RANCHING Business
when determining whether it’s better to purchase, lease, rent or have the job done as a custom hire. “If a producer is tackling a big brush clearing job
and is making the commitment to maintain the new open landscape, purchasing the necessary equipment may make sense,” Homeyer says. “By the same token, it may not make sense to purchase haying equipment for use solely on your property. There are opportunity costs not only for producers’ capital, but for their time.” Some questions that need to be considered: Do you
have time or the available labor to operate the equip- ment enough to justify the cost? How long is the project? How much time will you or your employees be able to dedicate to the project? Will it be a separate enterprise? If so, do you have time and supporting equipment it takes to make the enterprise successful? In his personal experience, Homeyer owned hay-
ing equipment. It was used primarily for his family’s operation. They needed approximately 150 bales a year to sustain their herd. When Homeyer put a pencil to it, he found that he needed to produce 500 bales a year to make the equipment pay for itself. Because he was not in a position to begin a custom haying business, he sold the haying equipment.
Knowing how much a piece of equipment may be
used is crucial information for the lease process as well, Homeyer says. Almost all leases require additional payments at the lease’s end if the equipment has been used for more hours than stated in the lease; therefore, a producer needs to know the approximate number of hours the equipment will be used and have the dealer calculate the payments based on the estimated usage. The calculations will be done in blocks of time,
generally 300 hours per year, meaning the base calcula- tion will be 300 hours and then increase by increments of 300 to 600 hours and 900 hours. If the producer’s estimate is substantially less than one of the calcula- tion points, the producer should ask that the lease be calculated on his estimate.
What is the impact on your tax situation? The decision to purchase or lease often comes down
to the impact on a producer’s tax situation, Homeyer says. “Every operation is different,” Homeyer says. “Large
operators or those who have several sources of income in addition to their agricultural enterprises may need to spend a certain amount each year to keep their taxes
is weaned and will be ready to go by the second week of June — Bulls and Heifers available!
Our Fall Calf Crop
TRIPLE RANCH
www.TripleLBlackHerefords.com
• Registered Black Herefords • Bobby & Jared Lide
714 FM 1366 • Mexia, TX 76667 • 254-739-5311 Bobby (Cell) 254-625-3800 • Jared (Cell) 254-625-3806
tscra.org
June 2013 The Cattleman 53
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