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Pr - Economic Depreciation: Evidence Of Change From High Margin To Low Margin Periods

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  • Ward, Barry

Abstract

Strong returns for US Midwestern field crops from 2006 to 2012 together with favorable tax incentives (bonus depreciation and Section 179 expensing) led to strong demand for new and used farm machinery and equipment over this period. The subsequent period (2013 to present) of lower crop prices and profit margins has led to relatively weaker demand and lower market values for used farm machinery and equipment. These lower market values for farm machinery and equipment sales and trade-ins have created a higher rate of effective economic depreciation for this machinery and equipment compared to the previous high profit period. An analysis of farm machinery and equipment sales data from the online used farm equipment sales platform, Machinery Pete, allows us to examine the change in resale prices of used farm equipment over the period of profit margin change from 2002 through 2015. Change in resale price per unit and price per-hour-of-use of eight tractor models over this time series shows a change in economic depreciation. Farm machinery and equipment were found to have a lower resale value per unit and per-hour-of-use and therefore higher effective economic depreciation in the period of lower profit margins from 2013 through 2015.

Suggested Citation

  • Ward, Barry, 2017. "Pr - Economic Depreciation: Evidence Of Change From High Margin To Low Margin Periods," 21st Congress, Edinburgh, Scotland, July 2-7, 2017 345785, International Farm Management Association.
    • Handle: RePEc:ags:ifma17:345785
    DOI: 10.22004/ag.econ.345785
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    1. Beaton, Aaron J. & Dhuyvetter, Kevin C. & Kastens, Terry L. & Williams, Jeffery R., 2005. "Per Unit Costs to Own and Operate Farm Machinery," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 131-144, April.
    2. Timothy L. Cross & Gregory M. Perry, 1995. "Depreciation Patterns for Agricultural Machinery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 194-204.
    3. Roger C. McNeill, 1979. "Depreciation of Farm Tractors in British Columbia," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 27(1), pages 53-58, February.
    4. Lee, Bun Song, 1978. "Measurement of Capital Depreciation within the Japanese Fishing Fleet," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 225-237, May.
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    Agricultural Finance; Farm Management;

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