Sunday, September 23, 2018

A costly conundrum

September 3, 2018 by  
Filed under Clodhopper

Bigger isn’t always better when it comes to farm machinery, says Clodhopper.

As somebody once said, if it isn’t broken, don’t fix it – a true enough statement but not one which is very often observed.

Harvest 2018 was just about wrapped up around here by 10 August. And the honest among us would say that yields are 30% down in the wheat crop. Some growers are saying the 3t/acre (7.5t/ha)  crop has returned – if indeed it ever went in the first place.

Others are reporting yields below this mark. And with spring crops somewhat of a mixed bag – and root crops currently looking little better – it is little wonder that better prices will barely cover the rent and interest charges or both.

Farmers in these parts are in a despondent mood. Weak sterling might be good for grain prices but input costs are also rising – including the cost of new machinery, which has now surpassed even the dizzying heights reached a long time ago.

Big purchase

No wonder that one bigger grower balked at the thought of paying in excess of £400,000 for a brand new combine in a lighter shade of green. Instead, he sent me a picture of his new secondhand machine, a bargain at nearly £250,000 less than a new model.

The secondhand combine runs well – sweetly in fact alongside his other machines. And it does the same job as a new one, cutting the same amount of cereals at the same rate yet saving money in finance charges and depreciation.

I never have liked the word depreciation. It means to lower in value, to underrate, to lose quality and diminish in market value. And for a machine to lose 20% of its value as soon as it leaves the lucky dealer’s yard is costly.

I would argue that any machine is worth nothing in the agent’s yard standing still. Once a machine goes to work earning its keep, its value should soar – not fall. So why the high starting price? Let’s blame the old oil increase excuse: the price goes up so the price of steel follows.

Rising prices

The problem with rising prices is that they rarely come down again. And machinery is one of the biggest costs when growing a crop of wheat. I fail to see how a large high capacity combine harvester generates a return on investment or reduces labour hours – let alone generates higher yields.

It begs the age-old question: Do you spend the money and buy a combine? Or do you hire one in for the three weeks it will be used? It’s a tough choice because several years of hire eventually add up to the purchase price of a decent machine.

There does not seem to be any correlation between farm size or economies of scale. Smaller farm businesses with smaller machines have the smallest costs. Larger units have much higher costs but is running bigger machines over larger areas really cost effective?

Does replacing two small machines with one larger one really pay? Not in my book. Two older machines with less value can easily do the same job as one. Yes, extra labour is required in peak times but bigger does not mean better. And two machines give you more options than one.

If a breakdown occurs, at least one combine is still going. And keeping machines longer is still cheaper than a early and regular replacement policy. I like to trade-in when I’m ready, not when the local agent is offering 0% finance that saves no money only defers the payments.

Too many machines

Yet many farmers still have excess machinery on the farm. Especially tractors. I guess it is sometimes easier to jump on and off a tractor seat rather than take the time to swap implements. An old tractor always stuck on a flail mower can save time and hassle especially at harvest time.

Like many others, I like to keep these older slower machines rather than spending big and having sleepless nights as a result. Newer, wider machines might do the job quicker – especially during ahead of difficult weather, but you often pay for the privilege in stress.

I know many will disagree and everyone in farming is entitled to their opinion. For me, though, machinery must either drop in price or the day of the smaller machines must return. Those big new machines are geared for the bigger boys only – I simply can’t afford to spread the cost.

If you cannot make money, you have to save it. If that means hanging on to that old machine for another season, so be it. As the car advert says, you do the maths yourself.

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