You are in farming because you like agriculture, and you want to make a living from it. Therefore, one way or another, you have to make a profit from your farm. It is not a desire. It is a clear requirement to keep going.
You will find out that…
The source of your lack of profit is not because your crop yield is not the top one or because you don’t use the best agricultural machinery. The way farmers decide what farm equipment to buy is the key to success.
Let me show you why.
When you buy agricultural machinery, it is a business decision. Therefore, you should analyze if the agriculture equipment you like it is the one that brings profit. Spoiler alert: the equipment you desire the most is probably the source for your farm’s loss and not a true profit generator.
Buying cutting-edge agriculture equipment
Many farmers like a cutting-edge tractor like John Deer 9rx series.
I will not deny that such an investment can bring you much benefit in the right context. However, I saw so many farmers who use a tractor like this in small plots making it almost obvious that it is not the right fit.
We farmers are like boys who like to play with their toys. However, these toys are expensive, and the game overall is risky! You have to be a millionaire to afford to play with such expensive toys.
We farmers dream of having equipment with the latest features, similar to our cars: ideally, they are full options. We see at exhibitions as Hanover Germany, the newest technology equipment that could even better solve our problems and accomplish a wide variety of tasks. And we start to dream of them.
But before you decide to buy one, you should ask yourself: what features are wishes (cool to have) and what are the real needs? After you complete this technical analysis, a business analysis should follow.
My solution to escape this trap
I did this business examination to evaluate if the farm equipment I want is the right fit.
I have made this analysis for the same farm machinery with a different setup. And the result surprised me.
Therefore, I knew from the beginning what to expect. The document used to do this evaluation is available for you here.
Low agricultural machinery utilization
Farming is a complex activity that needs many different types of equipment. We use most of them for a short time in the production process.
For instance, we use a harvester approximately two months per year. Compare this usage with how a car manufactory company uses its assets intensively 24/7 365 days, with some limited downtimes.
Can you see the difference?
Let’s make it more obvious…
On average, a combine harvester is used around 300 hours per year, meaning 3.42% of the total time in one year (24 hours x 365days).
It is ridiculously low!
I will give you an example.
The well-known Rolls Royce company has a subscription model for aircraft motors called “power-by-the-hour” since 1962. This model is still used today, and airline companies like it.
Why?
The Rolls Royce’s goal is to use a motor as much as possible, therefore, to maximize profit from a particular engine.
Why is an agricultural machine manufacturer not ready to implement a similar system? Why are farmers not willing to rent the equipment in the same way as airline companies do with the aircraft engines?
Nowadays, even Michelin uses a similar system for truck tires.
Any farm equipment is built for a specific need and can’t be used by a farmer all year round as other businesses use their assets.
Therefore, we should understand our needs, analyze data before making any decision.
My solution to escape this trap
In my case, I did this kind of analysis.
It emphasized that I need to work more land to be on profit with that equipment. This fact was eye-opening. Therefore I took a decision knowing what the consequences are.
You can do the same business analysis for you by taking this document.
Agricultural machinery maintenance and setup
Many farmers like to own agriculture machinery.
But let me tell you, your main business is not to repair agricultural machinery. It is to deliver crops.
Therefore, when you rent it. It’s not your responsibility to fix it. You can focus on what brings value to you as airline companies do.
On the other hand, when you buy a tractor, a combine harvester, or any other farm equipment, you bring all those problems to your farm.
And you know how critical it is the perfect timing for you to harvest or do other agricultural work. Think about: how much time you spend on your farm for maintenance and setup?
To repair this cutting-edge equipment, you need expensive tools and appropriate knowledge.
Therefore you spend your money on something that doesn’t bring value to your farm.
You will have a farm full of tools that you barely use because every single agricultural machine manufacturer has its proprietary system, which is not compatible with another producer.
Nowadays, the tools we need to repair a piece of equipment are more specific to the producer than ever before.
Agricultural machinery is a factory on the wheals that need special care. And they are barely used (e.g., 3.42 % per year).
Because of this, every time I wanted to prepare the equipment for a task, I needed to return to my notebook to remember the way to do it. Because of many of the setups, I did it seldom, like once per year. Therefore, the time needed to do this task is increasingly high compared to someone doing the same job with a higher frequency.
You don’t realize it, but your time is money, and you can better use your time.
The cost of the farm equipment that you don’t use
I know many farmers who have yards full of farm equipment.
Are you one of them too? Let’s find out!
Look at the farm tools and equipment that you have. How many of them do you use frequently?
We all have equipment that is in our yard in case we need them. Just look to the list of farm tools and equipment, and ask yourself:
when did I use this one last time?
And start to do something about them. Their value decreases over time, and you will not be able to sell them for a reasonable price.
Because we farmers are so used to have such a low usability ratio (e.g., 3.42%), we don’t realize that all that equipment is money.
And be sure you have just the tools and equipment you need to run your farm business) and for the situations that are most likely to happen.
The lack of business analysis in farm – the root cause of all
Every farmer should make his analysis for his particular case to understand what is the best approach for him.
My recommendation is to make this analysis for every agricultural machinery you need, even if it looks similar,
do this analysis one more time because your situation changes over time.
Many farmers will tell me, “I am a farmer. I don’t have time for this“. I have to tell you that this kind of decision will make you profitable and happy.
If you want to have a profitable farming business, you need to take action.
Conclusion
Let’s not confuse,
farming is a business,
and if you want to make a profit from your farm,
you should use business tools
to analyze which investment brings money or destroy your farm’s wealth.
Therefore using business tools on your farm is truly necessary if you want to have a business and not an expensive hobby. I highly recommend you do this kind of analysis before buying any equipment on your farm.
Or you can do things as you did before reading this blog, and you will get the same results over and over again. It is your choice.