Machinery Cost per Unit Area

Machinery cost per hectare has two halves that behave in completely different ways, and almost every argument about machinery is really an argument about which half somebody is looking at. Variable costs — fuel, repairs, lubricants, the operator's hours — are incurred per hectare and stay roughly constant per hectare no matter how much ground is covered. Fixed costs — depreciation, interest, insurance, housing — are incurred per YEAR and are unaffected by use, so their contribution per hectare is a hyperbola falling as the area rises.

That shape is the entire economics of farm machinery. A combine with $40,000 of annual fixed cost costs $400/ha in fixed charges over 100 ha and $80/ha over 500 ha, and nothing about the machine has changed — only the divisor. It is why the same header is ruinous on one farm and cheap on the next, why custom operators can undercut owners while charging a profit, and why "we already own it, so it costs nothing to use" is the most expensive sentence in farm management. The machine costs what it costs whether it moves or not; using it more does not raise that cost, it spreads it.

Depreciation is the term most often left out, on the grounds that it is not a cash payment. It is nevertheless the largest fixed cost for most machines, and ignoring it means the machinery appears to cost less than the sinking fund that will have to replace it. The honest way to carry it is the expected fall in market value over the year of use, which for a modern machine is steepest in its early years — a fact that argues for buying used and against replacing on a short cycle, unless the reliability of new equipment is worth the premium in a narrow harvest window.

Two refinements make the figure defensible. Repairs are not really constant per hectare: they rise with accumulated use, so a machine late in its life carries a higher variable cost as well as a lower fixed one. And labour belongs in the variable half even when the operator is the owner, because owner time spent on a tractor is time not spent elsewhere. Leaving it out makes owning look better than hiring by exactly the amount of work the owner does for free.