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Per Unit Costs to Own and Operate Farm Machinery

Author

Listed:
  • Beaton, Aaron J.
  • Dhuyvetter, Kevin C.
  • Kastens, Terry L.
  • Williams, Jeffery R.

Abstract

With increasingly thin margins and new technologies, it is important that farm managers know their cost of field operations on a per unit basis (e.g., acre, ton, bale). Accurate per unit costs give confidence when constructing enterprise budgets and evaluating new technologies, such as no-till. Custom rates are often used as a proxy for per unit costs; however, this research, using entropy and jackknife estimation procedures, found that custom rates understate total ownership and operating costs by approximately 25% for an average Kansas farm. Estimates from these models are then used to benchmark actual costs against expected cost.

Suggested Citation

  • Beaton, Aaron J. & Dhuyvetter, Kevin C. & Kastens, Terry L. & Williams, Jeffery R., 2005. "Per Unit Costs to Own and Operate Farm Machinery," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(01), April.
  • Handle: RePEc:ags:joaaec:43720
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    References listed on IDEAS

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    1. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
    2. Timothy L. Cross & Gregory M. Perry, 1995. "Depreciation Patterns for Agricultural Machinery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 194-204.
    3. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
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    Citations

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    Cited by:

    1. Shockley, Jordan M. & Osborne, William A. & Dillon, Carl R. & Pierce, Jerry S., 2016. "A Two-Tiered Benchmarking Analysis for Cost Management," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    2. Watkins, K. Bradley & Hill, Jason L. & Anders, Merle M. & Windham, Tony E., 2006. "Whole-Farm Evaluation of No-Till Profitability in Rice Production using Mixed Integer Programming," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(03), December.
    3. Pendell, Dustin & Williams, Jeffery & Sweeney, Daniel & Nelson, Richard & Rice, Charles, 2006. "Economic Feasibility of Carbon Sequestration with Alternative Tillage Systems," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    4. T. Sathiya Priya & N. Vivek, 2016. "Restructuring the agricultural supply chain," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 10(1), pages 135-148.
    5. Ibendahl, Gregg, 2015. "The Effects of Machinery Costs on Net Farm Income," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    6. Williams, Jeffery R. & Pendell, Dustin L. & Sweeney, Daniel & Rice, Charles W. & Nelson, Richard G., 2006. "A Risk Analysis of Carbon Sequestration in Claypan Soil with Conservation Tillage Systems and Nitrogen Fertilizers for Grain Sorghum and Soybean," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35327, Southern Agricultural Economics Association.
    7. Peterson, Jeffrey M. & Smith, Craig M. & Valentin, Luc, 2005. "A Water Quality Trading Simulation for Northeast Kansas," 2005 Annual meeting, July 24-27, Providence, RI 19167, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    benchmark; custom rates; custom work; entropy; jackknife; machinery costs; Production Economics; Productivity Analysis; Q10; Q12; C51; C60;

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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