Machinery costs driving up fixed farming expenses

MarketsFarm — Fixed costs on farms continue to rise year-over-year, a statistic largely attributed to increasing land values and interest rates.

At the beginning of 2019, Farm Credit Canada (FCC) reported farmland values across Canada increased by an average of 6.6 per cent during the previous year.

But that’s not the main driver of fixed costs, according to Dave Sullivan, chief operations officer of Global Ag Risk Solutions, pointing instead to machinery.

“We make those choices as farmers every day,” Sullivan explained at Keystone Agriculture Producers’ annual general meeting in Winnipeg.

“It’s within our control, not the market,” he said. “Those decisions drive our costs much more than the cost of land.”

Sullivan predicted that machinery purchases will decrease in years to come.

“We’ll see this trend of fixed costs flatten out,” he said, adding that farm profitability has “sucked the working capital” out of agriculture in Western Canada.

One notable trend is that equipment purchases have slowed down in recent years. Combine sales are down by as much as 27 per cent.

FCC expects to release its report on 2019 Canadian farmland values this spring.

— Marlo Glass reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.