PR - AN EXAMINATION OF MACHINERY COSTS AND MACHINERY INVESTMENT IN KANSAS

Abstract:

Machinery is an important asset class on grain farms with the typical Kansas farm owning $400,000 of machinery. Because farm machinery is expensive and costly to operate, farms have incentives to monitor and control their machinery purchases. However, farm incomes nearly doubled in 2007 and have remained high through 2013. This paper examines whether farmers used that extra income to purchase more and newer equipment and, if they did, whether equipment costs increased significantly. We find that equipment levels (either more or newer equipment) did increase slightly over 20 years and substantially since 2007. However, the added equipment did not significantly affect production costs as the operating costs of the machinery is over six times the management depreciation cost.

Keywords: machinery, investment, farm management, cost, expenses