SURVIVING A SLOWED ECONOMY
All winter long most farmers had a machine shed full of equipment and machinery, sitting idle waiting for the 2009 spring planting season to arrive.
With all of the money that has been put towards that machinery, is there any way it can be used for extra revenue? Or for those farmers that look at a machine shed and see they are lacking in the machinery department, is there a way to get their farm work done efficiently as if they had larger equipment?
Tom Olsen, ISU Extension farm management field specialist, said equipment sharing as well as labor sharing was something that was popular a few years ago, and with the decline in corn and soybean prices and the rising cost of inputs, he believes it may become popular again.
Olsen said many farmers have gone into sharing agreements that include many different scenarios.
For one example, there may be a sharing agreement with a farmer who has bigger equipment, but looking for quality labor; perhaps from a smaller farmer who needs access to larger equipment and can provide that quality labor. In exchange, both producers get their work completed.
“You can exchange labor for another farmer’s machinery line,” said Olsen. “A farmer with 320 acres can be like a hired man for a farmer with 2,000 or 3,000 acres.”
Another sharing agreement, Olsen said is in joint machinery ownership.
According to William Edwards, an Extension economist, and author of Ag Decision Maker’s Joint Machinery Ownership fact sheet, many farmers have reduced their machinery costs by joint ownership. This helps smaller operators utilize their machinery more efficiently and still enjoy the convenience of owning a full line.
“It also helps younger operators,” Edwards said, “get started with less capital tied up in machinery.”
Edwards urged that each partnership have an exit strategy in case of disagreement or termination of farming by one party. The agreement should also explain how to determine the value of the machinery at the time of dissolution.
There are a few ways joint machinery ownership can work. There are sharing costs where the costs of jointly shared machinery should be shared equitably and an unequal use agreement where one owner uses a machine over more acres than the other.
For example, in an unequal joint machinery ownership, where two farmers purchased a combine together, one farmer may use it for 600 acres while the other will only use it for 300 acres.
Both will provide their own fuel and labor, with the easiest arrangement for the larger farmer to own two-thirds of the combine and the smaller farmer own the other one-third. And the repair costs would be split the same.
“If you utilize the capital you have and use it more efficiently by sharing between neighbors,” said Olsen, “you can cut costs or better utilize equipment with machinery sharing agreements.”
Besides sharing equipment, another way to increase revenue on the farm with existing machinery is to perform custom field work for others.
“If you have a combine you can do custom work with your bigger equipment that your neighbors may not have,” said Olsen.
Commercial spraying is another option, he said. “If you own a larger sprayer that others in your area may not own, and with many farms possessing trucks and trailers, another opportunity for increased revenue may be to put your truck on the road commercially.”
Olsen also said he has seen many farmers expanding their income streams with a new business. He said he knows of one Iowa producer who owned his own tiling implements and branched into custom tiling, without purchasing new or additional equipment.
For more information about joint machinery ownership, visit ISU’s Ag Decision Maker at www.extension.iastate.edu/agdm.
Contact Kriss Nelson by e-mail at jknelson@frontiernet.net.
SURVIVING A SLOWED ECONOMY
Doug Arneson. of Joice. in Worth County. is using the foundation of a former hog nursery as a dike for his liquid fertilizer stored in the second and third tanks. Arneson is pointing to the water line entering the foundation where he will be installing a pump and using the first tank for water storage during spraying time.
Last year it was soaring fuel prices. This year it is high fertilizer prices. Costs that have exceeded what farmers are accustomed to paying, have made them look for ways to lower their costs. One way is to buy in volume.
However, to buy in volume and take delivery of an entire semi trailer load of product requires storage and enough demand to use the contents in a season to realize the savings. For farmers who are not large enough to purchase large lots of product, can pool resources with neighbors to get the same savings larger operations get when buying in bulk.
Doug Arneson, who farms near Joice, in Worth County, is joining with area farmers to buy starter fertilizer in semi trailer quantities. To store it all, he bought a one-third interest in a new diesel fuel storage facility with the Bruns Brothers of Fertile, located several miles south of Joice.
Arneson’s fertilizer storage tanks make use of a foundation as a containment area that was originally made for a hog nursery. Arneson has filled two 500-gallon tanks with starter fertilizer and has a third tank that will hold water for spraying. A water line was part of the nursery and a pump will be installed at one end to finish the facility. Arneson said the savings from the first year of use will pay for the tanks, plumbing, and pump.
State law requires a secondary containment area where storage is greater than 5,000 gallons. This is on a per-farm basis so many farmers are going to several smaller storage areas of less than 5,000 gallons to avoid the containment requirement in lieu of a single large fertilizer storage facility.
The Iowa Department of Agriculture and Land Stewardship enforces laws regulating fertilizer storage facilities. Farmers buying fertilizer for their own use are not required to have a commercial license. A license is required for anyone “that sells, offers for sale or distributes fertilizer or soil conditioners in the state and must pay tonnage fees and ground water fees,” according to an IDALS press release.
Farmers must purchase fertilizer from a license holder and farmers cannot sell fertilizer without having a license. Farmers must also follow laws that cover containment, loading and unloading of both liquid and dry bulk fertilizers and placement restrictions of anhydrous ammonia storage locations.
While Arneson’s fertilizer storage will be located on his farm, the diesel fuel he buys in bulk will be stored several miles away at the Bruns Brothers farm near Fertile. Three 9,000-gallon fuel tanks were installed with Bruns’ owning two of the tanks.
Bruns Brothers will store farm diesel in one tank and highway diesel in the other. Arneson will keep farm diesel in his tank. Having their own fuel in their own tanks will eliminate the need for keeping track of fuel as they will buy and use the fuel as individuals for their own use only.
Arneson and Bruns devised their plans for buying diesel fuel in bulk last fall. Building, inspection, and approval of the facility were done according to requirements established by the state fire marshal. Cost of the dike and accompanying equipment totaled $15,000, not including the tanks.
Storing his farm diesel in another tank freed up the fuel tank on his farm that Arneson will now fill with highway diesel for his semis and pickup.
Buying in semi truck quantities will mean a loss of business for local dealers who once sold to area farmers making several trips delivering in smaller quantities. Doug Arneson explains it as a business decision on his part.
“I remember hauling a lot of $3 corn when it should have been $4 and that was a business decision,” said Arneson referring to the goal of buying low and selling high sometimes works better than at other times.
Contact Clayton Rye by e-mail at crye@wctatel.net.
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