The Enid News and Eagle, Enid, OK

Ag

January 26, 2013

What’s storage building worth?

ENID, Okla. — It is widely accepted that storing farm equipment under a shelter is better than storing it outside and hay stored in a barn is better than hay stored in the field.

But how can we determine just how much a farm storage building is worth? The answer is different for every operation, but there are some guidelines that will help producers make an intelligent decision about whether or not you can afford a building — or afford not to have one.

Cost of owning a building

The cost of a building depends on many factors, including the amount of side enclosure, type of floor, height and type of construction.

Depreciation is calculated as the beginning value minus the ending value divided by the useful life. For instance, if the building were worth $5,000 after 20 years, the actual depreciation would be $1,000 per year ($25,000-$5,000/20 years).

Instead of using depreciation and interest, some producers may prefer to use annual principal and interest payments. Interest is calculated based on the average value, which is the beginning value plus the ending value divided by two.

Taxes and insurance are location dependent, so readers should consult their local tax assessor.

Annual repairs will vary considerably. In many years, there likely will be no repairs. However, in other years repairs could be considerable. Readers are encouraged to calculate a realistic average annual repair estimate or consult with their builder and include that cost as part of the annual expenses.

Storing machinery inside

In a nationwide survey, farmers were asked about the resale value of their farm equipment at trade-in and whether or not it was stored inside when not in use. Farmers who traded their equipment after five years got significantly more for tractors and other equipment that were stored inside than for equipment stored outside.

A 3 percent savings per year on barn-stored equipment is a conservative estimate of storage benefits. Additional savings can be expected from reduced down time. Deterioration of rubber and plastic parts due to exposure to the sun is a major contributor to breakdowns and increased maintenance time. It has been estimated that barn-stored equipment has less than half the down-time of field-stored equipment.

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