Horsepower/cost vs. productivity/profit

I was looking at a nieghbors 'tractor' the other day. An articulated behomoth. I think he said it cost a quarter million or something. I remember him saying that the lights cost 9k dollars.

I know he has a lot of land. Sections (square miles) but I don't know how many.

I guess the question is when does size and cost and 'productivity' get in front of us? I see my little 400 against his huge machine and wonder how much does he have to do just to afford that. So is it true then that when my 400 was new that it was able to do what this biggie can? Not size but productivity/profit wise? I know the answer is NO, but when does tractor size/worked acres/cost to run and profit gained really come around to a given threshold? By getting bigger stuff don't you require yourself to get more ground just to pay for it?

I am not a farmer. I was born in Alaska and spent the rest of my life in the Marines. Now I bought the farm (so to speak). It amazes me to see the size of some of this stuff!

It can be a vicious circle.

You get more land to farm so you get a bigger tractor.

You get a bigger tractor so now you need more land to farm.

You get more land so now you need a bigger tractor.

By becoming a bigger farmer you may not make more profit but you may build net worth.

You can match your machinery and time to make as much off of 200 acres as you can off of 2000 acres if you don't spend it wisely.

Gary

a few things to consider.....

on one hand no matter what size tractor, it only takes one operator, therefore the bigger the tractor, the more you can get done every hour, with only one operator, think more of all the old combine pictures you used to see with 20 combines in a large wheat field - now one can that with 19 less combine drivers.......

but on the other hand, if something happens to that one huge large combine or tractor, all productivity stops....the others in the example above can't keep on going......

then the issue of travel time.....typically, the bigger your stuff and your farm, the further you have to travel, all travel time is basically costing you in terms of income and productivity, and the larger units will use more fuel than a smaller one while in transport, but sgain might be easier and cheaper to move one outfit than 10....

then comes the issue of little or multi jobs, if you buy a multipurpose machine it might not do heavy tillage as well or as fast, but it can make you money baling or grinding feed or moving snow the other times of the year.....
when that guy with huge tractor has a spot flooded out, what does he do to replant - nothing - his outfit is too big to justify cruising around for little spots....

then comes the issue of trade in/scrap -
just like a good pickup - there is always a good market for a good used pickup, but after you take that multi million dollar machine and run it over a million acres, who wants it? there would very little if any trade in value or resale value if it is traded in....

just a few ramblings i guess.....

another thing I might add,
around my area because of acreages, etc, a 50 to 90 hp tractor market is way overpriced,

but I can buy a larger maybe 120 to 140 hp tractor cheaper than an 80 hp model... so therefore, when i figure total cost per hour or productivity per hour, I include the original purchase price in my consideration (and all my stuff is well used)

not sure which big 4 wheel drive your neighbor has but in it's day that 400 was likely the equivalant of his beast. It was the biggest rowcrop tractor IH made.

The way I see it a sad result is fewer kids get to grow up like I did 50 years ago. Instead they sit around with video games and get fat rather than the experience of working with nature and watching things grow.

Yeah Gary it can be a vicious circle. But I would say there are thresholds. The thresholds are based on time and cost. A 50 hp tractor can work so much ground per hour when the operator runs out of time he/she either has the size of the farm or does one of two things--hires another operator with another 50 hp tractor or buys a bigger tractor.
So if you have 50 tillabe acres and you have to get the plowing (for example) done in say 2 days then you need X size equipment. The 2 days is driven by say you have a 8 to 5 job and can only work at night and the weekends. Let's say for this example you are actually getting it done in 1 day. Now the neighbors place goes on the market, same size you alreay have-50 acres, and because you do have that 8 to 5 job you can afford to buy it (rent it). Still have to get the plowing done in 2 days and you can. Then you buy yest another piece still have to get done in 2 days but it takes 3 days so what do you do? Hire someone or buy bigger equipment. That's what I mean by thresholds.

I wonder if the Amish go through the same thing with horses. You can only use so many teams in a day and working at night is not productive. Many hands make light work. I would have loved to work on an Amish farm, just for the experience.

I'm not a farmer, I just dabble. But I can see where a bigger brush hog, which would require a bigger tractor, for example, would let me get done sooner. Same with plows, disks, etc.

Larry in Michigan

When does size get ahead of $ prodoctivity? When size gets so big that it gets out of the manager's hands....... Once you get a bunch of employees around and a certain bureauocracy sets in to control that, then I believe you start losing prodoctivity. The other reason is if he's buying a big tractor for envy instead of need. If he's got the acres to justify the rig, it will be more cost effective. It'll probably lower his fuel costs per acre as well as labor costs.
One other factor is field size and shape. If he's got small or uneven fields then he's certainly not getting the best from the big tractor. The same is often true of the little tractor in these fields but you tend to have far less riding on the efficiency of the little tractor so it isn't such a big factor...
I also believe that it doesn't make a bit of difference whether you run new gear or old gear, cost wise if it's sized to what you're doing. Old gear is not cheap to run when you factor in the cost of repairs and downtime or the cost of bringing it into line with a new machine. You'll spend the money one way or the other. Some of us fix old gear and bring it to new condition because we either like the old gear or can put a bunch of sweat equity into the old stuff to bring it up to snuff... but it STILL HAS A COST.

