Machinery purchases are big ticket items for Australian grain growers, who are often presented with differing opinions around investment options.

GRDC has completed a two-year project to develop a comprehensive guide for growers in Australia's cropping regions to support informed decision making around machinery purchases.

The project had input from farm business consultants Farmanco, Pinion Advisory and AgriPath working together with Primary Business, CussonsMedia and Kondinin Group.

The result is a comprehensive guide to machinery investment, outlined in a new podcast and video from GRDC, featuring 30 case studies with grain growers from across Australia and a benchmarking tool to support machinery investment decision-making.

Dowerin grain grower Andrew Todd, whose machine investments are matched to meet Dowerin's low rainfall and sandy soils constraints, says depreciation is a big issue in a market where new machinery values are rising rapidly.

“The traditional measure has been machinery investment per cropable hectare or perhaps per tonne of grain produced, where this guide or this ratio is taking into consideration maintenance, labour and also the use of contracting,” Mr Todd says.

“It’s highly relevant and something that the previous measures haven't taken into consideration.”

Kondinin Group research manager Ben White says the guide is helping growers compare their position when it comes to industry averages for similar farming operations. Photo: GRDC

Kondinin Group research manager Ben White says the guide provides a snapshot of the machinery ownership levels of over 450 growers nationally and is helping growers compare their position when it comes to industry averages for similar farming operations.

“Growers are typically presented with conflicting opinions when it comes to machinery purchases and the decisions around big-ticket investments can be stressful.” Mr White says.

“This guide provides a range of tools to help growers make more informed purchasing decisions.”

Amongst the tools is a new benchmarking formula, which allows growers to calculate their machinery investment levels relative to their overall farm profit.

The Machinery Investment Ratio formula requires growers to calculate their total plant, labour, maintenance and contracting costs relative to their total gross farm income. This ratio indicates the efficiency of owning and operating machinery.

Using this formula, GRDC research found on average, the level of national machinery investment was 34 cents in every dollar of farm income generated (a machinery investment ratio of 0.34).

Mr White says while this ratio can vary regionally, businesses that have a ratio of less than 0.34 are typically more efficient with their machinery investments.

“The benchmarking data provides growers with a critical starting point to compare their own machinery investment strategies and could help determine whether they are over or underspending in comparison to industry averages,” he says.

“Growers can then analyse their own machinery utilisation, fleet management practices, repair and maintenance costs, and labour levels to better manage their investment in machinery.”

“It’s important to note that there is no ‘one size fits all strategy’ and growers need to determine the levels of machinery investment or a contracting approach that’s suitable for their farm business.”

The guide also encourages growers to maintain an up-to-date machinery value inventory.

“The cost of machinery, including used equipment, is escalating rapidly, so keeping tabs on current inventory values as machinery supply tightens will be important in the context of machinery investment ratios,” Mr White says.

The guide contains a decision support tool from Farmanco which provides a framework for grain growers to use when making machinery and technology investments on farm.

It allows growers to identify the relative long-term cost of owning machinery so comparisons between machinery investment options can be made.

As part of the project, grain growers from across Australia were interviewed for in-depth case studies that investigated machinery inventories, likely impetus for change or trade and individual grower’s philosophy and approach to machinery investment.

The Machinery investment and replacement for Australian grain growers guide is available on the GRDC website.