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Farmers look to leasing options for equipment savingsA noted authority on equipment economics recently cited findings of a comprehensive industry study "U.S. Ag equipment : Powering Jobs And Dollars" conducted by the leading equipment manufacturer and dealer associations. A noteworthy finding was annual farm equipment sales in the United States accounted for $63 billion last year, not counting related materials and services. That represents the equivalent of over $186,000 spent for every 1,000+ acre U.S. farm. Cited in the same article was a survey of dealers reporting expected price increases of 2 to 3 percent this year; manufacturers also report expected higher margins. Given the escalation of land and other input costs, and in spite of favorable commodity prices, producers are not taking their own margins for granted. Midwest farmers continue to scrutinize their costs, particularly equipment which represents on average 42 percent of non-land production expense according to the U.S. Department of Agriculture. Many are turning to MachineryLink, Kansas City, Mo., which covers all routine maintenance and repairs associated with normal wear and tear while customers are responsible only for daily maintenance while using their leased combines. When it comes to the cost of owning equipment what may not be as easy to calculate, but just as ominous a risk, is the cost of excess machine capacity if you lose rented acreage, or experience major repair expense, or the crippling effect on a operation from crop loss and major breakdowns. Whether supporting hyper-growth, or hedging risk against the next downturn, asset dexterity will be critical. Leasing enables the producer to reduce the real risks of ownership while re-allocating capital into more productive equipment , investing in appreciating assets, or expanding other revenue generating operations. A sound asset management strategy allows farmers to adjust to the risks and opportunities of land availability, erratic weather, fluctuating commodity prices, pending legislation, and the velocity of demand to supply alternative fuel production. Unlike finance payments or roll programs, the Innovation Managed Lease allows customers to waive payments in certain crop-loss instances and the flexibility to bank unused hours for future use or the reverse. If a MachineryLink customer loses a farm in the middle of his combine lease, the terms can be adjusted. If he acquires more land and needs a bigger machine, he can upsize. There are a number of reliable tools available to aid producers and their advisors assess their costs, potential savings, and risk profile. The University of Illinois has machinery cost calculators for various farm equipment as part of its Farm Management website at www.farmdoc.uiuc.edu/manage/machinery/. At Iowa State University, the Farm Machinery Economics course via the Agricultural Management e-School provides an opportunity to learn how to control machinery costs, analyze strategies for replacing machinery, and determine optimum machinery capacity. Visit www.extension.iastate.edu/ames/fme.htm. For more information, call 888-272-3323, or visit www.machinerylink.com. Date: 7/13/07
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