What is in this article?:
• For individual farmers, decisions about machinery and equipment are quite often their most financially-impacting.
• Making equipment decisions may appear daunting, but the good news is that farmers have several sound options when considering farm equipment needs.
Information key to decision-making
Whether shopping to buy or rent, or undecided, the more knowledgeable you are about your current utilization/efficiency and the cost of your production, the more informed decision you will make. In the case of renting, this information helps you better structure an agreement for an appropriate level of utilization (number of hours) for your farm.
Utilization should be one of your key data points when looking at whether to rent or buy combines. As every farmer knows, although it represents one of the most sizeable farm expenses, a combine is the least utilized of all farm machinery with a utilization rate of about 7 percent a year.
Many farmers — even those whose acreage warrants purchase consideration — don’t feel the price is justified for a machine that sits in their barn the majority of the year, and consequently decide to rent and use the available capital in other areas of their business.
In the event of crop loss, a rental solution carries a lesser burden than ownership. If you financed the combine, your dealer would not stop your lease payments, and the combine still depreciates in value even though it is not used.
Producers sometime forget that the combine they own depreciates each year whether they use it or not. Thus, they are paying an economic price even in years they don’t need their machine due to crop failure.
Today’s farm machinery has the technological capabilities to deliver unprecedented information about everything from grain yields to soil composition to optimum planting — all of which take the notion of precision farming to a new level and enable farmers to be more efficient and thus more profitable.
We find that many farmers are exceptionally savvy at learning how to best use the available technology to their efficiency and productivity advantage. From this technology perspective, rental is a pretty clear winner over purchase.
As an example, we talk a lot with our customers about the notion of “smarter harvest” — trying to help them with their businesses from a macro level as opposed to simply renting a combine to them.
In support of that, we offer our data analytics platform, FarmLink Analytics, which provides current information to help make better grain marketing decisions. The platform includes weather, yield, and basis information — data points enabling farmers to make better, more informed decisions on when to sell their grain.
In conclusion, there are clearly many variables that go into making major equipment decisions, and there are advantages to both renting and purchasing.
If you arm yourself with information, clearly understand the pros and cons of your possibilities, and vet them against your specific situation, you will undoubtedly make a smart decision for your farm.