Farmer Iron

Moving Ahead with Buying Plans

Dow slippage and softer commodity prices are the news of the day. However, there are some farm gems buried in there ...

Dow slippage and softer commodity prices are the news of the day. However, there are some farm gems buried in there too - energy prices are falling (even if diesel is being stubborn). Fertilizer costs have slid a bit. So what does that do for your equipment buying plan?

 

For years, I've written that farmers should have a capital purchase plan for equipment similar to other fleet businesses. Equipment should have a "life" on the books, but once depreciated off you can determine how long to operate a machine before replacing it and restarting the depreciation clock. It's about your debt and tax appetite, as some financial gurus call it.

 

Given the current market conditions, it appears some farmers are talking about re-evaluating, but for others the ability to buy equipment may only be hindered by its availability. Last week at the Sunbelt Ag Expo we heard from at least one supplier that they were sold out of mid-size, and higher, tractors until into 2009. Major players are pushing those orders back.

 

Some softness in the market is expected - give two years of more than 50% growth for big iron. If it slips a bit, that still keeps numbers high over the three-year period. The key is your buying plan.

 

If you have a schedule for equipment replacement that you've worked out with your accountant, do you stick to it? Do you delay a purchase for a year? Those are personal decisions. However, the pressure to produce food isn't going away and end-users are going to need crops for the foreseeable future. They'll pay what they're worth to get you to plant (really).

 

This is not a time to miss crop pricing opportunities. Old crop corn has been flying into local elevators, probably for a lot less than the $7-plus it could have been moved for this summer. But taking what you can get now is not a losing proposition.

 

At the end of the day, a popular saying here at Farm Progress, you have to think about the long-term health of your business. That does mean keeping efficient, productive equipment at work on your farm. And frankly, that equipment can save you money with its new features and enhanced performance.

 

The lurch in the markets creates uncertainty and volatility, but that can also create opportunities to price profitably. Seek out the opportunities as they come your way.

 

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