By John Shutske
Economic projections for 2025
As we wrap up 2024, Wisconsin agriculture has seen its ups and downs. Fall crop prices were among the lowest in years, while interest rates and cash rent remained relatively high. Looking to 2025, there are positive signs, such as a potential for modest reductions in input and interest costs. However, USDA projections for next year’s farm prices—$3.90 per bushel for corn and $10.00 per bushel for soybeans—fall below Wisconsin’s estimated break-even prices of $4.65 and $10.80 per bushel, respectively. Given this mixed outlook, most producers are being cautious about making significant changes and investments, including in machinery. Whether it’s a skid steer loader for a dairy operation, a tractor, or combine for row crops, machinery represents a major investment, and the annual costs to own and operate machinery impact a farm’s bottom line.
When to consider buying or replacing farm equipment
Machinery ownership and operation expenses are significant. Several factors should drive the decision to purchase new equipment or replace existing equipment. For example, you may need to expand capacity with a larger planter or tractor to offset a lack of labor during activities like spring planting or hay harvest. Or, you may find that older, heavily used machines require frequent repairs due to years of wear.
Buying new equipment can seem attractive and even exciting, but high prices and elevated interest rates may make the investment less feasible. This is where buying quality used equipment becomes a practical alternative, because it provides the ability to cut costs while still meeting production needs.
Choose equipment that fits into your operation
When purchasing used machinery, it’s crucial to evaluate the functionality and requirements of equipment based on your farm’s needs. Whether you plan to expand your operation or replace a worn-out machine, understanding evaluation criteria like field capacity, intended use, and horsepower requirements is essential. For example, a small livestock farm may meet its needs with an 85 PTO horsepower tractor, while tilling and planting more acres per hour or doubling daily acres harvested will require more machine power. Ensuring the equipment is matched well with existing equipment can help avoid unnecessary costs. Depending on your farm, you may also need to consider technology-based factors such as compatibility with existing precision agriculture components.
Understand and evaluate the costs
Economics plays a huge role in purchasing decisions. It is important to compare the cost of ownership with alternatives like hiring a custom operator or leasing equipment. Ownership provides convenience but requires an understanding of all costs. It’s also worth noting that new equipment is usually covered by warranty for a significant time, an option less likely with used machinery. Preventative maintenance and understanding the machine’s condition can help mitigate unanticipated costs. Engaging with your local mechanic and service providers, reading and discussing maintenance schedules, and evaluating parts availability are critical steps to avoid a costly and frustrating surprise.
Buying used machinery usually provides upfront savings compared to buying new. High interest rates can make financing new machinery a challenge and add risk during uncertain times. Used machinery offers a lower initial cost, allowing farmers to conserve capital for other critical needs. An older machine that has been well-maintained per documented operators’ manual recommendations can hold much of its value throughout its functional life. Thoroughly assessing the condition of used equipment and budgeting for maintenance can make it the most prudent choice for many farmers.
Prioritize safety features for a better long-term investment
Safety should be another priority when purchasing used equipment. Farming is hazardous, with a high incidence of injuries linked to tractors and machines. Row crop, silage, and hay harvest machines can be particularly dangerous during operation and repair. Features like shields, lights, and markings (reflectors, SMV emblem) that comply with regulations and rollover protective structures (ROPS) are essential. Older tractors or other machines without these features may not be worth the risk. The presence of safety shields and other devices may also be an indicator of how well the last owner took care of their equipment. Always insist on getting an operator’s manual when purchasing used. Safety includes proper worker training, and the operators’ manual is the best source of crucial information.
Be cautious buying from online platforms and auctions
Buying used equipment requires research. Online platforms and auctions can sometimes provide opportunities but require caution. Never make a major equipment purchase sight unseen. If you are unsure, consider bringing an experienced mechanic or trusted advisor to inspect and help identify issues that might not be readily apparent. Researching a specific make and model’s weak points—either online or by talking to those with experience using the same machine—can also be invaluable. For example, some machine designs have known design issues that can lead to well-documented failures in drivetrains, engine components, or other systems. If purchasing from a distant seller, carefully investigate transportation costs and logistics.
Leveraging online and in-person social networks and local expertise is also a smart idea. Neighbors and other farmers can provide insights into which makes and models perform well under local terrains, soil conditions, or other local situations. Many farmers have experience buying used equipment and can offer advice on what to look out for and how to negotiate a fair price. Social media groups and forums dedicated to specific brands or types of equipment are also valuable resources for information and recommendations.
Conclusion
Considering the tight margins expected for 2025, Wisconsin farmers must carefully weigh every financial decision. When a change is warranted, used machinery can stretch dollars while achieving operational goals. Whether expanding capacity, upgrading old equipment, or addressing an unmet labor need, used machinery offers a viable option, but you must carefully consider needs, evaluate equipment condition, and prioritize safety. As we face an uncertain year, these steps can help farmers adapt while keeping expenses in check.
Source : wisc.edu