As with any other function on your farm, buying inputs is a skill that requires prudence and practice. And it doesn't matter if you have been doing it for two years or 20; every buyer is bound to make a mistake now and then.
Some years maybe you can afford to slip up. But when crop prices are low and margins are tight, like this year, even the simplest mistake can bleed red on your balance sheet.
But there's help. We asked professional farm managers across the Midwest to tell us the most common buying mistakes they see among their farmer customers. Recognizing them is the first step to avoiding them in the future and to cutting input costs on your farm.
1. Buying the brand your supplier recommends
Randy Harmon, farm manager with Halderman Farm Management in West Lafayette, IN, says the most common, and most expensive, buying mistake he sees is when farmers let their fertilizer and chemical company determine which package they should use. "Farmers have a ton of decisions to make, and it is difficult for anyone to keep track of all the new chemicals plus all the new prepackaged mixes," Harmon says. "So there is a tendency to defer that to the people who work with it every day."
Deferring the decision typically results in good performance, he adds. But the danger is that you may be paying more than what you would need to. "There are a lot of effective herbicide combinations available, and there is a significant difference in the cost," Harmon says.
To avoid overpaying, you should continue to ask your suppliers for recommendations, Harmon advises. But after receiving a recommendation, ask what cheaper alternatives are available and what are the trade-offs. "For example, you've told me that this program will work well," Harmon says. "Now, is there something that will cost me $4/acre less that will work nearly as well?"
If there are two suppliers in the area, Harmon advises that you try to get a second or third bid and ask the same questions of them.
Making the final selection will depend on the level of weed pressure in your field. "If you have a field that has high weed pressure, then you may want to go with the Cadillac approach," he says. "But if you have relatively clean fields and there are good postemergence options available for cleanup if there is a problem, then you may want to scale back to the Chevy approach to herbicides, especially with current grain prices. See if you have a problem you need to work on and come back with a rescue treatment if needed."
2. Buying incomplete sets
"Farmers would never think of buying a wrench set and not buying a wrench driver," offers Jorge Vicuna, farm manager with Haskell Agency in Huron, SD. "Yet they will do things that don't make any sense when looking from a broader perspective, like keeping one item out."
Vicuna calls this common mistake "unbalanced buying." "It's like buying a big plow and not buying enough tractor or a big tractor and not enough implement," he explains.
Avoiding this mistake basically comes down to the managerial skill of the individual, Vicuna says. "That is what he can't buy or find anywhere else." But it can be learned.
Vicuna advises that before making any major purchase, you should plan out the whole sequence in which the item fits. "For example, if a guy is going to buy a bigger combine, he has to realize that he will need a bigger tractor and more carts to dump the grain in," he says. "And if he is going to boost his yield to 150-bu. corn, he better think about building more storage. Otherwise, he will have some corn sitting on the ground. So you have to look at the whole operation rather than just going out and doing one thing."
3. Buying to gain total control
A related buying mistake is when farmers refuse to pay out a certain cost like land rent or custom hiring out of fear that they will lose control of their farm. Vicuna calls this tendency "excessive control" and says it stems from farmers' fear of losing control of their farm especially after periods of expansion. The danger is that it can cause farmers to do things that create inefficiencies, such as buying more land than they can afford just to avoid renting, or buying more equipment just to avoid custom hiring. "There's an old saying, 'He who grabs too much loses grip,'" he says.
To avoid taking excessive control, Vicuna says you need to strive for a balanced operation; in other words, a certain part of the land should be owned, a certain part rented on cash and a certain part rented on shares. Custom hiring should also be a part of that balance. "A guy should have equipment only to about 60 to 70% of his need and the rest should be hired," Vicuna says. "That would double his harvesting capacity and practically double his planting capacity."
To find out what a good balance is, Vicuna advises farmers to spend some time with a successful operator. "Pay attention to a guy who is doing it right," he s ays. "He gets his work done, his house doesn't look like a mess, and he has time to be a good father and take care of his family. There is a balance a guy can strike."
4. Buying only from the big guys
Marty Thornton, senior vice president at Commerce Bank in Bloomington, IL, says that a common mistake farmers make when buying seed is to ignore seed companies other than the market leaders out of fear they will be sacrificing quality or service.
"For example, there is one company that has over 40% of the seed corn market," Thornton says. "But even though it is the largest, about 60% of the market comes from other companies and other products. And there are a lot of good products from those other companies."
He says many of the small companies have the same access to elite genetics and do an excellent job of handling and processing.
5. Buying too late
Waiting to buy seed until late in the year is another mistake Thornton sees. Many farmers have been delaying the purchase because in recent years they have been able to get free seed from seed companies that have merged and that want to rid themselves of obsolete lines.
But there's risk to that, Thornton warns. "Farmers who wait until February or March will probably find fewer choices of high-performing products." He says a better time to buy is December or very early January at the latest. "That's when your premier products are available," he says.
6. Buying based on too little data
Larry Neppl, president of Iowa Farms Associates, Fort Dodge, IA, says another common buying mistake related to seed is relying on a minimum number of test comparisons to make the decision. "Some of the research I've seen shows that if you take one side-by-side comparison of two varieties and one has a better yield than the other, you've got only a 52% chance that the same one is going to yield better the next time because of all the variability," Neppl says.
He tells his clients that to avoid this mistake they need to look at a minimum of 50 side-by-side comparisons, ideally 200, of two different varieties, which brings the odds that the same test results will happen again up to 95%.
7. Buying strictly on price
Neppl also sees too many farmers focusing strictly on price when making their purchasing decisions. He says it is important to look at service as well, regardless of what product you are buying. Shopping for service is even more important now than in the past, he adds, due to the merger of seed and chemical companies, which market total packages that can encompass multiple products and services designed to solve a given problem.
8. Buying before getting the details
Many farmers fail to get all the details about a product before buying, offers Edward Kiefer, a farm manager with Hutchinson Farm Management, Geneseo, IL. "Say with a computer, there are many things as far as quality of the internal components, the service and the warranty that can differ between brands," he says. "So, probably the biggest mistake is not getting everything they need and discovering later on what those differences may have been."
To avoid this mistake, Kiefer advises a two-step approach: First, make a point to ask a lot of questions. If you don't know what questions to ask, ask the sales rep for the names of customers you can talk to who have used the product. Ask them what they like and dislike about the product, what problems, if any, have come up and what questions they would ask based on their experience.
Second, ask the salesperson for a written proposal before buying that outlines the price and terms of the agreement. "It could be a formal proposal or something very simple that is written on an 8_1/2 x 11 sheet of paper and faxed in less than a minute," he says.
Depending on the product, the proposal should include price, when payment is due, inclusion of any cash discounts and their terms, warranties and terms of delivery such as date, charges and location. "Let's say you want to buy so many gallons of a certain herbicide, and a price is quoted. Is that the price of the herbicide delivered to my office in Geneseo, IL, or do I have to pick it up in Indianapolis? Those sorts of details are getting more important as we deal with larger suppliers that may be out of close proximity to the farm."