During the agricultural boom that started in 2006, farm income zoomed and many producers upgraded their equipment. Data from two major farm states, Illinois and Kansas, shows the impact of the expenditures. In Kansas, equipment investment equals $250 an acre, double what it was a decade earlier, write economist David Widmar at the blog Agricultural Economic Insights. A similar gauge, machinery expense, is up as well – more than $80 an acre now vs $50 in 2003. Machinery expense is about 20 percent of farm production.
“As farm revenues, and the value of farm production, decline in 2014, the strategies to purchase and maintain their equipment lines will likely need to adjust,” writes Widmar. A cutback in purchases will conserve cash. Widmar says machinery investment and machinery expense “will be much more difficult to adjust to the lower commodity price environment.”