On our 300-acre, 150-cow dairy farm, we have kept machinery costs to a minimum by custom-hiring much of our crop work done. Would it be smart to buy a newer pull-type discbine to mow alfalfa and an ag bagger for storing haylage and corn silage? I know these two pieces of equipment are not cheap, but it seems like we end up waiting for our custom harvester to get here because these items are being used on other farms. If we could mow our own hay, I think it would get our custom harvester here more quickly. The same thing is true for an ag bagger. Right now, our silage and haylage are stored in our silos, which slows down the harvest. Please advise.
Tom Kestell: It is always important to think of the timing and efficiency of your forage harvest, so congratulations on starting that process. The first place to begin is with a serious and two-way conversation with your custom harvester on what impact you could have on harvest. In my opinion, the biggest bottleneck at harvest is not with the cutting of the hay. Most times custom operators want to cut the crop so they can control the timing of the harvest to fit their schedule. It also impacts the merging and harvesting of the haylage if the right-size swaths are not cut to begin with.
The real bottleneck can be in unloading the crop at the silo. What your custom operator uses to haul the haylage or corn silage will help to determine a solution. If hauling with trucks, then using an accumulator at the silo can help streamline unloading. Teaming with a high-capacity blower and high-horsepower tractor on the blower will help you keep up with many choppers.
If your silo system of storing and feeding your herd is in good working order and works for your operation, then I wouldn’t switch to a new system. Look over the entire harvest procedure to see where the most cost-effective and helpful changes can be made.
Good luck, and remember that changing one thing may be very beneficial but also can lead to other changes that are costly and not as efficient.
Sam Miller: I commend you for taking a step back and analyzing your business to see the bottlenecks and seek solutions. Your plan would improve efficiency by minimizing the time and cost of custom harvest forages while performing the hay cutting and bagging in-house. Prepare a partial budget analysis to help guide your decision. This analysis should compare the cost of custom hiring all the tasks with the cost of hay mowing and bagging. Don’t forget to include the added labor, insurance, operating costs and, of course, the cost of the equipment to purchase.
In addition to a pure financial comparison, complete a second partial budget comparing the intangible benefits such as greater peace of mind, improved forage quality and any other items. For assistance, contact your Extension ag agent or farm 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 drafted the article Working successfully with a custom operator. Today’s farming economics suggest to invest only in capital assets that produce a high rate of return on investment. Large, expensive pieces of farm machinery, such as an ag bagger or combine that are used only a few days out of the year, may be unprofitable for one farm to own. This economic reality has resulted in an increased number of custom-operation businesses that own the equipment necessary to harvest high-quality alfalfa, corn silage and feed grains in a timely manner.
Using the services of a custom operator allows you to capture the efficiencies of large-scale harvesting equipment without incurring the high costs of machinery ownership. It eliminates the need to hire seasonal labor, and you can direct your scarce labor resources into the work 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 satisfactory partnership. This will help them schedule your harvest along with their other clients. Be sure to have this conversation early in the year, not when it’s harvesttime.
Do homework before renting land
My neighbor, who is my dad’s uncle, is planning to retire this fall after he finishes harvesting his 270 acres of crops. He says he would like me to rent his land next year. It’s good land 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 co-op delivering propane gas and diesel fuel. I take my vacation in the spring and fall to plant and harvest my crops. With this extra land, I would probably have to hire another retired neighbor to help me with planting and harvesting. I think I can handle the workload with some help. I have a good line of equipment that I bought from my dad when he quit farming in 2015. What are your thoughts? Am I missing something?
Tom Kestell: Congratulations on your success at this stage of your career. Take a step back and evaluate how this extra land would fit into your operation. Can your tillage and planting equipment handle almost 50% more acres? Have you talked to your banker to see if your line of credit can handle the extra operating costs? What is your marital status? If married, get your significant other on board with their support — it can be critical at times.
You could also look into the most time-sensitive areas of your farming operation, as some of the planting, spraying, etc., could be custom done. The management of this venture will be the most important thing to concentrate on. Take your time to choose the best corn hybrids and soybean varieties for your area and management of that crop.
This change in the size of your farming operation can be all good if you have a solid workable plan before you jump into the venture. Plan to protect yourself for the downside, and hope and work for the upside so the added workload doesn’t overwhelm you and your loved ones.
Sam Miller: This added acreage is a bit more than a 50% increase in the size of your farming enterprise. Be certain you have the equipment capacity to handle it. In addition, complete a forecast of your existing farming enterprise and a second one with the additional acres. Based on your comments, you should be able to spread the cost of your equipment over more acres to improve the bottom line, but you will have to add cost in terms of hiring help.
Also review your crop insurance program. Will the added land be insured with your current actual production history, or will it be at a lower transitional yield?
Finally, consider your marketing plan for the crops. You don’t indicate if you have storage or if you sell off the field, but complete a plan for marketing and delivering the crop at or after harvest. An Extension ag agent, farm technical college instructor and your crop insurance agent can assist in helping answer these questions. Good luck with your analysis.
Katie Wantoch: The number of farmers who rent land continues to rise as farmland is transitioned to retired farmers or owners who do not farm. Farmland rental rates are usually the largest input cost a farmer has, since often it is more profitable to rent the land than own it. Complete a partial budget analysis to assist with the decision to rent additional land.
Partial budgeting is an analytical tool for determining answers to the impact on profitability. It is also a method for analyzing operational changes — renting vs. owning, raising your own replacements vs. using a custom heifer raiser, employing a new technology vs. keeping an old one, etc. Partial budgeting asks: What will the increased revenues be? What will the eliminated or reduced costs be? What will the increased costs be? What will the eliminated or reduced revenues be? You should first answer these questions to determine the impact of the change on profitability.
Note that the first two questions identify increases to profitability while the last two questions identify decreases to profitability. After answering these questions, you can compare the net change. If it is positive, then the change may be warranted.
Agrivision panel: Tom Kestell, dairy farmer, Sheboygan County, Wis; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, Extension agricultural agent specializing in economic development, Dunn County, Wis. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].