Equipment and Labor Sharing: a Risk Management Tool for Small and Medium-Sized Farmers
http://www.extension.iastate.edu/coops/workshops/
North Central Risk Management Agency
Iowa State University Extension
University of Missouri Extension
Sponsors
Website
• Purpose• Flyers• Brochures• Registration• Dates and Locations• Resources• Case Studies• Presentation• Contacts
Website - PurposeThese 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/
Flyer
Brochure
Dates and LocationsIowa Workshop Dates
Date Location
February 16 Webster County Extension Office108 South 8th StreetFort Dodge, IA
February 21 Hills Bank720 First Ave SEMount Vernon, IA
February 22 Carrollton InnHwy 71 N & 18th StreetCarroll, IA
Missouri Workshop Dates
Date Location
February 28 Farm Credit Services Office 2880 North Washington Chillicothe, MO
March 1 Nevada TeleCenter Bowman Cafe2015 North West Street Nevada, MO
Registration
General Resources
AgDMResources
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
Operating Agreement
Business OrganizationCapital ContributionsLand HoldingsProfits and lossesRights to file suitTransfer of membership interestSpousesTermination and dissolutionPersonnelInsurance Record keepingMeetings and CommunicationFinancingReplacement of equipment Use of equipment outside the system Day to Day issues
Example Articles and Operating Agreement
Business Plan
Exit, Succession or Transfer
Legal OrganizationResources
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 Note—an 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.”
Case Studies
Ten Case Studies to be listed
Presentations
Will be posted and available soon
Sponsors
Carroll County Extension Service
Hills Bank
Linn County Extension Service
Webster County Extension Service
Local Sponsors
Contacts
Program components
• Machinery Dating
• Machinery Economics
• Analyzing Case Studies
• Legal Business Organizations
• Farm Program Issues
• Wrap Up
• Evaluations
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 haveIn their group.
CaretakerOptimisticPassionateEnthusiasticTrue RomanticPeople OrientedPeacemaker
What Are You?
PreparedLoves to PlanDetail OrientedPunctualValues Family TraditionsConservative and StableWell-Organized
EnergeticDesires ChangePlayfulMaster NegotiatorNatural EntertainerAccepts ChallengesImpulsive & Spontaneous
Problem Solver“Why” MentalityVery ComplexCool, Calm, CollectedIntellectualWork Is Play, Play Is WorkPerfectionist
Over-EmotionalMushyUnrealisticTenderheartedSmotheringTalking to MuchNosey
You Are Seen As
RigidRestrictedStubbornOpinionatedBossyUptightMarried to the Task
RudeIrresponsibleNot SeriousSelfish or Self-centeredIgnores RulesImpatientFlirtatious
ArrogantUnrealisticEccentric, WeirdUnfeelingSarcasticCriticalUnappreciative
CaringRomanticSpiritualHaving FaithFlexibleCaretakerGreat Communicator
You See Yourself As
StableDependableFirmKnows What’s BestEfficientResponsibleGoal Oriented
Straight ForwardEasy-goingNow OrientedNegotiatorMulti-taskerSpontaneousSucceeding
KnowledgeableExpedientVisionaryInnovativeRationalWittyDeep Thinker
Machinery Dating
Second Activity: Have groups select Machinery Sharing Characteristics that they would like to havein 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
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 out—fewer weather
delays• Opportunity to do custom work
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!
Machinery Economics
• Getting Started
• Scheduling
• Record Keeping
• Cost Accounting
• Income Taxes
Machinery Economics
• Example case
• Worksheet Activity for participants to work
through
Case Studies
Ten case studies that focus on three typical scenarios:
Combine sharing
Machinery only
Total sharing (inputs to marketing)
•Neighbor
•Other State
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. You’ve decided to look at the potential of a combine sharing arrangement.
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.
Machinery Only
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.
Sharing It All
1. Partner Characteristics
2. Strengths and Weaknesses
3. Opportunities and Threats
4. How to Begin?
5. Where to look?
6. Legal Issues
Select a “Spokesperson” and “Recorder” to report back to the whole group.
Case Study Questions
Legal Business Organizations
• Business Structures• Operating Agreements• Video of Roger McEowen –
Sharing Farm Machinery Alternatives
• Resources
Farm Program Issues
• USDA Commodity Payments
• Impact of Business Structure
• Reviewed Resources
Wrap Up
• Review of workbook materials
• Highlight the case studies
• People to contact
Evaluations
• End of meeting
• Follow-up evaluation
Fort Dodge EvaluationsStrongly
AgreeAgree Neutral Disagree Strongly
Disagree
1. The objectives of this workshop were clear to me.
12 18 3 0 0
1. The session covered all the learning objectives outlined.
6 23 5 0 0
1. The content was well organized. 15 15 4 0 0
1. The information presented was current or new to me.
10 13 7 4 0
1. The visuals and handouts were easily understood and helpful.
14 16 4 0 0
1. Enough time was available to cover the subject matter.
9 17 8 0 0
1. The training provided me with new knowledge.
13 12 9 0 0
1. The information presented will be helpful to me in my business.
15 15 4 0 0
Fort Dodge Evaluations
TopicsVery
ConfidentModeratelyConfident
NotConfident
The potential benefits of sharing machinery and labor in your operation
26 9 0
The potential challenges for sharing machinery and labor in your operation
24 10 1
The options for creating a business organization to share machinery
16 18 1
The possible implications on farm program payment eligibility
10 18 7
The potential tax issues involved in sharing machinery
7 23 5
Availability of additional resources to help you plan for machinery and labor sharing in your operation
24 10 1
Fort Dodge Evaluations
Practice or ActivityVery
LikelyModerately
LikelyNot
Likely
Seek more information about machinery and labor sharing arrangements
23 9 3
Initiate discussion with potential partners about sharing machinery
20 13 1
Develop an operating plan to share machinery and labor
18 13 2
Make changes in your current sharing arrangement (if applicable)
6 13 2
how likely are you to take the following actions:
Summary
• Three workshops were conducted– Fort Dodge, Iowa– Mount Vernon, Iowa– Nevada, Missouri
• 81 participants
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
Thanks for the opportunity to present
Questions?