July 17, 2020 |Equipment
Is equipment sharing right for you?
To boost efficiency and cut costs, sometimes two farmers are better than one.
High-end tractors and precision ag equipment sell for five and six figures — among the top capital expenses on a farm. Not surprisingly, many producers delay machinery purchases until boom years.
But there are more ways to manage costs than to do without necessary equipment. One is to partner with another farmer.
Sharing equipment helps farmers:
- Lower the expense of owning and maintaining equipment
- Reduce capital investment
- Save on labor costs through automation
- Upgrade to specialized equipment
There’s more than one way to share, too.
One option is for two farmers to buy identical equipment and use both at different times in the season. It’s like getting two machines for the price of one. This is a good arrangement for cotton and grain operations that need to run more than one harvester at the same time. Owning your own equipment also keeps things simple. You might not even need to exchange much cash. Both owners can buy insurance to cover the partner’s equipment while it’s on their farms.
Joint ownership is a good option for farms that are transitioning to a younger generation. It also has benefits for farmers who aren’t related. Co-owning equipment helps older ag producers keep expenses down as they near retirement. And it helps younger farmers — who typically don’t have as much capital — expand.
Decide what’s right for you
Whichever model you choose, here are some things to consider.
- Find a compatible partner. Look for someone who communicates openly and honors commitments. It’s common to share equipment with a friend, neighbor or relative. You also might find a good match in your commodity group. Visit prospective partners’ farms to see how they run their operations and maintain machinery.
- Make sure you can both use the equipment when you need it. For planting and harvesting equipment, consider partnering with a farmer in another area. Someone who farms some distance north or south of you probably has a different planting or harvest schedule. Compare your records and make sure there isn’t an overlap.
- Decide how to handle operating costs. It’s simplest if you and your partner generally use the equipment for an equal number of hours or acres. Make sure the equipment is insured and well maintained. Discuss what to do ahead of time if something breaks, and who’s responsible for making and paying for repairs. Keep good records and compensate each other with use fees to keep things even.
- Figure out transportation. If you plan to transport equipment yourselves, make sure you understand state and federal trucking regulations. If you haul it over 150 miles, for example, you must comply with drug testing and other Federal Motor Carrier Safety Regulations (FMCSR). It might be easier to have your equipment dealer transport the machinery.
- Put the details in writing. Whether you purchase equipment with a partner, or each buy your own, make sure you have a written agreement. A good contract will set clear expectations, help you track finances, and spell out how to handle disagreements.
“A good attorney can help advise farmers of the best entity structure to help mitigate risk for both partners involved in these equipment sharing structures. It’s important to visit with an attorney to explain each unique situation and the desired agreement on sharing equipment,” said John Mayo, Robstown Relationship Manager.
There’s no one-size-fits-all approach to sharing equipment.
The following websites can help you explore your options:
- Understanding Equipment Sharing: A Farmer Toolkit: This free toolkit from a USDA sustainable agriculture program explains several ways farmers can share equipment.
- Iowa State University Extension and Outreach: Ag Decision Maker, the university’s ag economics and business website, offers many resources on equipment sharing and joint ownership. Use the search field or visit the machinery page to find articles, fact sheets and sample legal agreements.