Paying dearly for under estimating machinery costs
Yields in 2015 exceeded all expectations but poor prices left farmers working their own lands with a modest profit, while most conacre died in debt.
There are lots of variables that will determine 2016 grain prices, but present indications are for prices to be similar to 2015...and possibly lower.
So, if you intend to farm the same area as last year, you will need another year of exceptional yields combined with reduced costs to maintain income.
The major costs are machinery, land rental, fertilisers and pesticides. The benefits of increasing land area to get economy of scale is being destroyed with high rental costs.
However, farmers continue to believe that the costs associated with machine ownership present a significant saving over contractor charges. In practice that is often not the case.
The only advantage of machinery ownership is being able to do work on the day you want to do it. Before replacing any machine you should look at the costs of all the alternatives - leasing, contractor, neighbours or partnership with another farmer or farmers to provide one good outfit between you.
Compare this against the true cost of ownership, including depreciation, maintenance and repair, insurance, interest charges, workshop equipment, machinery sheds, fuel, lubricating oils and labour. Then divide that by your proposed acreage.
What will happen to the annual cost per acre if you lose or gain some land? What will the impact of the machine cost be on your ability to take advantage of some other opportunity that may come your way in the coming years?