Large Increase in Machinery Costs Suggests Need to Reconsider Machinery Purchase Decisions

By Gary Schnitkey and Nick Paulson et.al

Between 2021 and 2023, prices of new agricultural equipment increased by over 20%, resulting in similar increases in machinery costs on farms. To remain competitive, farmers may wish to reassess machinery management strategies, particularly when older machinery needs to be replaced. Combines typically represent the single largest investment on farms.  Harvesting over 3,000 acres per combine will lower costs. The number of tractors, tillage implements, and planters also significantly impact costs.

Increases in Machinery Prices and Costs

An index of tractor prices paid, calculated by the National Agricultural Statistics Service (NASS), illustrates the increase in tractor prices over time (see Figure 1). While Figure 1 is specific to tractors, similar increases have occurred for many agricultural machines. Over time, tractor prices have continued to increase, but gains were relatively modest between 2011 and 2020. The tractor price index was 100 in 2011, the base year of the index. The index increased to 114 in 2020, representing a 14% rise over the nine years from 2011 to 2020. Much larger increases occurred in 2021 through 2023:

• 2021: The index increased from 114 to 123, an increase of 8%,
• 2022: The index increased from 123 to 131, an increase of 7%, and
• 2023: The index increased from 131 to 138, an increase of 5%.

From 2020 to 2023, tractor prices increased by 21%, compared to 14% from 2011 to 2023.

Those significant price increases correspond with supply chain challenges which arose during the COVID pandemic and a general rise in inflation, which continues to this day. Labor shortages have also occurred. Continuing supply disruptions caused by trade disputes are likely to persist and further increase costs. Machine manufacturers have also reduced output due to concerns about generally lower demand for machinery resulting from lower grain farm incomes.

Increases in machine prices are a large contributor to machinery-related costs on Midwest farms. Figure 2 shows per-acre machinery costs summarized from farms enrolled in Illinois Farm Business Farm Management on central Illinois farms growing corn on high-productivity farmland. Machine-related costs include:

• Depreciation represents an economic charge for the use of machinery. Depreciation costs increased from $69 per acre in 2021 to $87 in 2024.
• Fuel and oil increased from $19 per acre in 2021 to $23 in 2024.
• Repairs increased from $32 per acre in 2021 to $39 in 2024.
• Machine hire increased from $16 per acre in 2021 to $22 in 2024.