dpilot83 - 9/3/2024 21:06

Where are my numbers off here? I don’t run new equipment but I’m trying to evaluate the true cost of doing so.

I’m imagining everything but harvest for around here. I’m basing the farm size on the machine that can cover the most ground. A new $600K sprayer can probably keep ahead of 15,000 acres pretty good here.

15,000 acres takes probably three $500K tractors and three $300K planters

Probably need one $200K drill for that size operation here (not a lot of wheat grown here anymore)

This does not include support equipment like semi’s and fuel trailers and pickups and so on.

So seeding and spraying you have $3.2M invested without support equipment.

Take that $3.2M and invest it for 5 years at 7.5% and you have $4.59M at the end.

Say you put the $3.2M in the equipment instead and run it for 5 years. It depreciates 10% per year. Worth $1.89M at the end.

So your true cost (not including repairs and interest and fuel and labor) over 5 years is $4.59M minus $1.89M equals $2.7M

That $2.7M has covered 15,000 acres a year for 5 years or 75,000 acres.

So planting and seeding has cost $36/acre not including support equipment, labor, fuel, repairs and insurance. Almost $30 of that is just seeding opportunity cost and depreciation.

That seems like a lot to me. If you told someone you wanted $30/acre plus support equipment, fuel, labor repairs and insurance to custom plant for them, they’d laugh at you. And charging that much would only get you the equivalent of a 7.5% ROI which would be representative of returns for a low stress passive ROI.

If you want 12%+ like you should get for a high stress active investment like planting you’d be looking at $37/acre before the support equipment, fuel, labor repairs and insurance.

Seems a guy needs to cut that cost in half to be reasonable. Are my numbers significantly off here?