Team Farming - 2

28 Jul 2016

By Elizabeth Williams
DTN Special Correspondent

NASHVILLE (DTN) -- Because no two farms or farmers are alike, collaborative farming can take on different forms. Some are full partnerships but others simply share equipment. When John Gladigau, from Alawoona, South Australia, won a fellowship to study 50-60 collaborative farm operations around the world, he discovered "there is no 'working model' out there and there are no rules because every farm is so different." The key is to find a farmer who shares your similar values. We'll outline four ways farmers have teamed up with other farmers in nontraditional ways to grow their business.

1. Try a trial marriage.

For Rick Fruth of Napoleon, Ohio, it started with a popcorn company offering him more acres than he could handle. "I called my neighbors, Mark and Dennis Schwiebert, whom I respected, and said, 'I'll plant, harvest and manage raising popcorn on some of your acres and you can plant, harvest and manage a crop on some of my acres. And we bought some equipment together and we helped each other out," Fruth explained. After four years testing their compatibility, they formalized their partnership, operating 2,500 acres.

Through the years Fruth also got to know area farmer Rob Rettig and admired his forward thinking and work ethic. They found they had compatible personalities. In 2009, they decided to combine operations to improve their risk mitigation and economies of scale. Although the land is owned separately, the partners operate the farm business as a unit.

"For me, it was a way to grow responsibly, without competing against our neighbors. We grew slowly as each partner brought land into the operation," said Fruth. The combined farming operation, New Vision Farms, now encompasses 7,500 acres in northwest Ohio with over 100 fields and 50 landowners utilizing seven full-time employees and three to four part-time employees.

Even when everyone gets along, it's not an easy process. "What it comes down to is, it's all about trust," said Rettig. "You will be tested."

2. Commit to a partnership of equals.

Gladigau and another farmer in his area, Robin Schaefer, joined forces because they trusted each other, had similar values and goals and they wanted to grow. To form their partnership, they first started with a blank piece of paper. "We said, if we were to design the perfect family farm concerning ourselves, what would it look like? What would the decision-making process be like?" Gladigau explained.

"One of the things we decided was we wanted the latest technology, so we sold all our machinery -- some of it to our new operation, but not much of it," said Gladigau. "Our cost of machinery went from $138 per acre to $97 per acre with our newer, more expensive equipment because we utilized it more efficiently over more acres. We run our two seeders 806 hours per year; our annual sprayer use is 1,500 hours. Our two 40-foot harvesters go 24 hours per day."

Gladigau warned, "Don't get the idea that collaborating guarantees profit. Our biggest risk is drought. But since we had had five droughts in the past seven years before coming together, the probability of having a drought in year one of our farming together was low, right? Unfortunately, we suffered the second worst drought in those eight years during the first year (2008) we farmed together. But according to my records, we were no worse off farming together than if we had remained separate. And the next year, we had a cash surplus."

3. Join forces but keep finances separate.

In Chris Barron's group in Rowley, Iowa, everyone owns their own land and everyone owns their own grain. An overall management "company" is in charge of planning, purchasing and marketing. Two other "companies" own the equipment and trucks which rent to the eight group members.

By joining forces, "we can maximize our equipment," said Barron. "We bought a strip-till bar that cost us only $30 per acre. In fact, one of our farm team members said we were saving him $40 per acre on equipment costs."

Barron reported aggregating input purchasing saves about 5%. "And although we all make our own marketing decisions, we can combine forces and get some good deals. We met with Cargill earlier this year and asked what can we do to be a good customer? After some discussion, we agreed to sell 400,000 bushels corn for October delivery, and we also made basis deals for December and January delivery," Barron said.

Barron's equipment enterprise charges land-holding partners per-acre fees based on the equipment cost (principal, interest, repair, fuel, labor and insurance) plus a 5% to 12% return. The partners earn labor credit of $15 to $30 per hour. But that includes more than just running a tractor. For example, to clean and detail a combine -- a 35-hour job, you can receive $1,200 as credit on your equipment invoice.

Invoices are issued once in the spring and again in the fall. Barron's planting cost, using a JD 8335R tractor with JD 1770NT planter was $20.45 per acre this year.

If you don't like bookkeeping and can't account for every $1 spent on your farm, collaboration may not be for you. Your team members don't want to pay for "estimates." And they don't want to be surprised at the end of the year when you reconcile the books. Barron's group keeps track of every single piece of equipment on each farm for how long and with which operator.

Besides cost savings, another advantage of a larger collaborative operation is back-up for your labor. "We have 'three-deep' back-up for each piece of equipment," said Barron. "What happens when the guy running the sprayer gets sick? We have back-up."

How does Barron handle who gets planted first? "Someone has to be first and last. We look at logistics and soils. We try to be fair."

To determine who makes the ultimate decision, Barron's group has a list of "Decision Rights" -- naming who has the right to make the final decision for each major category of the farm operation. "For example, Randy Blin and I are responsible for the final decisions on equipment. Others can influence our decision, but we have the final say," Barron explained.

"When I first came back to farm and told my dad I wanted to partner with some people, he said it doesn't work. So, I did some research -- where it didn't work was when everyone got together to improve efficiency. No one said, 'We got together to help others and have a better life.' The key to our group is that [helping others and having a better life] is our goal. We have a great group who truly cares about each other. But, still, we are a work in progress. It's constantly evolving," Barron said.

4. Buy inputs or merchandize grain as a group.

For those wanting less management collaboration, but still want to benefit from group purchases and sales, farmers in southwest Ohio have a time-tested model. They joined together 40 years ago to form Premium Ag Commodities Inc. (PACI). The group hired a manager to purchase crop inputs in bulk, then added an experienced grain merchandiser and invested in a crop insurance agency. The three dozen current members represent 175,000 acres. Alan Thompson of Springfield, Ohio, said he saves about 5% to 10% on fertilizer since PACI negotiates a bundled price.

For grain sales, Thompson said, "[Alone] we can get 50,000 bushels to corn processors in three days, but if the group can get 250,000 bushels there, we might make at least an extra nickel per bushel."

The group also raises specialty grains for a Japanese customer. Putting their product directly on barges headed for New Orleans doubles their premiums.

Mark Bryant of Washington Court House, Ohio, values the level of expertise the group can hire. "I can't afford to have a specialist in my operation to handle purchasing, crop insurance and grain merchandising," said Bryant. "A 100,000-acre producer couldn't afford this."

Also, the group values the combined expertise of its members. The opportunity to affiliate with progressive operators has elevated everyone's management skills, said Lamar Ratliff of Greenfield, Ohio.

[To read more about PACI, see https://www.dtnpf.com/… .]

No matter how your farm team is organized, all these successful operations emphasize similar elements to success. The key is sharing similar values, being able to resolve conflicts, opening lines of communication and demonstrating respect for each other, they said.

DTN Executive Editor Marcia Taylor contributed to this story.

EDITOR'S NOTE: Next: What can go wrong with collaborative farming and how to avoid mistakes others have made.

(MZT/CZ)