Hay growers should know their costs of owning and operating haying equipment before deciding whether to do it themselves or hire custom operators, says Whitney Wiegel, University of Missouri Extension ag business specialist.
Machinery ownership costs include depreciation, insurance, interest and property taxes, he says.
“These costs depend upon the market value of the equipment, how each equipment purchase is financed, insurance costs and property tax rates. Machinery ownership costs are often prohibitive when equipment is not used to its full capacity or when the hay produced has little value,”Wiegel says.
Machinery ownership costs are relatively fixed in the short run, meaning that no matter how much hay is baled, ownership costs don’t change for the hay enterprise. But when calculating production costs for each bale produced, these costs are spread out over all units of production.
“Therefore, the situation of owning hay equipment is made more favorable when the volume of hay produced with the equipment can be increased,” he says.
Operating costs include labor, fuel, maintenance and repairs.
“These costs are considered variable costs because the cumulative dollar value of these expenses will vary with the quantity of hay baled,” he says. Like ownership costs, they should be spread across all units of production.
“Dividing the total ownership and operating cost by the units of hay baled provides a dollar value that signifies the ownership and operating costs embodied in each unit of hay. When a hay producer’s machinery ownership and operating costs are less than the custom rate, it is cost-effective for the producer to bale his own hay. When his costs are greater than the custom rate, he should consider hiring a custom baler.”