The machine costs have increased significantly over the years. This puts pressure on the profitability of farmers and forces them to be smarter with their money. Controlling these costs is essential to remain financially healthy, especially in a time when agricultural businesses face fluctuating incomes. The differences in machine costs per hectare are large, as shown in American research.
Companies with lower machine costs per hectare are often more profitable. Managing machine costs is not a one-time task, but a process that requires constant attention, as stated by the University of Illinois. The trend in America also applies to Europe, as evidenced by reports from Eurostat and the FAO.
Cost increases and trends
In Europe, the costs of agricultural machinery and maintenance have increased by an average of 2.5% per year between 2003 and 2023, according to Eurostat. This represents a total increase of about 64% over twenty years. Energy prices have risen by an average of 4.2% per year during the same period. These increases are partly due to stricter environmental regulations and technological innovations, which often come with higher acquisition and maintenance costs. Similarly, in America, rising energy prices since 2003 have had a significant impact on costs for farmers, especially in regions focusing on grain production.
Fuel costs
In the US, fuel costs have increased by 150% since 2003, with peaks in 2008 (+40%) and 2022 (+32%), according to the Energy Information Administration (EIA). European farmers are experiencing similar trends, but fuel costs vary greatly by country. In the Netherlands and Germany, they account for up to 20% of total operating costs, while farmers in Southern Europe often report higher percentages due to fewer economies of scale and higher transportation costs. Between 2010 and 2023, diesel prices in Europe have risen by an average of 120%, partly due to excise duties and environmental taxes.
Repair and maintenance costs
The technical complexity of modern machinery globally leads to higher repair costs. In Europe, these costs have increased by an average of 3.1% per year since 2010, according to FAO data. In France, the average rate for a mechanic is €85 per hour, which is 35% higher than a decade ago. Germany has seen similar increases, with rates ranging between €75 and €95 per hour, depending on the region. In America, these costs are comparable, but the availability of technicians is generally better, resulting in shorter waiting times. In Southern and Eastern Europe, such as Spain and Romania, longer waiting times and higher transportation costs for repairs pose an additional challenge.
Investment behavior and depreciation
American farmers heavily invest in machinery during periods of high income. Expenditures have increased by 4% per year since 2000, according to University of Illinois data. European farmers also invest, with subsidies from the Common Agricultural Policy (CAP) being a significant incentive. Between 2015 and 2022, €54 billion in subsidies were provided in Europe for sustainable machinery. Countries like France and Germany benefit greatly from this, while farmers in Southern Europe, such as in Greece and Portugal, have less access to financing.
Efficiency and economies of scale
In America, large farms have, on average, 25% lower machine costs per hectare. This is because large farms can better leverage economies of scale. A similar pattern is seen in Europe: farms larger than 500 hectares in Germany and France have, on average, 30% lower costs per hectare than farms smaller than 50 hectares. Smaller farmers in Southern Europe, where farms are generally smaller and receive fewer subsidies, often operate with margins of less than 5% due to higher costs per hectare and limited economies of scale.
Both in America and Europe, farmers are facing increasing machine costs due to higher fuel prices, complex technology, and growing maintenance requirements. While American farmers focus on scaling up and smart investments to control costs, European farmers benefit from subsidies and sustainability initiatives in some cases. However, controlling machine costs remains a continuous challenge in both regions, especially in periods of low profitability due to low prices.
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