Machine costs put pressure on the farmer's results

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, writes the University of Illinois. The trend in America also applies to Europe, as shown by reports from Eurostat and the FAO, among others.

Cost increases and trends
In Europe, the costs of agricultural machinery and maintenance have increased by an average of 2003% per year between 2023 and 2,5, according to Eurostat. This represents a total increase of about 64% in twenty years. Energy prices have increased by an average of 4,2% per year over the same period. These increases are partly due to stricter environmental regulations and technological innovations, which often come with higher purchase and maintenance costs. Similarly, in the US, rising energy prices have had a major impact on costs for farmers since 2003, especially in regions with a focus on grain production.

Fuel costs
In the U.S., fuel costs have increased by 2003% since 150, 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 widely 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 increased by an average of 120%, partly due to excise taxes and environmental taxes.

Repair and maintenance costs
The technical complexity of modern machinery is driving up repair costs worldwide. In Europe, these costs have increased by an average of 2010% per year since 3,1, according to FAO data. In France, the average rate for a mechanic is €85 per hour, which is 35% higher than ten years ago. Germany is seeing similar increases, with rates ranging from €75 to €95 per hour, depending on the region. In the US, these costs are similar, 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 are an additional challenge.

Investment behavior and depreciation
American farmers invest heavily in machinery during high-revenue periods. Spending has increased 4 percent per year since 2000, according to data from the University of Illinois. European farmers are also investing, with subsidies from the Common Agricultural Policy (CAP) providing a major incentive. Between 2015 and 2022, €54 billion in subsidies were provided in Europe for sustainable machinery. Countries such as France and Germany are the main beneficiaries, while farmers in southern Europe, such as Greece and Portugal, have less access to financing.

Efficiency and economies of scale
In America, large farms have an average of 25% lower machine costs per hectare. This is because large farms can better exploit economies of scale. In Europe, we see a similar pattern: farms larger than 500 hectares in Germany and France have an average of 30% lower costs per hectare than farms smaller than 50 hectares. Smaller farmers in Southern Europe, where farms are on average smaller and receive less subsidy, often operate with margins of less than 5% due to higher costs per hectare and limited economies of scale.

In both America and Europe, farmers are seeing rising machinery costs due to higher fuel prices, more complex technology and increased maintenance requirements. While American farmers are focusing on economies of scale and smart investments to control costs, European farmers are benefiting in some cases from subsidies and sustainability initiatives. However, in both regions, controlling machinery costs remains an ongoing challenge, especially during periods of low prices.