THE COST OF MAKING HAY WHILE THE SUN SHINES

Originally published on July 22, 2004

 

Haybines and balers are now working hard to put up the required feed on most prairie farms. While all of us would like to own new haying equipment, each farmer should know what this equipment costs on a per acre or per bale basis.

How many hay acres do you need to cut each year to justify a new mower? How many bales do you need to make each year to justify a new baler? When should you consider renting instead of buying?

Pulling a new $32,000, 16-foot haybine across your farm is costly. According to my calculations, if you are cutting 640 acres with this new mower-conditioner, your cost is $12.06 per acre.

Pulling a reconditioned $15,000, 16-foot haybine over the same 640 acres lowers the cost to $8.34 per acre.

Both of these costs include an hourly tractor and repair cost.

Estimating costs

To calculate your estimated annual haybine costs, see table 1. I have calculated the per acre costs of running a new and used 16-foot mower over different acreage. You can see how the per acre costs decrease as hay acres increase.

After reviewing your per acre costs, you will have to decide at what point you can justify the trade-off of profitability against the increased reliability and pride of owning a new mower.

While it is possible to rent a haybine, an equipment dealer insider told me that renting isn't encouraged.  If you are able to rent one, you will pay at least $10 per acre. You will also be responsible for new mower knives once the job is done.


 

 

In table 3, I added an hourly tractor and repair cost to the existing rental costs and I calculate a total mower cost of $15.06 per acre.

It doesn't take long for a used haybine to match this rental rate.

As we see in table 1, by cutting only 216 acres of hay with a used haybine, we lower mower cost to $14.79 per acre.

The baler: new, used or rented?

To justify the costs of owning a new versus used baler, the same tradeoffs apply. As shown in table 2, making 600 bales with a new $32,000 baler costs $11.21 per bale. Making the same bales with a used baler costs only $7.24 per bale.

Renting a baler instead of buying one is the right choice in certain situations. In our area, I can rent a new baler for $4 per bale.

After adding an hourly tractor and repair cost, as shown in table 3, the cost is $7.74 per bale. In table 2, we see that for the new $32,000 baler to match this rented per bale cost, it must make at least 1,116 bales every year.

If the new baler makes less than 1,116 bales, it is cheaper for the farmer to rent.

The used baler produces a lower per bale cost after fewer bales.

In table 2, the farmer is better off owning the used baler than renting a new baler if he makes more than 528 bales each year.

Once again, the farmer must determine the point at which he can justify a new baler.

I have found that there is often more comfort in maintaining your farm's profitability than there is in using the newest equipment. 

This is not to say that buying the equipment is not the right choice in your situation, only that when farming is becoming increasingly difficult, it is more important than ever to know your costs.

To justify the costs of owning a new versus used baler, the same tradeoffs apply. As shown in table 2, making 600 bales with a new $32,000 baler costs $11.21 per bale. Making the same bales with a used baler costs only $7.24 per bale.

Renting a baler instead of buying one is the right choice in certain situations. In our area, I can rent a new baler for $4 per bale.

After adding an hourly tractor and repair cost, as shown in table 3, the cost is $7.74 per bale. In table 2, we see that for the new $32,000 baler to match this rented per bale cost, it must make at least 1,116 bales every year.

If the new baler makes less than 1,116 bales, it is cheaper for the farmer to rent.

The used baler produces a lower per bale cost after fewer bales.

In table 2, the farmer is better off owning the used baler than renting a new baler if he makes more than 528 bales each year.

Once again, the farmer must determine the point at which he can justify a new baler.

I have found that there is often more comfort in maintaining your farm's profitability than there is in using the newest equipment. 

This is not to say that buying the equipment is not the right choice in your situation, only that when farming is becoming increasingly difficult, it is more important than ever to know your costs.

 

Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at allyn@hth-accountants.ca or website www.hth-accountants.ca. He is also involved in the family farm near Loreburn, Saskatchewan.