may vary as between custom-hired and self-owned equipment, as shown in 

 Table 6. But the major problem when comparisons are made between sub- 

 stitution of custom services for self-performed work has to do with esti- 

 mation of costs. 



In comparing the costs of owning equipment or of hiring work done, 

 only machines that do the same type of work and produce the same quality 

 product should be compared. For example, comparing the cost of owning 

 a hay baler with the cost of hiring a field-forage harvester for making grass 

 silage is not sufficient, because the choice between these two machines in- 

 volves the whole question of the economy of grass silage versus field-cured 

 hay. To obtain a correct comparison, some consideration must be given to 

 the change in income that is directly attributable to the change in product. 



In making the decision as to whether to buy labor-saving machinery or 

 to hire the job done with similar equipment, the annual ownership costs of 

 power equipment such as tractors or trucks generally are not considered. The 

 reason for this is that tractors and trucks are usually retained on farms re- 

 gardless of the quantity of work custom hired. The annual ownership cost 

 of a tractor is a fixed farm expense. The addition or elimination of one job 

 does not change the ownership cost of the tractor, which must remain on the 

 farm for other uses. But suppose a farmer is considering whether to own 

 or to hire a field-forage harvester, in which the "bundle" of equipment in- 

 volves a second tractor or truck to be used only with the harvester. In this 

 case the fixed costs of the additional power would be allocated to the single 

 job. Under these circumstances, one cost of doing the job with his own 

 equipment would be the fixed ownership cost of the additional power equip- 

 ment. Another and more obvious situation in which this principle would not 

 apply would be the case in which all jobs are custom hired. Under these 

 conditions all units of power could be disinvested along with the machinery, 

 which would be custom hired. 



When a farmer buys labor-saving equipment or custom hires his job 

 done, farm labor is usually freed from that particular job and is thus avail- 

 able for other uses. If this labor can be put to productive use or if it can 

 be removed from the payroll, as in the case of day labor, then some price 

 must be placed on it. In actual practice, custom hiring frequently frees only 

 the labor of one man and then only for part of a day. Hence making a quick 

 adjustment in the farm business to absorb profitably this limited amount of 

 labor is difficult. If a farmer can make up productive use of small amounts 

 of free time, a zero value should be placed on such labor. But if the labor 

 can be used profitably the procedure recommended is to value the freed 

 labor at the approximate community wage rate or at about Si. 00 an hour. 



In summary, the information that should be assembled for making a 

 decision as to whether to own or to hire a machine is as follows: (1) the 

 amount of work to be done, (2) the performance rate of the machines (simi- 

 lar to that shown in Table 6), (3) the price changed by the custom operator 

 (similar to that shown in Table 7), (4) the annual fixed cost of owning 

 the machine (similar to that shown in Table 8), (5) the direct operating 

 costs to the farmer who performs the job (similar to that shown in Table 

 9), and (6) the value of the labor saved. ^ 



3 G. E. Frick and S. B. Weeks, When to Hire and When to Own Farm Equipment 

 on New England Dairy Farms, New Hampshire Agr. Ext. Serv., Ext. Cir. 302 (1951). 



15 



