Share Equipment, Cut Costs

April 8, 2016 02:28 AM
 
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Learn how six farmers minimize machinery expenses and increase yields

For a group of Minnesota farmers, sharing equipment has transformed how they allocate their money, knowledge and time. It all started with Tim Malterer’s out-of-the-box idea—which provided benefits to help preserve each family’s legacy.

Six farmers (two who farm full-time and four who work off-farm) share one line of equipment and labor through Malterer Schultz LLC. The lineup includes a tillage tool, a 560-hp tractor, a 24-row planter and one combine. Five of the six farmers have ownership interest in a total of 25 pieces of equipment. 

After accessing their needs, the older equipment was traded in or sold to buy newer bigger machines with the latest technology. 

Since forming the LLC in 2013, machinery cost has decreased a minimum of $20 per acre for each farmer, Malterer says.  

Monetary gain is just one of the benefits of the LLC. Of the six farmers involved, two are in their 30s and the other four are in or around their 60s. The younger partners manage new technology and the older partners provide wisdom on production practices. 

Each farmer also brings unique expertise to the group. For example, Malterer provides agronomic recommendations for the others, and Schultz provides financial oversight. 

Sharing labor has proven to be an advantage, as well. Schultz didn’t run a machine this year, thanks to help from Malterer and the others. 

“Extra help and new equipment has been great for my crops,” Schultz says. “It’s also given me more time to expand my cattle and hog businesses.” 

To round out the benefits, corn and soybean yields have improved.

“We’ve increased yields 15% to 20%,” Malterer says. “Two main factors were adding manure from 
David’s farm and more manpower means planting at the perfect time.”    

The group works together to tackle planting, harvest and tillage. Planting and harvesting is completed in a loop, or as fields are ready. 

“I don’t care who gets corn planted first or last as long as the planter is running,” Schultz says.

“Everyone treats each other’s land like it’s their own,” Malterer adds. “We document everything we run across in the field. It’s as easy as there was a tile blowout on your Back 40.”

The LLC has worked out a way to bill each member based on acres, time and labor with deductions for equipment owners when applicable. “Punching a time clock in each field to log hours and tracking billing is challenging,” Malterer says. “I don’t think you can pry us apart if you wanted to. The benefits outweigh any adversity.”

It takes a considerable amount of paperwork, time and logistics with lawyers to set up an LLC as well as 
effective communication among the group. For Malterer Schultz LLC, their efforts have paid off. 

Sharing equipment might not work for every farmer. “The biggest objection is the fear of not having equipment when it’s needed,” says Mike Gunderson, Purdue University associate professor of agriculture economics. “Weather means we have a limited window to work with and shared machinery could cause a new hurdle.”

Malterer and Schultz offer the following advice on what to look for in an equipment sharing partner(s).

  • “It comes down to personalities, and you have to have similar farming philosophies to make this successful,” Schultz says. 

If you have one person who cuts costs but sacrifices yield and another who chases yield at any cost, making purchasing decisions will be tough. Look for similar viewpoints and goals to simplify decisions.

Even a pact as simple as stopping fieldwork for supper goes a long way, Malterer says.

  • Production practices, such as tillage and row spacing, need to align. For example, Malterer had to change his tillage practice to adapt to the rest of the group.    

“Change is hard,” Malterer says. “In the scheme of things, you have to be willing to try something new.”

  • You have to trust group members with the financial details of your farm. 

“Before we buy new equipment, we talk about how it affects our cost per acre,” Malterer says. “It has to make sense for everyone.”

  • Talk to a lawyer to determine tax and liability details to protect all partners. “Having a lawyer is necessary for the group to function successfully,” Gunderson says. “If it does fail, an LLC gives you legal protection.”

As a rule of thumb, farmers need to cut corn costs by $100 per acre in this economy. Sharing equipment might be one way to do so while reaping additional benefits. 

“Big investments are risky in an economic downturn, but sharing equipment could decrease risk,” Gunderson says. “This might be the perfect time to try it.” 

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Comments

 
Spell Check

Ed Swinger
Redfield, IA
6/16/2016 07:12 AM
 

  I owned equipment with a neighbor until he ran into economic headwinds and couldn't get s loan. So I had to buy his half out and now own all the equipment and no extra income. Thank goodness I had enough equity and understanding banker.

 
 

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