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Why farmers outsource

Mike Wilson, Senior Executive Editor

April 1, 2008

4 Min Read

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Most farmers I know don't want people to know when they outsource their marketing or taxes to the experts. First they don't want you to think they're lazy for not doing it themselves. Second, they might not want you to know they'd rather give the job to someone else.

But the fact is, on large-scale farms today, those who spend money on outside expertise usually find it's money well spent

Perry Hansen (below) is a good example. Every spring he puts together a file on his Garden City, KS grain and livestock farm and ships the papers off to an outside accountant, who prepares the farm's tax returns. What may seem strange is, Hansen himself is a CPA with a B.S in Accounting. He's worked in a regional accounting firm and serves as controller for a western Kansas equipment dealership.

So why not handle the farm's taxes himself?  "It's good to have someone from the outside looking at our work to see if there's something we missed or if we could handle something differently,•bCrLf says Hansen. "It's good to have a security blanket to fall back on in case we have an audit.•bCrLf

As farms grow, more operators see themselves as CEOs of a business and choose to relegate certain tasks to outside experts.

According to a recent Farm Futures survey, bookkeeping and marketing are the most common management tasks outsourced by farmers.

According to our survey production practices like herbicide and spraying applications, along with trucking, tend to get outsourced, probably in response to a lack of manpower or time during planting and harvesting. Those who outsource production tend to be smaller, especially those outsourcing planting and pesticide application. According to our survey, manure handling and application is another popular outsourcing task.

Better decision-making "When you outsource tax or other accounting needs, you end up getting higher quality reports because of the expertise offered in those areas,•bCrLf says Paul Ellinger, University of Illinois Ag Economist. "Outsourcing will leave you with a better product and a better decision-making framework because you have an expert giving you that feedback.•bCrLf

The people who are happy to spend money for outside expertise realize that information is valuable, says Ellinger.

"Not only is it more efficient, in terms of hours in a day, but individual functions are being done at a higher level so better information ultimately comes back to the producer to make decisions. When they see themselves as businessmen, they realize, some of these functions are better suited to someone else.•bCrLf

Good managers may outsource a task that only needs to be done occasionally. The logic: It's better to bring in a specialist that deals with the topic on a regular basis.  

"Farmers do not feel it is worth their time to become an expert in something that doesn't have to be done everyday,•bCrLf says Kevin Dhuyvetter, Professor of Farm Management at KansasStateUniversity. 

The Farm Futures survey shows that farmers who outsource bookkeeping and marketing tend to be much larger than average — 40% or more larger. Managers of larger farms often have many things to do and literally don't have the time to do everything, says Dhuyvetter.  

Ken McCauley (left) lets someone else handle bookkeeping at his 4,000-acre White Cloud, KS farm because "we don't like it as much as we like other things on the farm,•bCrLf he says. "We haven't bought any ag software and it seemed like it was always changing, so we leave it to someone else.•bCrLf

Garry Niemeyer, Auburn, Ill., leases two semi-trucks and outsources grain hauling to go with his two combines and two auger carts during harvest, primarily because of manpower issues.

On the other hand, he outsources his marketing program "because I don't have a clue,•bCrLf he says with a laugh.

"Fundamentals used to play a bigger role in marketing,•bCrLf he says. "Now it's all about global factors, like China. How do I know if a potash mine shut down in Trinidad? It's all about information, so I let others handle it.

"I have seven marketing services I call on,•bCrLf he explains. "When four or five of them get on the same page and say nearly the same thing, I get busy doing something with my marketing.•bCrLf

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About the Author(s)

Mike Wilson

Senior Executive Editor, Farm Progress

Mike Wilson is the senior executive editor for Farm Progress. He grew up on a grain and livestock farm in Ogle County, Ill., and earned a bachelor's degree in agricultural journalism from the University of Illinois. He was twice named Writer of the Year by the American Agricultural Editors’ Association and is a past president of the organization. He is also past president of the International Federation of Agricultural Journalists, a global association of communicators specializing in agriculture. He has covered agriculture in 35 countries.

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