Investment costs of a in the field, stand-alone, onion handling line

Amortisation and financing costs of the complete mobile unit per kilo of harvested and bagged onions.

This machine is a good example of how the Dutch have achieved the number one spot as the biggest exporters of onions, potatoes and other agricultural produce in the world. They reduce their production costs by reducing their inflationary labour costs, substituting them for stable financing costs; they invest in equipment that requires much less man power, and finance it with long term loans that are unaffected by inflation. Better still, the higher inflation, the more profitable it is to invest in machinery if the interest agreed is fixed. With inflation, labour costs increase whilst financing costs on an investment already made remain the same.

How much do the mobile unit machines cost?

To work out the amortisation and financing costs, we have to know how much all of the machinery costs.

1. All of the machinery (including installation) mounted on a trailer costs approximately $500,000
2. Harvesting machines cost approximately $ 45,000.00
3. Second-hand trailers (one for setting up facilities and another for transporting the harvesting machine) we estimate cost of $100,000
4. Unforeseen expenditure, $30,000

Total investment is: $ 645,000.00

We are going to amortise this investment in 5 years (60 months) paying 6% annual interest.

Using the tool to calculate the cost of a loan on our page "Calculate the cost of a loan", we can see that to redeem the entire loan we would have to pay $149,636 each year for 5 years; at the end of the 5 years, the 645,000 dollars would be repaid plus accrued interest

How much does the mobile unit cost per kg of harvested onions loaded onto a lorry, ready for market?

The mobile unit can follow harvests in a country, but as we are unaware of the local conditions, we will calculate three possibilities:

The mobile unit operates 90 days a year.

Operating 90 days the unit will produce 90 x 84,000 = 7,560,000 kilos of onions.

The financing cost* $ 149,635.92/ 560,000 = 0.027 per Kg of onions or 2.7 US cents/Kg of onions.

The mobile unit operates 180 days a year.

Operating 180 days the unit will produce 180 X 84,000 = 15,120,000 kilos of onions.

The financing cost* $ 149,635.92 / 15,120,000 = $ 0.01 per Kg of onions or 1 US cent/Kg of onions.

The mobile unit operates 270 days a year.

Operating 270 days a year the unit will produce 270 X 84,000 = 22,680,000 kilos of onions.

The financing cost* $ 149,635.92 / 22,680,000 = $ 0,007 per Kg of onions or 0.7 US cents/Kg of onions.

*The financing cost is the financial obligation to meet loan requirements.