the land is paid for or at least paid way down or the rent is reasonable then in many years some farmers probably need the tax write off to avoid giving half of their profit to the various branches of government. Some are pushing for more acres and increased cash flow, to do that year in and year out you have to be able to move fast and cover the ground. Debt is not frowned on by business managers and bankers the way it once was as long as the business is cash flowing to pay the bills, look at how wall street punishes any old line, reliable company which maintains steady performance and cautious expansion against the high flyers buying out their rivals and attempting to expand 15-20% per year, everyone with an ounce of brains knows that nothing goes up forever but that seems to be the standard a lot of operators have to meet these days.

AS others have said it's cost per acre VS income per acre. Got a friend. He had everyone talking a few years ago when he bought a newer 4X4 tractor (not many in the area and even fewer newer ones). Then he complained to every none farmer or small farmer he could about how much fuel an hour it burned. But chisel plowing actual fuel consumption was just a tad under a gallon per acre. Compared to my 1206 Farmall it was cheap on fuel alone. I was close to 2 gallons an acre doing the same thing. Now both tractors were in fairly decent condition but if I broke down the cost of repairs was spread over about 150 acres. His over 1000. Nephew is faming my land now. Older equipment. When planting beans his planter goofed up. Skipped a row for 3 rounds before it was noticed. Sure not a great loss but still a loss. 8 rows about 1/4 mile long. Older late 80's tractor ran great though. My BIL and nephew need to invest in both a newer drill and corn planter.

Rick

Didn"t see the skip?...no monitor? Planting is the most important job all year. You can"t make up for a poor job.

To be blunt they probably didn't tell you because they didn't feel it was any of your business. I know guys who get REAL touchy when you ask how many acres they farm - let alone asking them intimate details about their financial situation.

I agree, "cost per acre of equipment used." When I started 9 years ago I had a JD A and a #5 mower, worn out 336 baler. Did 20 acres that year. My "parts per acre" cost more than my fertilizer and rent combined. There comes a point where buying older equipment is not as good as buying moderately old equipment that is in fair shape. For me when I got started the price was "if you haul it off you can have it" then I made it work. Not sure if I would do it this way again but at the time it was the only option.
Now I'm into equipment from the late 70's early 80's. Get a lot more done and am broken down a lot less. Breakdowns cost a lot more when they happen though.

I suspect a lot of the big equipment is leased instead of owned.

I was talking to an old friend last week. He farms both here in Nebraska and up in South Dakota. He has something like four combines and only owns one. Leases or rents the others.

When I was farming, I always owned my equipment, but I always wondered if it didn't make sense during planting and harvesting to simply rent big equipment for a few days and then take it back.

Goose, I think leased equipment is a tax write off. New equipment has to be pro-rated over x number of years. Not sure how many, ask a cpa. CPA has a term for what I call pro-rated too. geo

My equipment for my farming operation ranges from 8 years old to 42 years old, with a few other older tractors and additional pieces of equipment that go back to the 1950's and 1960's. Pretty much anything I have bought has been clean, older, well kept, and low hour equipment. I have not financed much, and prefer to keep it that way. I have only two payments left on my 8 year old planter, the newest piece of equipment I have purchased. Lost a piece of land this year due to "local politics" and we were on the wrong side, according to the landlord. So be it. I refuse to be "owned" or "controlled" by the likes of this landlord. Never been all that good at "kissing butt!" I watched the new tenant come in with a fleet of equipment that was new and state of the art with all the technological advances money could acquire. Nice to see he had the same struggles (with uncooperative weather) this spring that I did with my well kept fleet of "experienced" equipment. At least my equipment can keep moving in spite of the little electrical "gremlins" that can and inevitably will invade. I also don't owe my soul to JD Credit, or the former landlord! My last comment.......................to use some of the terms used by the BTO's........................."my cost per acre in equipment is a whole lot less, thus, I am not bleeding the red ink per acre these BTO's are bleeding!

Pretty easy to write off the entire purchase of equipment in the first year unless you are a BTO operator that buys close to a million year. Little guys with a few hundred thousand have nothing to worry about.

If you live in a state like ours, the top end limit is $25,000 for that first year write off on the state tax return. Not a big problem for me as I have only purchased 3 items where the net purchase price exceeded that amount of $25,000.

(quoted from post at 08:56:31 06/15/16) To be blunt they probably didn't tell you because they didn't feel it was any of your business. I know guys who get REAL touchy when you ask how many acres they farm - let alone asking them intimate details about their financial situation.

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To be blunt, they couldn't tell you because they just don't know.