Repair cost of tractors and agricultural machines in family farms

Available online at www.sciencedirect.com ScienceDirect Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 Farm Machinery and Processes Management in Sustainable Agriculture, 7th International Scientific Symposium Repair cost of tractors and agricultural machines in family farms Edmund Lorencowicz a *, Jacek Uziak b a University of Life Sciences in Lublin, Department of Machinery Exploitation and Management of Production Processes, Głęboka 28, 20-612 Lublin, Poland b University of Botswana, Department of Mechanical Engineering, P/Bag UB0061, Gaborone, Botswana Abstract The mechanization cost in agriculture institute between 20% and 30% of the total production cost. The repair cost of agriculture machines is the second important element of the operation cost of the machines. The paper presents problems related to the calculation of the repair costs and analysis of selected family farms in Poland. The paper argues that there is no precise method for the calculation of the repair costs. The variation of factors influencing the costs, such as exploitation conditions, machines quality or prices relations; causes that the coefficients used in the calculations are not universal and differ between different countries. 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the Centre wallon de Recherches agronomiques (CRA-W). Peer-review under responsibility of the Centre wallon de Recherches agronomiques (CRA-W) Keywords: farm machinery costs; family farms. 1. Introduction Modern agriculture is characterized by high level of mechanization. The number of machines and other equipment increases constantly with the increment of the operation costs. Such costs stand at 20 to 30% of the total production cost (Lips & Burose, 2012). Essentially, the repair and maintenance costs are the second, after fuel, component of operation costs. Despite the high quality of the modern machines, in many cases the actual unit repair cost is much higher than for traditional designs. The knowledge of repair and maintenance costs is essential for * Corresponding author. Tel.: +48 81 531 97 36 E-mail address: edmund.lorencowicz@up.lublin.pl 2210-7843 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the Centre wallon de Recherches agronomiques (CRA-W) doi:10.1016/j.aaspro.2015.12.010

Edmund Lorencowicz and Jacek Uziak / Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 153 making decisions related, among others, to the replacement of machinery and correct preparation of farm s budget (Morris, 1998). The tractors and machines costs in Polish agriculture are relatively high. It is mainly due to the high level of land fragmentation with the average farm area of less than 10 ha and with the total number of farms above 1,429 thousands (Statistical yearbook, 2014). Almost half of the Polish farms have the agricultural area of less than 5 ha, whereas only about 11 thousands farms has the area above 100 ha. There are 1,437,000 tractors with the average age of above 23 years. The other machines used in Polish agriculture have similar data related to the average age and the level of wear. The largest farms have managed to improve their technical equipment thanks to the funds from the European Union. However, in general the majority of machines are overworked and fully exploited. In general, the owners of small farms do not invest in new machines but prolong the utilization life of the existing machines even to 40 years. That increases the frequency and costs of repairs. The majority of farmers try their best to reduce the maintenance costs by performing the repairs themselves and by using cheaper spare parts. The aim of the investigations is to indicate the difficulty and complexity in the calculation of the maintenance and repair costs in family farms. 2. Calculation of repairs and maintenance costs The calculation of the repair costs of tractors and agricultural machines is a complex and problematic issue. It is due to random character of those costs and its dependency on several parameters. As a standard the calculation is done with the application of the repair cost coefficient which is the ratio between the accumulated repair costs to the list price of the machine (1). r repair cost coefficient, Kn accumulated repair costs [PLN], Cm list price of the machine [PLN] r=kn/cm (1) Hence, an annual cost of the repairs can expressed as: Kn= Cm*r (2) and a unit cost: Kjn repair unit cost [PLN/h] W T estimated life [h] Kjn= Cm*r/W T (3) Another measure used sometimes for the calculations of maintenance and repair costs is the repair cost coefficient calculated for the hour or 100 hrs of machine use: r 100 repair cost coefficient calculated for 100 hrs of machine use Kjn= Cm*r 100/100 (4) The repair cost theory developed in 1950s indicates the relationship between the repair costs and the age and use of the machines. That relationship has been confirmed by research done in several countries (Albisser et al., 2009; Hunt, 2001; Landers, 2000; Lips & Burose, 2012; Niari et al., 2012; Wendl, 1989; Witney, 1998). However, there are also reports indicating that the annual repair costs remain at the same level (Liechti, 1994). The above research reports on an investigations performed over a long period of time (monitoring of the machines over a period of 10 years) in farms with small areas (up to 20 ha).

