Economic Aspects of Machinery Hire Services Managed by Farmer Groups inKampar Regency, Indonesia

Abstract.

Farm machinery hire services have become important business groups within a small farming community in Kampar Regency, Indonesia. This research evaluated the economic aspects of the machinery hire services managed by farmer groups with a focus on cost, revenue, profitability, and economic efficiency. A total of 20 machinery hire service groups located in seven districts of the region were purposely selected. Group managers and custom operators were interviewed to collect field data during the rainy (growing) season in 2012/2013. The results showed that the seasonal total work varied across hire service groups and depended on the number and type of machines owned. Seasonal costs among custom operators varied considerably. Depreciation and labor were the dominant fixed and variable costs, respectively. Although having a relatively low profit, the machinery hire service groups were profitable and efficient businesses under current levels of custom rates. The low seasonal total work, due to limited number and type of machines and short seasonal working time, is an important constraint on increasing profitability. Therefore, there is an opportunity to make the hire service groups more profitable and viable businesses by adding several different types of machines.