Custom operators help farmers save on labor and equipment

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On our 300-acre, 150-cow dairy farm, we have kept machinery costs to a minimum by contracting out much of our harvesting work performed. Would it make sense to buy a new traction discbine to mow alfalfa and an agricultural bagger to store hay and corn silage? I know these two pieces of equipment aren’t cheap, but it looks like we end up waiting for our custom harvester to get here because these items are used on other farms. If we could mow our own hay, I think our custom combine would arrive faster. The same is true for an agricultural bagger. Currently, our silage and silage is stored in our silos, which slows down the harvest. Please advise.

Tom Kestell: It’s always important to think about the timing and efficiency of your forage harvest, so congratulations on starting this process. The first place to start is a serious, two-way conversation with your custom combine about the impact you could have on the harvest. In my opinion, the biggest bottleneck to harvesting is not cutting the hay. Most of the time, custom operators want to cut the harvest so that they can control when to harvest according to their schedule. It also impacts silage merging and harvesting if the right sized windrows are not cut to begin with.

The real bottleneck can be unloading the crop at the silo. What your custom operator uses to haul hay or corn silage will help determine a solution. If you haul with trucks, using an accumulator at the silo can help streamline unloading. The combination of a large capacity blower and a high horsepower tractor on the blower will help you keep up with many choppers.

If your herd storage and feed silo system is in good working order and working for your operation, I wouldn’t change to a new system. Examine the entire harvesting procedure to see where the most profitable and useful changes can be made.

Good luck and remember that changing one thing can be very beneficial, but can also lead to other costly and less effective changes.

Sam Miller: Kudos to you for stepping back and analyzing your business to see the bottlenecks and look for solutions. Your plan would improve efficiency by minimizing the time and cost of custom harvesting forages while doing the hay cutting and bagging in-house. Prepare a partial budget analysis to guide your decision. This analysis should compare the cost of custom hiring all tasks with the cost of mowing and bagging hay. Don’t forget to include additional labor, insurance, operating costs and of course the cost of equipment to be purchased.

In addition to a purely financial comparison, complete a second partial budget comparing intangible benefits such as greater peace of mind, better forage quality, and any other items. For assistance, contact your Extension ag agent or agricultural technical college trainer for partial budget examples. Good luck completing the analysis and making the best decision for the business.

Katie Wantoch: Former University of Wisconsin-Extension ag agents authored the article Working Successfully with a Custom Operator. Today’s agricultural economics suggests investing only in capital assets that produce a high rate of return on investment. Large, expensive pieces of farm machinery, such as an agricultural bagger or a combine harvester that are only used a few days a year, may not be profitable for a farm. This economic reality has led to an increase in the number of custom companies that have the equipment needed to harvest high-quality alfalfa, corn silage and feed grains in a timely manner.

Using the services of a custom operator allows you to enjoy the efficiency of large-scale harvesting equipment without incurring the high costs of machine ownership. It eliminates the need to hire seasonal labor and you can direct your scarce labor resources to the job you do best: milking, feeding and managing cows for maximum profit.

Focus on developing a successful working relationship with your Custom Operator. Communicating your acreage and crop maturity expectations will ensure a successful partnership. This will help them plan your harvest with their other customers. Make sure you have this conversation at the start of the year, not at harvest time.

Do your homework before renting land

My neighbor, who is my father’s uncle, plans to retire this fall after finishing the harvest of his 270 acres of crops. He says he would like me to rent his land next year. It is a good plot and the rental price would be fair. I am 32 years old and farm 450 tillable acres in central Wisconsin. I also work full-time for a cooperative that delivers propane gas and diesel fuel. I take my vacations in the spring and fall to plant and harvest my crops. With that extra land, I would probably have to hire another retired neighbor to help me plant and harvest. I think I can handle the workload with a little help. I have a good range of equipment that I bought from my dad when he left farming in 2015. What do you think? Am I missing something?

Tom Kestell: Congratulations on your success at this stage of your career. Take a step back and consider how this additional land would fit into your operation. Can your tillage and planting equipment handle almost 50% more acres? Have you spoken to your banker to see if your line of credit can support the additional operating costs? What is your marital status? If you’re married, get your significant other on board with their support – this can sometimes be critical.

You can also look into the most pressing areas of your farm operation as some of the planting, spraying, etc. could be custom made. Managing this business will be the most important thing to focus on. Take your time choosing the best corn hybrids and soybean varieties for your region and crop management.

This change in the size of your farming operation can be a good thing if you have a solid and achievable plan before embarking on the adventure. Plan to protect yourself against the downsides, and hope and work for the upsides so the extra workload doesn’t overwhelm you and your loved ones.

Sam Miller: This extra acreage represents a little more than a 50% increase in the size of your farming business. Make sure you have the gear capacity to deal with it. Additionally, complete a forecast of your existing farming business and a second with the additional acres. Based on your feedback, you should be able to spread the cost of your equipment over more acres to improve the bottom line, but you will need to add costs in terms of hiring help.

Also review your crop insurance program. Will the land added be assured with your current actual production history, or will it be at a lower transient yield?

Finally, consider your crop marketing plan. You do not indicate if you have a warehouse or if you are selling the field, but complete a plan for marketing and delivering the crop at or after harvest time. An agricultural extension agent, an agricultural technical college instructor, and your crop insurance agent can help you answer these questions. Good luck with your analysis.

Katie Wantoch: The number of farmers renting land continues to increase as farmland is transferred to retired farmers or landlords who do not farm. Farmland rental rates are typically a farmer’s highest input cost, as it is often more profitable to rent the land than to own it. Perform a partial budget analysis to assist in the decision to lease additional land.

Partial budgeting is an analytical tool to determine responses to the impact on profitability. It is also a method for analyzing operational changes – renting or owning, raising your own replacements or using a custom heifer raiser, using new technology or keeping an old one, etc. ? What costs will be eliminated or reduced? What will be the cost increase? Which revenues will be eliminated or reduced? You must answer these questions first to determine the impact of the change on profitability.

Note that the first two questions identify increases in profitability while the last two questions identify decreases in profitability. After answering these questions, you can compare the net change. If positive, the change may be justified.

Agrivision Panel: Tom Kestell, dairy farmer, Sheboygan County, Wisconsin; Sam Miller, Managing Director, Agricultural Banking Group Head, BMO Harris Bank; and Katie Wantoch, agricultural extension officer specializing in economic development, Dunn County, Wis. If you have any questions you would like the panel to answer, send them to: Wisconsin Agriculturist, PO Box 236, Brandon, WI 53919; or email [email protected].

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