Both parties need to have a good understanding of their own existing cost base. From there, costs of sharing machinery can be calculated to assess the merit of developing an arrangement. Depending on the individual and level of involvement they want, there are lots of options available, whether that be a contract farming agreement, labour and machinery sharing joint venture or simply just sharing an item of machinery.
The relationship between the two parties is paramount to the success of the arrangement. Both businesses must want the arrangement to work and neither party should feel forced into it. By way of example cost savings can be made through sharing a combine. Typically it is one of the largest capital items in any business, that only gets used for 6 weeks of the year. The main stumbling block with this is drying and cutting one party’s fields wet and the others dry. This is easily overcome by averaging the drying costs across the businesses involved. It is important to understand that whatever arrangement you come to, there must be flexibility and the understanding that operations on your own farm won’t always be complete exactly when you want. However, with planning and clear communication these issues can be managed from the outset.
With net farm incomes likely to come under pressure with the reduction of direct support, costs need to be addressed now to ensure the profitability and viability of your farming business is sustained. It is imperative that options are explored and developed now, so that businesses are in a position to manage changes as they arise.
Joint ventures or machinery sharing agreements require significant planning and structure in place to ensure that they operate smoothly. If you are considering exploring this further or would like to know more information about how these agreements could work then please contact your local office.