21 April 1995

Do your sums to find out if its worthwhile buying

Whether the extra cost of machine ownership over employing a contractor can be justified is a dilemma faced by many farmers. Gary Markham runs through the costing procedure for a mower conditioner

A MOWER conditioner may be a relatively low-cost piece of equipment to buy. But compare total annual running costs of the machine with a contractors charge, and the price of ownership can start to look expensive.

There are well-proven benefits for a farm which runs its own mower – timeliness, for example, is critical to making good quality silage. However, it is important to recognise that those benefits have an associated cost.

The example in the table estimates that additional cost for a farm which takes three cuts of grass off 36ha (90 acres).

It shows the annual cost to the farm of running a 3m (10ft) wide trailed mower conditioner, pulled behind a 100hp tractor which averages 800 hours a year. Should that tractor clock up more than 800 hours, the tractor portion of the mowing cost – hence total mowing cost – will change.

Per hectare figure

The total cost a hectare of £32 (£13/acre) is the important figure. Compare it with a typical contractor charge of £18.75/ha (£7.50/acre). Over the annual 108ha (270 acres), total running costs for the farms mower add up to £3450 compared with a contractors bill of £2025 – an annual difference of £1425.

Attractive though those potential savings may appear, any benefit from a switch in policy can quickly be lost if reduced timeliness and poorer silage quality are the result.

So the decision on machine ownership versus a contractor has to be based on more than sums.

For example, how reliable is the local contractor and what is the availability of the farms existing labour/tractor pool during the critical silaging period, are just two of the factors that need careful consideration.

&#8226 Gary Markham is a farm business consultant with chartered accountants Grant Thornton.


Mower conditioner costings (£)

Mower/100hp

conditionertractor

Area of silage (acres)90

Number of cuts3

Average workrate (acres/hour)5.4

Purchase price (after discount) (A)11,50025,000

Selling price (after 5 years) (B)3,76811,093

Average value (C=(A+B)/2)7,63418,046

Annual costs

Interest @ 9% (D=Cx0.09)6871,624

Average depreciation (E=(A-B)/5)1,5462,781

Insurance @ £15/£1000 (F=15x(C/1000))115271

Total annual fixed costs (G=D+E+F)2,3484,676

Hours worked annually (H)50800

Fixed costs an hour (I=G/H)476

Operating cost per hour

Labour (J)06

Fuel (K)01

Spares and repairs % (L)3%5%

Spares and cost (M=(AxL)/H72

Cost an hour (N=I+J+K+M)5415

Total cost an hour (P=54+15)69

Total cost an acre (R=P/workrate per hr)13

Total cost a hectare32

Total annual cost (S=PxH)3,450