I'd also suggest that the guy that has his gear sized to be just a touch behind on his timing is probably going to come out ahead finincially. He's running the gear to it's maximum capacity. He'll probably lose a bit of yeild because he's a bit behind, but it's still a crop that's going to make money without the extra expenses of bigger gear...

I don't think the remarks about a guy needing bigger gear to get his work done on evenings or weekend are particularly relevant in this discussion because he's buying the gear from a paycheck to keep his hobby going and trying to not have it interfere with his dayjob. That's his choice, but finincial prodoctivity is not what he's after.

Rod

There is an economics of scale advantage in farming just like any other industry but it only works up to a point. His cost per acre to run that big equipment is probably low enough that you would be sirprised and once you get the first one paid for trading every couple of years doesn't cost very much.

I agree with you completely. Today the word "play" dominates kids' lives. I grew up on the farm in the 50's and early 60's. From the time I was big enough, I was handling square bales, silage, bags of grain, shoveling manure, and toting 10 gallon milk cans, one in each hand to a cooler 40 yds from barn. I had chores to do before and after school. If it was 95 degrees and there was hay to bale, we did it. We did not whine because it was too hot.
Today kids either are "seriously involved" with PLAYING; sports, skate boards, video games, but none the less PLAYING; not engaging in productive work. I have two grand children in high school who have NEVER experienced even one half of a days' hard work. I think this, along with the extreme liberalism forced by the politically correct CESSPOOLS of our country are the two main things that's sending our nation to H#LL.
Mr. Bob

Keep in mind that a lot of the high dollar equipment is leased instead of farmer owned nowadays.

I suspect this is true of these huge 4 wheeler tractors in particular. The dealer leases the tractor for the term of the factory warranty, then sells it for the residual value. And the resale value of these big guys isn't all that great, unless you can buy a service contract or extended warranty of some sort, and that just adds to the price of the unit. If you ever have to put one in the shop, you're talking BIG bucks just to get it in the door.

The fellow who leases our farm land farms quite a bit elsewhere, plus does a lot of custom harvesting. He leases two John Deere combines. It works for him that way, but he admits there's now way he could afford to own two $150,000 to $200,000 combines and come out ahead.

It is all a matter of timeliness. If a guy has 3,000 acres of corn to plant (a reasonable figure around here), and every day past optimum results in a 1% yield reduction, it is easy to figure. 3,000 acres X 190 Bushels per acre is 570,000 bushels of production. 570,000 X 1% is 5,700 bushels lost per day. 5,700 bushels X $4.75 is $27,000/day lost by planting past optimum time. Makes sense to be a little overpowered, as a type of insurance. With the few days available for fieldwork around here this spring, it is easy to see in the fields who was prepared and who wasn't.

I agree with many of the comments, but one thing to consir is the tax man. A friend bought one of the "huge" combines, and built a "hanger" (shop) for it. Because the tax man said too. The old combines did not get traded in or sold.

The same sort of thing is happening around my area, but with dairy farms. The neighbor and his son milked 150 cows and kept everything in house. Raised their own heifers and did most of the field work. Now that build a big barn. They milk 450, hire the heifers out to a neighbor, and have almost all their field work done by custom operators. Its hard to belief they are any better off than they were when they were milking 150 and doing everthing themselves... I just dont get it...

Better off? Probably not... but they're still milking cows, which they probably wouldn't be or wouldn't be for much longer if they didn't jump. Having help around allows them some time off too which they probably wouldn't have if they were running the whole show themselves before..
Anyone that thinks crops are tough ought to try milking cows for a while.

Rod

I think you are onto something with the time off... Now that they have a couple hired men they do go away every once in a while for a few days. Its just wierd to see them go so big since there is only one kid (27 years old) that wants to farm with his dad. Plus, since they only own 90 acres, they are banging on every door to find more land to rent....

They're not the only ones...
There's lots of them around here that are doing the same thing. The biggest difference is that they have several times the debt here. Some of them are probably in so deep that it's not to the bank's advantage to pull the plug of most of them. I've heard that there's a few in that situation lately... and they operate on a daily basis with the mentality that if they want er, send someone to milk the cows tonight. Even if they're treading water, the bank is still better off sticking with them in hopes that it'll turn around.
The fella that's having a hard time paying his bills, owes some money but still has some equity is in a dangerous position these days... He's got something to take. When you own nothing anyway, ya gots nothing to lose anyhow.
Somehow, I don't think most of these big guys got in this position by bad planning...

Rod