Farm Management Minute: Working together to be more efficient
In the past decade we have seen that farms have grown, equipment has gotten larger, and yields have shown huge increases. Along with these positive changes, we have also seen increases that are not so positive, such as the price of land, equipment, and inputs all going up. A trend that we have seen going the other way, but still creating challenges, is the number of people available to work or help on the farm.
Years ago, you had multiple generations on the farm and with the larger families; you never seemed to have shortage of parents, siblings, kids, grandkids, or neighbors around to help with work that needed to be done. However, as the years have gone by, families are having fewer children and fewer of them are staying on the farm. You also see a smaller number of older or retired farmers willing to help due to the size and speed of today’s equipment. So what can be done to overcome this?
One answer is relying on seasonal help, if available. This often comes from students during the summer, friends or neighbors on evenings or weekends, or from retired farmers. These situations are ideal, but are getting harder to find. Another option is a full-time hired hand. This option works well if you have enough work for them throughout the year, but that is not always a given. Another issue with this type of help is turnover; it is often difficult to find an experienced, reliable hired hand that will stay long term.
So what can be done? Sharing equipment or working together with another farmer could be the solution. The benefits of this can be two-fold. First if you have two farmers who own a combine together and harvest together, that partnership allows them to own a newer, higher quality machine at a fraction of the cost of owning it themselves. It also gives you an additional person to work with at harvest. This arrangement is a good way to save cost, gain help, but still allows both operations to be managed and financed independent of one another.
Another alternative is creating a partnership or LLC with multiple farmers. I have seen cases where 3-4 farmers will create an entity, and that entity will own the larger pieces of equipment. The individual operations are still financed and managed separately. This allows smaller farmers the benefit of access to newer and larger equipment than they could ordinarily justify. Each member would then each take their turns using the machinery on their own acres or often work together to get everything done more efficiently. Ownership of the entity is often done pro rata based on the size of the operation or capital contributed. For instance, you have three farmers, two of which who farm 1,000 acres and the third farming 2,000. In this case, you would set up the ownership as 25%, 25%, and 50%. All liability and capital contributions would match the ownership percentages.
Every situation will be different, but having good help at the right time can help your operation to be more efficient and more successful. As margins continue to get tighter, those operations who run efficiently will also be the ones who continue to grow and thrive.