Talk about sharing machinery, and the conversation often harkens back to the days of big families, small farms and giant threshing machines. A lot has changed since the old days, but as modern machines become more sophisticated and costly, there's still a strong economic case for getting as many hours as possible out of your investment. Whether you prefer to bargain with your neighbors like granddad did, or surf the Web to find someone from another state who's willing to share the expense of buying and maintaining a machine, there are plenty of challenges and opportunities to go around.
Erlin Wenes, a University of Minnesota extension farm management educator and long-time advocate of machinery sharing, notes that the cost of owning and operating farm machinery makes up 20 to 30% of the annual per-acre cost of raising corn and soybeans. MachineryLink, an online company that offers alternatives to ownership such as managed lease and fractional ownership programs, pegs the expense of ownership at closer to 40% of production costs.
Wenes points out that sharing equipment can help justify the use of larger, more efficient equipment on smaller or mid-sized farms. But there can be problems, ranging from not being able to find a partner, to ending an arrangement with someone whose management style or operation timing doesn't click with yours.
Case in point: Corn and soybean growers Curt Pietz and his son Mark shared a combine with a small-grain farmer for nearly 30 years. But the relationship ended when their partner started combining more of his own soybeans. “It worked out real well while it lasted,” Curt says. “The machine was traded every two years, so it was always under warranty. We owned the corn head and bean head and just moved the combine between farms. And since our partner had more than one combine on his farm, there was room for some flexibility.” Curt is now retired from farming and serves as director of Minnesota Agricultural Finance. Mark continues farming, but at least for now, he has decided that sole possession of a combine works better for him.
One problem with sharing equipment with your brother or neighbor down the road is if you both need to plant your corn or beans at the same time. It might be wiser to share a machine with a farmer whose growing season is different than your own.
“Sharing farm machinery with someone hundreds of miles away may be a better strategy,” Wenes notes. “A Corn Belt farmer jointly owning a combine with a Wheat Belt farmer can be a good match.” Wenes acknowledges that it may require some imagination and effort to track down a compatible partner in another county or state. He suggests looking for partners at national meetings or calling university extension agents in other states to see if anyone there is looking for a similar arrangement.
Let's make a deal
So let's say you found a partner, either local or distant, who is ready to split the costs of a machine with you. Your next step, getting a written agreement, is crucial. “Farmers are independent, operations change, and there's always the chance that one partner won't live up to his end of the bargain,” Wenes says. “Unless you plan well, sharing can lead to strained relationships between partners and family members. But most of these misunderstandings can be prevented with a structured written agreement that's signed by both parties, outlining how and when each party gets to use the machine, how expenses and maintenance will be split, and an equitable way to end the partnership if things don't work out.”
Sharing partnerships can vary in their details. Two or more farmers can split expenses and use hours evenly. Or the partners can establish a joint bank account to handle transactions involving jointly held machinery. If one farmer will use the machine on more acres than another, the larger-acreage farmer can assume more of the ownership expenses.
Get it in writing
Another academic proponent of machinery sharing is William Edwards, extension economist at Iowa State University. Edwards offers a sample agreement in which one grower uses the combine for more acres than the other producer does. In this case, Al and Chris purchased a combine that will be used to harvest 600 acres for Al and 300 acres for Chris. When the owners use the combine in a proportion different from their ownership share, Edwards suggests that both owners contribute to a special machinery account. The amount contributed is equal to a typical custom rate multiplied by each person's acres (see box).
The Internet has opened up a host of networking options for farmers. The MachineryLink Web site, for example, offers a free service that lets you search for other farmers who are interested in sharing the kind of machinery you want. If you don't find what you're looking for, you can post your own request for other farmers to see and respond to. Or, if you think finding and hashing out an agreement with another farmer is just too much hassle, MachineryLink offers short-term managed leasing or fractional ownership of one of the new combines it owns. “This has been a very popular program for us,” says Tim Riley, MachineryLink marketing and sales manager. “We've kept our fleet of four John Deere and four Caterpillar combines rolling all harvest season through the Corn and Wheat Belts. We're planning to add a lot more machines next season.”
Riley says the managed lease is the less complicated and more popular option, but some farmers like the fractional ownership option for tax purposes. Costs vary according to time of use and machine selected, with price per hour ranging from $90 to $110. The price includes all repairs, maintenance and transportation. The contract requires farmers to have insurance coverage while in possession of the machine.
For more information, contact MachineryLink, Livestock Exchange Building, 1600 Genessee, Suite 546, Kansas City, MO 64102, 888/272-3323, www.machinerylink.com.
Al and Chris purchase a combine for $60,000, each paying half the initial cost. They agree to each contribute $24/acre to a special combine account:
Al: $24/acre × 600 acres = $14,000 Chris: $24/acre × 300 acres = $ 7,200 TOTAL: $21,600
The following expenses are paid from the account:
Fuel and lubrication $ 1,600 (paid to supplier) Repairs and maintenance $ 3,300 (paid to supplier) Labor (180 hrs. at $10/hr.) $ 1,800 (paid to Al) Labor (90 hrs. at $10/hr.) $ 900 (paid to Chris) Depreciation, interest, $ 6,000 (paid to Al) insurance and storage (20% of combine value) $ 6,000 (paid to Chris) TOTAL $19,600
Excess funds can be carried over to the following year or refunded in proportion to each partner's combine use.
|For more sample joint ownership contracts and advice from Edwards, go to www.extension.iastate.edu/Publications/PM1373.pdf.|