Risk-Returns Criteria In Selecting Farm Machinery

William Edwards and Michael Boehlje

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The problem of selecting the proper scale of crop machinery for a given farming operation has always been complicated by the need to consider the effect of timely completion of field operations on harvested yields. The difference between the gross value of crop yields given optimal timing of all field operations and the actual yields has been termed the "timeliness" cost. By adding this cost to the other costs of owning and operating machinery, a total machinery.cost can be calculated. Minimization of total machinery costs (including mean timeliness cost), all else constant, has frequently been employed as the criterion for optimizing the size of the machinery set (Boisvert; Burrows and.Siemans; Mclssac and Lovering; Tulu, Holtman, Fridley and Parsons). However, timeliness costs are stochastically dependent on the number of days suitable for field work during critical periods of each year. Year-to-year variations in weather patterns produce corresponding variations in timeliness costs. Avoidance of extremely high timeliness costs in any one year has often been advanced as a reason for farmers to" possess machinery larger than the size which will minimize long-run total machinery costs (Kletke and Griffin).

Date: 1980-01-01
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