154 Edmund Lorencowicz and Jacek Uziak / Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 The actual values of the repair cost coefficients are different in different countries (tab.1). Table 1. Repair cost coefficients r for selected tractors and agricultural machines for various countries Repair cost coefficients r as a percentage of list price Machine Per 100 hrs of Annual use Polish data a) Tractors below 30 kw of engine power 4.50 0.69 Tractors above 30 kw of engine power 5.00 0.75 Trailer 5.00 1.67 Plough 5.00 5.00 Fertilizer spreader 7.33 11.00 Grain drill 5.00 7.14 Sprayer 4.00 6,00 Combine harvester 4.44 2.67 Baler 4.00 6.15 Potato harvester 1 row 6.25 5.00 Swiss Data b) Tractors 21-29 kw of engine power 8.33 1.00 Tractors30-36 kw of engine power 7.50 0.90 Trailer 5 ton 6.00 1.80 Plough 8.33 8.89 Fertilizer spreader 500 litres 5.00 10.00 Grain drill 3 m 4.00 8.57 Sprayer 500 litres 3.33 8.00 Combine harvester 3.9-4.2 m 4.17 2.35 Baler 5.00 3.00 Potato harvester 1 row 6.67 2.82 UK data c) Tractor x 1.00 Trailer x 2.67 Plough x 7.50 Fertilizer spreader x 10.0 Grain drill x 6.67 Sprayer x 4.67 Combine harvester x 2.50 Baler x 4.00 Potato harvester x 2.80 USA Data d) Tractor x 0.50 Trailer x 2.50 Plough x 5.00 Fertilizer spreader x 6.67 Grain drill x 5.00 Sprayer x 4.67 Combine harvester x 1.33 Baler x 4.00 Potato harvester x 2.80 South African Data e) Tractor 5.90 x Trailer 1.80 x Plough 4.90 x Fertilizer spreader 12.90 x Grain drill 7.90 x Sprayer 4.90 x Combine harvester 2.80 x Baler 6.00 x Potato harvester 6.00 x a) (Muzalewski, 2008), b) (Gazzarin, 2014), c) (Witney, 1988), d) (Hunt, 2001), e) (Theunissen, 2002) The differences in the actual values are due to local conditions such as agriculture characteristics (size of the farms, production conditions) and also price relations (cost of spare parts, labour, power). In many countries there is

Edmund Lorencowicz and Jacek Uziak / Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 155 also a problem with updating of the values of the coefficients. The investigation on the real repair costs and the values of the coefficients requires a lot of effort and is very expensive. The correction of the repair cost with the application of suitable factors is one of the methods to take into account the age and use of the machines (tab.2). The following correction factor can be applied according to the formula: x repair cost correction factor Kn= Cm*r*x (5) Table 2. Repair cost correction factor (x) for tractors Use as % of W T Initial Value Final Value 10 20 30 40 50 60 70 80 90 100 0 0.31 0.45 0.56 0.64 0.72 0.78 0.85 0.90 0.96 1.01 10 0.58 0.66 0.74 0.80 0.87 0.92 0.98 1.03 1.08 20 0.75 0.82 0.88 0.94 0.99 1.04 1.09 1.14 30 0.89 0.95 1.00 1.05 1.10 1.15 1.19 40 1.01 1.06 1.11 1.16 1.20 1.25 50 1.11 1.16 1.21 1.25 1.29 60 1.21 1.25 1.30 1.34 70 1.30 1.34 1.38 80 1.38 1.42 90 1.46 Source: (Taschenbuch, 2002) Table 2 indicates that in case of tractors with use of above 90% of estimated life the increase in the repair costs reaches 46% in comparison to the average values (correction factor 1.46). 3. Materials and Methods The investigations of mechanization costs, including the repair costs, were done on the group of 200 farms, starting in year 1992. The analysis was done for data collected in 2001 from 103 farms (Lorencowicz, 2005; 2007). Additional investigations were done by graduate students and covered analysis of selected cases. It included 5 farms with arable area from 17.8 to 65.5 ha (Łuczkowski, 2014; Stankiewicz, 2007). The costs of the repair in a private workshop were established (Kita, 2009). The study covered repair cases of tractors (13) and combine harvesters (4). The enquiry included repair costs also in the authorized agricultural machine services (Kudeń, 2015). The analysis of repair costs of 49 tractors was also included in the results. 4. Results and Discussions In the group of investigated 103 farms the average annual use of tractors was on 312 hrs (mostly between 151 and 300 hrs). For trailers the annual average use was 63 hrs (most frequently below 40 h). For other machines, the annual use was typically below 40 hrs/year. The predicted length of the life for tractors was ca 30 years and for the other machines between 20 (sprayers) to 30 years (trailers). The annual costs of the spare parts ranged between PLN 2,000 and PLN 8,000, depending on both, the size of the farm (Fig. 1a) and value of the machine set (Fig. 1b). The average share of the spare part costs in the direct machinery costs (excluding depreciation) was 23%. The data from the farms under investigations indicate was high proportion of repair costs. The value of the spare parts purchased was from 19% up to even 61% of the direct costs (Łuczkowski, 2014; Stankiewicz, 2007).

