Listen to the podcast here http://cashcowfarmer.libsyn.com/ep-26-5-ways-to-print-money-with-excess-machinery
During the boom times of $8 corn and $16 soybeans three or four years ago, many farmers offset tax burdens by purchasing machinery and using the section 179 accelerated depreciation. A few of us were a bit too aggressive in doing this and ended up with a little more machinery than we should have.
Currently, selling the machinery is not a great option, not only because it would give you a new tax burden, but also because the market for used machinery is not very good.
At Cash Cow we are focused on becoming the Sam Walton of production being the lowest cost producer in the market, making sure you don’t have any waste in the system.
Some options to make money from the used machines follow.
It’s a good idea to rent out your combine and similar equipment. The combine is a very expensive piece of machinery, and we only use it two to three months a year. There are probably another three to six months when that combine can produce for you.
Machinery Link is one great opportunity for renting it out to other farmers who don’t want to hire a custom outfit but also don’t want to buy a new combine. However, while there’s opportunity here, it seems as if all the big dealers have filled this demand on the site.
Still there is some opportunity. Why not try?
2) Rent to Neighbors
Renting to neighbors is an obvious strategy, but don't be greedy here or you won't get a deal and your neighbor will quit answering your phone calls. You’re not the only one who has excess machinery.
When you’re renting machinery to your neighbors, figure out the market rate. Look at something like Machinery Link for the market rate and say, “I’ll give you a discount because we’re buddies and if you screw something up, I know where you live…”
Or maybe don’t say that.
Negotiate a nice rate (say it’s a sprayer and you want to charge $50/hour) and a minimum number of hours per month (e.g., 100 hours) that they must meet so that you meet your goals for printing money with the machine. They get a sprayer and save money on hiring someone, and you make money.
3) Custom Work Like Crazy
Actually doing custom work is a lot more profitable than it used to be. Farmers can do the work themselves for their neighbors.
There are co-ops and various other companies that do chemical application for, let’s say, $7/acre. You could always offer to do it for $6.50/acre, especially if the fields are right next to yours or are the same crop. That way, you don’t have to switch chemicals; you can just bill them for it. It’s easier for everybody.
There’s plenty of opportunity for harvest partnership. The custom harvest crews have really gotten high on prices during the boom times. I’ve worked with farmers whose custom outfit had a complicated formula on how they charged for combining and trucking. On a 200 bushel corn field it was costing that farmer $94/acre to have that guy cut and haul the corn 15 miles. That’s not a good deal with corn is less than $4 per bushel.
Cut with your neighbors and form an alliance. That’s how they used to do it in the old steam engine days. Harvest festivals were a huge community event. Low commodity prices can bring back that neighborly love.
4) Custom Farm for Some Retired Guys
I didn’t realize how much of this was actually done until recently. These retired folks hire farmers to do all the operations while still holding onto their land. Rather than cash rent or crop share, the farmer finances all the inputs, organizes everything, markets the grain, and hires all the field work done. That’s a good system for an over equipped farmer and an older farmer.
Talk to some of these retired guys, especially if the rents are high. Offer to custom farm for those retired neighbors. You can do the work but let them do the grain marketing and such. If you can show them that you can market grain better than them, they might even crop share with you. We offer free grain marketing strategy sessions at cashcowfarmer.com
5) Custom/Partnership Hybrid
Let’s say you’re done with planting and you have an extra guy around. If you’re able to, make a deal with some of your favorite custom harvesters to send your guy and a combine south with them after planting season. Make your own deal up; you can potentially make a couple of thousand dollars a day.
You have a guy that you’re financing and machinery that’s at risk every day, but hey—more work, more money.
Also, this can be done with co-ops that get behind. Buy some y-drops and offer to help the co-op or some neighbors drop nozzle liquid fertilizer in season. You can tell your co-op, “If you give me some acres I’ll make this investment, keeping a guy dropping nozzling fertilizer all year for you.”
Don’t let your excess machinery be literal and financial dead weight on the farm for huge portions of the year. Though it takes a little creativity, you could be making thousands in the time your machinery is sitting around.
What do you think? Have any questions or comments about how to turn excess machinery into money-makers? Let us know in the comments.
The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.