Buying Versus Renting a Combine: A Suggested Basis for Decision Making

From time to time, many farm operators are faced with a choice between buying one of several types and sizes of combines and hiring a custom machine. Heretofore, research studies designed to aid farmers in making sound decisions of this type have considered primarily the effect of annual use, or acreage harvested, on the costs of the various alternatives. This conventional analysis attempts to determine the annual acreage required to justify, on a cost basis, the purchase of a combine. Below this acreage, the hiring of a custom combine is more economical. Labor is usually valued at the going wage rate paid farm help in the area, and interest on investment is based on rates that local farmers pay for borrowed funds. This article points out why the conventional analysis often proves inadequate, and suggests a simple way in which these difficulties may be overcome by taking other important variables into account. While the suggested procedure is applied here to the problem of choosing the least-cost method of combining grain, it should prove equally useful for other economic problems of this type. The generous assistance of I. R. Starbird and E. L. Langeford, Farm Economics Division, Economic Research Service, who made available to the author data and specialized knowledge of the Mississippi Delta area, is gratefully acknowledged. The article has also benefited greatly from the comments and suggestions of R. V. Baumann, J. J. Csorba, A. S. Fox, M. S. Parsons, and M. L. Upchurch, Farm Economics Division, Economic Research Service.