Impact of Machinery Ownership Costs on Risk Efficiency and Farm Organization

Risk efficient crop enterprise combinations are developed on the basis of fixed machinery ownership costs (depreciation, interest, taxes, insurance, and housing) as well as variable operating costs in the optimizing process using a mixed-integer risk programming model. Selected solutions optimized with (versus without) machinery ownership costs tend to be less diversified with larger-sized crop acreage that capitalize on lower per unit fixed costs. In addition, they show lower income variability at comparable levels of income.