Equipment and Labor Sharing:
a Risk Management Tool for Small
and Medium-Sized Farmers
http://www.extension.iastate.edu/coops/workshops/
Sponsors
North Central Risk Management Agency
Iowa State University Extension
University of Missouri Extension
Website
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Purpose
Flyers
Brochures
Registration
Dates and Locations
Resources
Case Studies
Presentation
Contacts
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/
Flyer
Brochure
Dates and Locations
Iowa Workshop Dates
Date
Location
February 16
Webster County Extension Office
108 South 8th Street
Fort Dodge, IA
February 21
Hills Bank
720 First Ave SE
Mount Vernon, IA
February 22
Carrollton Inn
Hwy 71 N & 18th Street
Carroll, IA
Missouri Workshop Dates
Date
Location
February 28
Farm Credit Services Office
2880 North Washington
Chillicothe, MO
March 1
Nevada TeleCenter
Bowman Cafe
2015 North West Street
Nevada, MO
Registration
General Resources
AgDM
Resources
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 Organization
Capital Contributions
Land Holdings
Profits and losses
Rights to file suit
Transfer of membership interest
Spouses
Termination and dissolution
Personnel
Insurance
Record keeping
Meetings and Communication
Financing
Replacement of equipment
Use of equipment outside the system
Day to Day issues
Example Articles and Operating Agreement
Business Plan
Exit, Succession or Transfer
Legal
Organization
Resources
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
Local Sponsors
Carroll County Extension Service
Hills Bank
Linn County Extension Service
Webster County Extension Service
Contacts
Program components
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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 have
In their group.
What Are You?
Caretaker
Optimistic
Passionate
Enthusiastic
True Romantic
People Oriented
Peacemaker
Energetic
Desires Change
Playful
Master Negotiator
Natural Entertainer
Accepts Challenges
Impulsive & Spontaneous
Prepared
Loves to Plan
Detail Oriented
Punctual
Values Family Traditions
Conservative and Stable
Well-Organized
Problem Solver
“Why” Mentality
Very Complex
Cool, Calm, Collected
Intellectual
Work Is Play, Play Is Work
Perfectionist
You Are Seen As
Over-Emotional
Mushy
Unrealistic
Tenderhearted
Smothering
Talking to Much
Nosey
Rude
Irresponsible
Not Serious
Selfish or Self-centered
Ignores Rules
Impatient
Flirtatious
Rigid
Restricted
Stubborn
Opinionated
Bossy
Uptight
Married to the Task
Arrogant
Unrealistic
Eccentric, Weird
Unfeeling
Sarcastic
Critical
Unappreciative
You See Yourself As
Caring
Romantic
Spiritual
Having Faith
Flexible
Caretaker
Great Communicator
Straight Forward
Easy-going
Now Oriented
Negotiator
Multi-tasker
Spontaneous
Succeeding
Stable
Dependable
Firm
Knows What’s Best
Efficient
Responsible
Goal Oriented
Knowledgeable
Expedient
Visionary
Innovative
Rational
Witty
Deep Thinker
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
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
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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)
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.
•Neighbor
•Other State
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.
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.
Case Study Questions
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.
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 Evaluations
Strongly
Agree
Agree
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
Very
Confident
Moderately
Confident
Not
Confident
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
Topics
Fort Dodge Evaluations
how likely are you to take the following actions:
Very
Likely
Moderately
Likely
Not
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
Practice or Activity
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?