Equipment and Labor Sharing: a Risk Management Tool for Small and Medium-Sized Farmers

1. Equipment and Labor Sharing:a Risk Management Tool for Small and Medium-Sized Farmers http://www.extension.iastate.edu/coops/workshops/

2. Sponsors North Central Risk Management Agency Iowa State University Extension University of Missouri Extension

3. Purpose Flyers Brochures Registration Dates and Locations Resources Case Studies Presentation Contacts Website

4. Website - Purpose These workshops will discuss strategies for sharing machinery and labor in your farming operation and provide tools to help you evaluate sharing as an option. The workshops will cover: Benefits and drawbacks of sharing equipment and labor Tax, liability, and farm payment eligibility issues associated with equipment and labor sharing Planning for sharing resources Available resources for planning and implementation of resource sharing arrangement http://www.extension.iastate.edu/coops/workshops/

5. Flyer

6. Brochure

7. Dates and Locations

8. Registration

9. General Resources

10. AgDMResources

11. Operating Agreement Business Organization Capital Contributions Land Holdings Profits and losses Rights to file suit Transfer of membership interest Spouses Termination and dissolution Personnel Insurance Record keeping Meetings and Communication Financing Replacement of equipment Use of equipment outside the system Day to Day issues

12. Example Articles and Operating Agreement

13. Business Plan

14. Exit, Succession or Transfer

15. Legal OrganizationResources

16. Machinery Sharing and USDA Payment Limitations USDA commodity payment limitations apply to each individual “person.” Limitations: Loan Deficiency Payments $75,000 Counter-cyclical payments $65,000 Direct payments $40,000 A “person” can be: An individual (including both spouses) A limited partnership A limited liability partnership (LLP) or company (LLC) A corporation, joint stock company or association A trust, estate or charitable organization A government agency Note—an ordinary partnership does not qualify. In a general partnership each member may qualify as a person. The “person” must be “actively engaged in farming,” which is defined as contributing: “Significant contributions of land, capital, or equipment or a combination of all three.” “…and active personal labor or active personal management or a combination of both.” “Contributions must be at risk and commensurate with the claimed share of profits and/or losses of the farming operation.”

17. Case Studies Ten Case Studies to be listed

18. Presentations Will be posted and available soon

19. Sponsors

20. Local Sponsors Carroll County Extension Service Hills Bank Linn County Extension Service Webster County Extension Service

21. Contacts

22. Machinery Dating Machinery Economics Analyzing Case Studies Legal Business Organizations Farm Program Issues Wrap Up Evaluations Program components

23. Machinery Dating Purpose: to get producers to think about the importance of communication, skills needed to make sharing work, and realize some of the benefits. Activity: Break into groups and have them select Personality Characteristics that they would like to have In their group.

24. What Are You? Caretaker Optimistic Passionate Enthusiastic True Romantic People Oriented Peacemaker Prepared Loves to Plan Detail Oriented Punctual Values Family Traditions Conservative and Stable Well-Organized Energetic Desires Change Playful Master Negotiator Natural Entertainer Accepts Challenges Impulsive & Spontaneous Problem Solver “Why” Mentality Very Complex Cool, Calm, Collected Intellectual Work Is Play, Play Is Work Perfectionist

25. You Are Seen As Over-Emotional Mushy Unrealistic Tenderhearted Smothering Talking to Much Nosey Rigid Restricted Stubborn Opinionated Bossy Uptight Married to the Task Rude Irresponsible Not Serious Selfish or Self-centered Ignores Rules Impatient Flirtatious Arrogant Unrealistic Eccentric, Weird Unfeeling Sarcastic Critical Unappreciative

26. You See Yourself As Caring Romantic Spiritual Having Faith Flexible Caretaker Great Communicator Stable Dependable Firm Knows What’s Best Efficient Responsible Goal Oriented Straight Forward Easy-going Now Oriented Negotiator Multi-tasker Spontaneous Succeeding Knowledgeable Expedient Visionary Innovative Rational Witty Deep Thinker

27. Machinery Dating Second Activity: Have groups select Machinery Sharing Characteristics that they would like to have in their group. Example: weekends off, work long hours, repair costs divided equally, operate new equipment, separate entity for machinery, have excess labor, want spouse involved, equal ownership of machinery

28. Advantages of Sharing • Greater annual use of large machines • More efficient use of labor during peak seasons • More dependable than hired labor • Fields more spread out—fewer weather delays • Opportunity to do custom work

29. Advantages of Sharing • Specialization of labor • More efficient use of repair tools and facilities • Volume discounts on input purchases • Two (or more) heads are better than one!

30. Machinery Economics • Getting Started • Scheduling • Record Keeping • Cost Accounting • Income Taxes

31. Example case Worksheet Activity for participants to work through Machinery Economics

32. Case Studies Ten case studies that focus on three typical scenarios: Combine sharing Machinery only Total sharing (inputs to marketing)

33. Combine Sharing Your combine is worn out. You have decided to trade. A new or newer combine is too high priced to meet your per acre goal. You’ve decided to look at the potential of a combine sharing arrangement. • Neighbor • Other State

34. Machinery Only You have a mid-sized profitable operation, but you see the rapid increase in the replacement cost of your machinery line. You realize you need more acres, but are not interested in a bidding war to get those acres. You are fairly flexible and understand the financial benefits of machinery sharing. You would prefer to be responsible for just your own acreage base. You would like to find someone to partner with on the “big pieces” e.g. the combine, 4wd tractor and planter.

35. Sharing It All You and a neighbor have worked together sharing some equipment and labor. You both have decided to broaden the scope to a full line of machinery and to share all the fieldwork. You want to upgrade the size and technology of the equipment line. To do this you feel you will need to add others to the group for both the acres and the financial strength to justify a “first-rate” line of equipment.

36. Case Study Questions • Partner Characteristics • Strengths and Weaknesses • Opportunities and Threats • How to Begin? • Where to look? • Legal Issues Select a “Spokesperson” and “Recorder” to report back to the whole group.

37. Business Structures Operating Agreements Video of Roger McEowen –Sharing Farm Machinery Alternatives Resources Legal Business Organizations

38. USDA Commodity Payments Impact of Business Structure Reviewed Resources Farm Program Issues

39. Review of workbook materials Highlight the case studies People to contact Wrap Up

40. End of meeting Follow-up evaluation Evaluations

41. Fort Dodge Evaluations

42. Fort Dodge Evaluations

43. Fort Dodge Evaluations how likely are you to take the following actions:

44. Three workshops were conducted Fort Dodge, Iowa Mount Vernon, Iowa Nevada, Missouri 81 participants Summary

45. Examine and refine the pilot workshop Identify case study gaps and fill them Develop a plan to conduct workshops beyond Iowa and Missouri Identify partners in other states Acquire funding for conducting workshops Publish as a North Central Regional publication Next Steps

46. Thanks for the opportunity to present Questions?