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Estimating Farm Equipment Depreciation: Which Functional Form Is Best?

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  • Jing Wu
  • Gregory M. Perry

Abstract

Farm equipment depreciation has been the focus of research in economics and engineering for more than 60 years. Using data from 16 years of auction sales, depreciation functions were estimated for 17 types of equipment, including tractors, combines, swathers, planters, discs, and trucks. The Box—Cox function did the best job of explaining variability in these various sales data bases and in forecasting prices in an out-of-sample data set. Nevertheless, the much less complicated double square root and sum-of-year's digits functions performed nearly as well. Simplified double square root estimates are provided for practitioners interested in forecasting equipment depreciation. Copyright 2004, Oxford University Press.

Suggested Citation

  • Jing Wu & Gregory M. Perry, 2004. "Estimating Farm Equipment Depreciation: Which Functional Form Is Best?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 483-491.
    • Handle: RePEc:oup:ajagec:v:86:y:2004:i:2:p:483-491
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    File URL: http://hdl.handle.net/10.1111/j.0092-5853.2004.00593.x
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    Cited by:

    1. Ivan Herranz-Matey & Luis Ruiz-Garcia, 2023. "Agricultural Tractor Retail and Wholesale Residual Value Forecasting Model in Western Europe," Agriculture, MDPI, vol. 13(10), pages 1-21, October.
    2. Ivan Herranz-Matey & Luis Ruiz-Garcia, 2023. "Agricultural Combine Remaining Value Forecasting Methodology and Model (and Derived Tool)," Agriculture, MDPI, vol. 13(4), pages 1-15, April.
    3. Ivan Herranz-Matey & Luis Ruiz-Garcia, 2023. "A New Method and Model for the Estimation of Residual Value of Agricultural Tractors," Agriculture, MDPI, vol. 13(2), pages 1-20, February.
    4. Delbridge, Timothy A. & Fernholz, Carmen & King, Robert P. & Lazarus, William, 2013. "A whole-farm profitability analysis of organic and conventional cropping systems," Agricultural Systems, Elsevier, vol. 122(C), pages 1-10.
    5. Tozer, Peter R., 2005. "Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137951, Australian Agricultural and Resource Economics Society.
    6. Daninger, Nathan & Gunderson, Michael A., 2017. "The Pricing and Depreciation Patterns of Used Tractors," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258282, Agricultural and Applied Economics Association.
    7. Ibendahl, Gregory & Griffin, Terry W., 2021. "Machinery Replacement Strategies," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2021.
    8. Ivan Herranz-Matey & Luis Ruiz-Garcia, 2024. "New Agricultural Tractor Manufacturer’s Suggested Retail Price (MSRP) Model in Europe," Agriculture, MDPI, vol. 14(3), pages 1-21, February.
    9. Lazarus, William F. & Ibendahl, Greg & Klose, Steven & Langemeier, Michael & Salassi, Michael & Smith, Nathan & Wolf, Chris & Zering, Kelly, 2016. "USDA Commodity Costs and Returns (CAR) and Monthly Milk Cost-of-Production (COP): A 2016 Data Product Review and Proposals for Change," Staff Papers 245164, University of Minnesota, Department of Applied Economics.
    10. Lips, Markus & Burose, Frank, 2012. "Repair and Maintenance Costs for Agricultural Machines," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 1(3), pages 1-7.

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