Equipment and Labor Sharing: a Risk Management Tool for Small and MediumSized Farmers

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Equipment and Labor Sharing a Risk Management
Tool for Small and Medium-Sized Farmers
http//www.extension.iastate.edu/coops/workshops/
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Sponsors
North Central Risk Management Agency Iowa State
University Extension University of Missouri
Extension
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Website

• Purpose
• Flyers
• Brochures
• Registration
• Dates and Locations
• Resources
• Case Studies
• Presentation
• Contacts

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Website - Purpose
These workshops will discuss strategies for
sharing machinery and labor in your farming
operation and provide tools to help you evaluate
sharing as an option. The workshops will
cover Benefits and drawbacks of sharing
equipment and labor Tax, liability, and farm
payment eligibility issues associated with
equipment and labor sharing Planning for
sharing resources Available resources for
planning and implementation of resource sharing
arrangement
http//www.extension.iastate.edu/coops/workshops/
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Flyer
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Brochure
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Dates and Locations
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Registration
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General Resources
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AgDMResources
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AgDM Spreadsheets

• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -34jointmach.xls
• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -38jointventfarmmach.xls
• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -21_35machfinancing.xls
• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -24fieldcap.xls
• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -28fielddays.xls
• http//www.extension.iastate.edu/agdm/crops/xls/a3
  -29machcostcalc.xls

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Operating Agreement
Business Organization Capital Contributions Land
Holdings Profits and losses Rights to file
suit Transfer of membership interest Spouses Termi
nation and dissolution Personnel Insurance
Record keeping Meetings and Communication Financi
ng Replacement of equipment Use of equipment
outside the system Day to Day issues
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Example Articles and Operating Agreement
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Business Plan
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Exit, Succession or Transfer
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Legal OrganizationResources
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Machinery Sharing and USDA Payment Limitations
USDA commodity payment limitations apply to each
individual person. Limitations Loan Deficiency
Payments 75,000 Counter-cyclical payments
65,000 Direct payments 40,000 A person can
be An individual (including both spouses) A
limited partnership A limited liability
partnership (LLP) or company (LLC) A
corporation, joint stock company or association
A trust, estate or charitable organization A
government agency Notean ordinary partnership
does not qualify. In a general partnership each
member may qualify as a person. The person
must be actively engaged in farming, which is
defined as contributing Significant
contributions of land, capital, or equipment or a
combination of all three. and active personal
labor or active personal management or a
combination of both. Contributions must be at
risk and commensurate with the claimed share of
profits and/or losses of the farming operation.
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Case Studies
Ten Case Studies to be listed
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Presentations
Will be posted and available soon
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Sponsors
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Local Sponsors
Carroll County Extension Service Hills Bank Linn
County Extension Service Webster County Extension
Service
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Contacts
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Program components

• Machinery Dating
• Machinery Economics
• Analyzing Case Studies
• Legal Business Organizations
• Farm Program Issues
• Wrap Up
• Evaluations

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Machinery Dating
Purpose to get producers to think about the
importance of communication, skills needed to
make sharing work, and realize some of the
benefits. Activity Break into groups and have
them select Personality Characteristics that
they would like to have In their group.
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What Are You?
Caretaker Optimistic Passionate Enthusiastic True
Romantic People Oriented Peacemaker
Prepared Loves to Plan Detail Oriented Punctual Va
lues Family Traditions Conservative and
Stable Well-Organized
Energetic Desires Change Playful Master
Negotiator Natural Entertainer Accepts
Challenges Impulsive Spontaneous
Problem Solver Why Mentality Very Complex Cool,
Calm, Collected Intellectual Work Is Play, Play
Is Work Perfectionist
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You Are Seen As
Over-Emotional Mushy Unrealistic Tenderhearted Smo
thering Talking to Much Nosey
Rigid Restricted Stubborn Opinionated Bossy Uptigh
t Married to the Task
Rude Irresponsible Not Serious Selfish or
Self-centered Ignores Rules Impatient Flirtatious
Arrogant Unrealistic Eccentric,
Weird Unfeeling Sarcastic Critical Unappreciative
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You See Yourself As
Caring Romantic Spiritual Having
Faith Flexible Caretaker Great Communicator
Stable Dependable Firm Knows Whats
Best Efficient Responsible Goal Oriented
Straight Forward Easy-going Now
Oriented Negotiator Multi-tasker Spontaneous Succe
eding
Knowledgeable Expedient Visionary Innovative Ratio
nal Witty Deep Thinker
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Machinery Dating
Second Activity Have groups select Machinery
Sharing Characteristics that they would like to
have in their group.
Example weekends off, work long hours, repair
costs divided equally, operate new equipment,
separate entity for machinery, have excess labor,
want spouse involved, equal ownership of machinery
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Advantages of Sharing

• Greater annual use of large machines
• More efficient use of labor during peak seasons
• More dependable than hired labor
• Fields more spread outfewer weather delays
• Opportunity to do custom work

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Advantages of Sharing

• Specialization of labor
• More efficient use of repair tools and facilities
• Volume discounts on input purchases
• Two (or more) heads are better than one!

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Machinery Economics

• Getting Started
• Scheduling
• Record Keeping
• Cost Accounting
• Income Taxes

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Machinery Economics

• Example case
• Worksheet Activity for participants to work
• through

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Case Studies
Ten case studies that focus on three typical
scenarios Combine sharing Machinery
only Total sharing (inputs to marketing)
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Combine Sharing
Your combine is worn out. You have decided to
trade. A new or newer combine is too high priced
to meet your per acre goal. Youve decided to
look at the potential of a combine sharing
arrangement.

• Neighbor
• Other State

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Machinery Only
You have a mid-sized profitable operation, but
you see the rapid increase in the replacement
cost of your machinery line. You realize you
need more acres, but are not interested in a
bidding war to get those acres. You are fairly
flexible and understand the financial benefits of
machinery sharing. You would prefer to be
responsible for just your own acreage base. You
would like to find someone to partner with on the
big pieces e.g. the combine, 4wd tractor and
planter.
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Sharing It All
You and a neighbor have worked together sharing
some equipment and labor. You both have decided
to broaden the scope to a full line of machinery
and to share all the fieldwork. You want to
upgrade the size and technology of the equipment
line. To do this you feel you will need to add
others to the group for both the acres and the
financial strength to justify a first-rate line
of equipment.
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Case Study Questions

• Partner Characteristics
• Strengths and Weaknesses
• Opportunities and Threats
• How to Begin?
• Where to look?
• Legal Issues

Select a Spokesperson and Recorder to report
back to the whole group.
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Legal Business Organizations

• Business Structures
• Operating Agreements
• Video of Roger McEowen Sharing Farm Machinery
  Alternatives
• Resources

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Farm Program Issues

• USDA Commodity Payments
• Impact of Business Structure
• Reviewed Resources

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Wrap Up

• Review of workbook materials
• Highlight the case studies
• People to contact

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Evaluations

• End of meeting
• Follow-up evaluation

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Fort Dodge Evaluations
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Fort Dodge Evaluations
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Fort Dodge Evaluations
how likely are you to take the following actions
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Summary

• Three workshops were conducted
• Fort Dodge, Iowa
• Mount Vernon, Iowa
• Nevada, Missouri
• 81 participants

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Next Steps

• Examine and refine the pilot workshop
• Identify case study gaps and fill them
• Develop a plan to conduct workshops beyond Iowa
  and Missouri
• Identify partners in other states
• Acquire funding for conducting workshops
• Publish as a North Central Regional publication

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Thanks for the opportunity to present Questions?