156 Edmund Lorencowicz and Jacek Uziak / Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 a) b) Fig. 1. Direct repair costs vs arable farm area (a) and value of the machine set (b) (Lorencowicz, 2005) The comparison between the repairs costs done in a small private garage (the job is done by the workshop owner) and in authorised machine workshop (3 companies, each with minimum 3 working positions and 5 employees) indicates vast variation. Such variation can be explained by the fact that the private garage repaired mainly older (even 28 year old), less complex tractors with low engine powers (average ca 40 kw). Whereas, the authorised services worked mainly on younger, few-year old tractors (average 7 years) with average engine power of 105 kw (maximum 221 kw). However, the repair costs were not related to the age of the tractors but with the scale of the repair. It is also apparent that Polish farmers decide to use the external workshop, either small garage or authorised service, only in complex cases, in which they cannot accomplish themselves. Fig. 2. Repair Costs vs the use of tractors (Kudeń, 2015) As it can be seen at the figure (Fig. 2), there is no relationship between the cost of the repair and the use of the tractor. Taking into account the average values, the repair cost coefficient for the tractors under investigations can be estimated at 0.26. 5. Conclusions Based on the research presented and on the analysis of the literature, it can be stated that there is no one, precise method for the calculation of the repair costs. The variation of factors influencing the costs, such as exploitation conditions, machines quality or prices relations; causes that the coefficients used in the calculations are not universal

Edmund Lorencowicz and Jacek Uziak / Agriculture and Agricultural Science Procedia 7 ( 2015 ) 152 157 157 and differ between different countries. It is advisable to estimate coefficients suitable for the conditions of a particular country, with its specific type of agriculture. The specific circumstances of Polish agriculture, with small sizes of the farms and old tractors and agricultural machines, highly affect the repair costs. At the same time, the low annual use of the machines creates the situation that many of those machines do not reach the usage level qualifying for a disposal. Regarding the repairs, it is also apparent that the farmers try to perform repairs themselves, limiting the outsourcing by specialized companies. References Albisser, G., Gazzarin, Ch., Gärtner D., 2009. Maschinenkosten in der Praxis. ATR-Bericht, 711, pp.12 Bruhn, I.,1999. Reparaturkosten von Traktoren. Landtechnik, 3, 166-167 Gazzarin, Ch., 2014. Maschinenkosten 2014. Technik Agroscope Transfer, 37, pp.52 Gazzarin, Ch., Lips, M. 2013. Berechnung und Grunddaten der Maschinenkosten. Maschinenkostenbericht, Juni, pp.33 Hunt, D., 2001. Farm power and machinery management. Iowa State Press, pp.368 Kita, L., 2009. Pracochłonność napraw wybranych maszyn rolniczych. Final Year Project supervised by E.Lorencowicz, University of Life Sciences in Lublin, Poland. Kudeń, A., 2015. Ocena kosztów napraw ciągników i maszyn rolniczych. MSc Thesis supervised by E. Lorencowicz. University of Life Sciences in Lublin, Poland. Landers, A., 2000. Farm machinery: selection, investment and management. Farming Press, Kent, pp.152 Liechti, R., 1994. Calculation and analysis of machines costs. [in:] Lorencowicz, E., Tomaszewski, K. (eds.) Rational mechanization of family farms. Seminar proceedings. AR Lublin, 86-99 Lips, M., Burose, F., 2012. Repair and maintenance costs for agricultural machines. Int. Journal of Agric. Management, vol.1, no. 3, 40-46. Lorencowicz, E., 2005. Koszty eksploatacji zestawów maszyn w gospodarstwach rodzinnych. RN SERiA, t. VII, z.1, s.156-160 Lorencowicz E., 2007. Wykorzystanie środków technicznych w wybranych gospodarstwach indywidualnych. RN SERiA, t. IX, z.1, s.273-277 Łuczkowski, S., 2014. Ocena eksploatacyjno-ekonomiczna zestawu maszyn w wybranym gospodarstwie rolniczym. Final Year Project supervised by E. Lorencowicz, University of Life Sciences in Lublin, Poland. Morris, J., 1988. Estimation of tractor repair and maintenance costs. Journ. Agr. Eng. Res. 41(3), 191-200 Muzalewski A., 2008. Zasady doboru maszyn rolniczych. IBMER Warszawa, pp.92 Niari, S.M., Ranjbar, I., Rashidi, M., 2012. Prediction of Repair and Maintenance Costs of John Deere 4955 Tractors in Ardabil Province, Iran. World Applied Sciences Journal, 19 (10), 1412-1416 Schaefer-Kehnert, W., 1957. Die Kosten des Landmaschineneinsatzes. KTBL-Berichte über Landtechnik. H.74. Stankiewicz, T., 2007. Nakłady materiałowo-energetyczne i koszty mechanizacji w wybranych gospodarstwach indywidualnych. MSc Thesis supervised by E. Lorencowicz. University of Life Sciences in Lublin, Poland. Statistical yearbook of agriculture. 2014. GUS Warszawa, pp.445 Taschenbuch Landwirtschaft 2002/03, 2002. KTBL Darmstadt, pp.279 Theunissen, P., 2002. An economical approach to agricultural machinery management. Comput. Manag. Information, Betlehem, pp.256 Wendl, G., 1989. Reparaturkostenuntersuchungen an Ackerschleppern. Grundl. Landtechnik Bd.39, 1, 17-21 Witney, B., 1988. Choosing and using farm machines. Longman Scientific & Technical, Singapore, pp.412