Farmers add acres by sharing equipment and labor.
Many farmers in the Midwest today feel they need to farm more than 1,000 acres to remain in business. Using larger machinery and spreading fixed costs over more acres result in lower production costs per bushel, and that's important with today's low commodity prices. But any farmer trying to expand his acreage knows it is a tremendous challenge to gain new ground at a reasonable price, and to find dependable help.
The answer for some growers has been to farm with another area farmer, sharing equipment, labor and other resources.
Cooperation, not competition. Take for example Scott Fritz (age 48) and Tim Reidelbach (age 41), both of Winamac, IN, who together farm 2,700 acres. They began farming together two years ago and are considering adding a third farmer to their joint farming venture.
"I was farming 1,800 acres and I felt the need to get larger, but it was a struggle to expand. I was having to outbid neighbors for land, and finding part-time help was hard," says Scott Fritz who started farming in 1974. "I got to thinking there could be real advantages for two farmers to bring their land and resources together. It's a better way of expanding than bidding against each other. You benefit from each other's management expertise, and you both understand farming and its risks. You don't have to hire someone to act like a farmer."
In 1998, Fritz approached Tim Reidelbach, another area farmer who served on a co-op board with him, about combining their operations. Reidelbach was farming 900 acres at the time. "It floored me when he said we ought to consider working together," Reidelbach says. "My first reaction was that I wasn't interested, but as my kids are approaching college age I decided it wouldn't hurt to talk with him about it. As we talked more, it sounded like a good idea." After six to eight months of discussion, the two decided to give it a try and began farming together in the spring of 1999.
Equipment and labor savings. Fritz's operation was already incorporated as Fritz Black Sand Farms. Today Reidelbach and Fritz both draw salaries from the corporation, which also pays the cash rents, crop inputs, repairs and all operating expenses. Reidelbach sold his line of equipment and purchased irrigation equipment to help match Fritz's capital in equipment. If things don't work out, Reidelbach will be able to pull out the land (rented and owned) and the irrigation equipment that he brought to the arrangement.
"The labor and equipment savings were substantial," Reidelbach says. "We were able to get rid of one line of equipment, and now we each know we have somebody we can count on." Their equipment lineup includes one 16-row planter, a 20-ft. drill and a combine with an 8-row corn head and a 30-ft. bean platform.
It's not uncommon for a new combine with an 8-row corn head and 30-ft. bean platform to cost more than $200,000 these days. To make expensive equipment investments pay, farmers need to run the machinery over many acres, says Howard Doster of Purdue University's ag economics department. "More people are trying to figure out how to use one set of big machinery jointly because it makes their labor much more productive at slightly lower machinery cost per acre," Doster says. "There are tremendous challenges, but increasingly people are trying to solve them because of the economic benefit."
In organizing their business relationship, Reidelbach and Fritz talked with Doster and an accountant. The pair took notes and set written goals and objectives. Although they operate as one farm business, they have not legally merged their businesses. They both want a few years under their belt before taking such a step. "My first concern was giving up total independence, but it's worked out well. We have good communications and trust," Reidelbach says. "Our personalities, beliefs and morals are compatible with each other and that's necessary for this type of arrangement to work."
Reidelbach and Fritz divide responsibilities on the farm. Fritz plants the corn, Reidelbach the beans. They share in the spraying and harvesting tasks. Fritz does the bookwork and marketing while Reidelbach handles input decisions and the field scouting and diagnostic work. "I once thought two people would be the ideal organization, but there's enough work for three," Fritz says. "We would like to find a third person with different skills than we have. That might include land and landlord relationships, mechanical skills or possibly legal skills."
A chance to grow. Another pair of Indiana farmers, John Culley (age 36) and his neighbor Andy Winiger (age 37) began sharing labor and equipment in 1992. Both hold full-time factory jobs in addition to farming a combined 1,315 acres around Mount Vernon, IN. Winiger's father, Frank, also assists in the operation.
Culley farmed with his father-in-law for a time. Then after his divorce, he started over with only 90 acres and some used equipment, but no combine. At the time, Winiger was looking for some help on his 500 acres. Culley and Winiger agreed to swap labor for harvesting in 1992 and have been working together ever since. Culley owns a 6-row planter, a 15-ft. drill, a disk and a harrow. Winiger owns a 12-row planter and a combine with a 6-row corn head and 25-ft. bean platform. They split the fuel costs based on the percentage of acreage they each have. Each one buys all the other inputs for his own land. They keep crop receipts separate as well.
Culley's acreage has grown to 365 acres and Winiger now farms 950 acres. As their farms have grown, they have worried whether they are being fair to each other in their exchange of labor and equipment. This year they are recording the hours they spend on each other's land to help them evaluate the arrangement.
"This has worked out well for both of us," Winiger says. "I can go off to my job and not have to worry whether things are going to be done right. I can depend on John." The two work opposite rotating shifts so one of them is always at the farm. Both take vacation time from their jobs during the busy seasons.
Adds Culley, "We've been able to accumulate more ground and get the work done while we both hold down full-time factory jobs. I wouldn't have been able to survive farming those first few years without the use of Andy's equipment."
Both men dream about farming full-time. Winiger who started farming in 1981 has accumulated more acreage and capital than Culley who began farming in 1989. "The difficulty for us is that we both want to farm full-time and we're competing with each other for land," Winiger says. "We aren't really sure how to share any additional acreage we pick up. If we get much bigger, we'll be too big for both of us to work in town, but not big enough for both of us not to work in town. It would be ideal if we could get large enough for both of us to farm full-time."
The right stuff. Rick Fox, Fowler, IN, is a full-time farmer and part-time accountant who prepares farm tax returns. He sees value in business arrangements that allow farmers to share equipment. "Working together is the way to go," he says. "With the cost of equipment so high there are going to be a lot of people who have to do that to make a go of it, especially those farmers with 1,200 to 1,500 acres."
For two years, he and another farmer had an arrangement whereby Fox rented the farmer's 1,000 acres, adding it to the 2,300 acres he already farmed. Fox provided all of the equipment and guaranteed a base salary plus a percentage of the profits on that 1,000 acres in return for the farmer's labor and management assistance. The arrangement worked well, but after two years, the other farmer decided to quit farming and work for an implement dealership.
"We had a good working relationship, but his goals ended up being different," Fox explains. "It takes the right two individuals with common long-term goals to make this work. Plus it helps if the two individuals have similar equity in the operation. Communication with everyone involved, including spouses, is critical."