Editor’s note: The following was written by Bradley Zwilling, Illinois FBFM Association and Department of Agricultural and Consumer Economics at University of Illinois, for the farmdoc daily website.
Not only have machinery values been increasing over time, so has the size of farms. This study compares machinery values on Illinois grain farms enrolled in Illinois Farm Business Farm Management Association (FBFM) for years 2010 and 2020. We also compare machinery value per acre during the same time period.
Both years show that as acres in a farming operation increased, so did the total machinery value. In looking at 2010, a farmer with 1,000 acres would on average have about $460,000 of machinery. In contrast, about $660,000 would be the machinery value on average for a 1,000 acre farm in 2020. This is about a 43% increase in 11 years.
When we compare other acre numbers, the amount of dollar difference increases, but the percent increase is about the same.
It is interesting to note as the size of the farm increases, the total machinery value increases at a decreasing rate. For example, when going from a 1,000 acre farm to a 2,000 acre farm, the average total machinery value increased by about $540,000 in 2020. When going from a 4,000-acre farm to a 5,000-acre farm, the average total machinery value increased about $280,000 or about 50% of the increase from 1,000 acres to 2,000 acres in 2020.
To look at the machinery value per acre farmed, for 2010 and 2020, machinery values per acre decreased as acres on the farm increased. The smaller acreage farms had the largest increase in machinery value per acre going from about $460 per acre for a 1,000 acre farm in 2010 to $660 per acre for a 1,000 acre farm in 2020, or a 43% increase.
The 2010 machinery value on a per-acre basis slowly decreased as the total acres on the farm increased. For 2020, the machinery value on a per-acre basis decreased more rapidly, going from about $660 for 1,000 acres to $460 for 5,000 acres. For 2010, the decrease in machinery value per acres was about $140 compared to $200 for 2020.
The dollar amount of machinery needed increases as more acres are added to the operation. When comparing this over an 11-year period from 2010 to 2020, the 2020 year increase in value was much higher on a dollar basis at lower acreages.
The increase in machinery values was not only due to the increase in actual value of machinery, but in addition, larger equipment that can cover more acres as well as more technology.
More machinery was also being purchased due to the increase in the federal expense election ($500,000 in 2010 going to $1,040,000 in 2020), allowing more of the capital purchases to be deducted as a current expense, if all of the qualifications of this tax law were met.