Matt Schuiteman knew right after he bought his John Deere 9650 combine that he'd be trading it in three years. It's just how he looked at staying up-to-date and machinery efficient when it came to harvest equipment.
This year, that's all changed.
On Sept. 17 he took eight weeks of temporary possession on a new John Deere 9760 STS combine for what he says will be half the cost of owning. It was made possible through MachineryLink, a growing Kansas City, MO, company that offers late model combines and tractors for producers to use on a seasonal basis. MachineryLink currently operates in 25 states across the country.
“We were ready to trade so timing was right,” says Schuiteman, who had heard of the machinery resource from other farmers and from magazine articles. The Sioux Center, IA, grower, who operates AJS Farms in a partnership with his grandfather, had already been leasing tractors for six years and had positive experiences with those deals.
Leasing is a hot button these days for most farmers. In fact, Terry Kastens, farm management specialist at Kansas State University says, “I always advise farmers to consider renting or leasing as an alternative to ownership. Just make sure you have enough work to meet the lease's minimum hourly requirements.”
Once Schuiteman contacted the MachineryLink representative in his area and nailed down the details, he scheduled delivery for his new combine.
The combine came off a wheat run from Texas to Montana. Schuiteman says his operation is its third crop and it arrived with 250 hours on it. “I'd rather not have it new,” he says. “Let someone else take care of those new equipment problems.”
Originally, he'd wanted delivery Sept. 10, not the 17th. But with a wet fall, he didn't need the combine that early. “They were good about communicating on delivery with us, too,” he says.
Once the combine was delivered to Schuiteman's door, he was then obligated to follow the service schedule to comply with the manufacturer's warranty recommendations. However, MachineryLink supplies the grease and some oil. In addition, a company field service rep stops by to check combine settings and see how it's operating. “He knows the machine inside and out, so it's nice to have his experience,” Schuiteman says.
If the combine is down for more than 48 hours, Schuiteman gets a new machine. If it's normal maintenance, however, the local John Deere dealership handles the repairs at no cost to him.
“My John Deere dealer was very receptive to the MachineryLink deal,” he says. “They like the maintenance part of it because that's where they make their money.”
With 4,000 acres of corn and soybeans, Schuiteman contracted for 275 separator hours over the eight-week period he took possession. Since it's the end of the combine's use for the year, he could easily add on extra time if needed.
“I can really put acres through this machine. It's got a lot of capacity. I should be doing about 150 acres a day with it,” he says.
Costs run about $7.50/acre, or about ⅓ of the Iowa State University custom rate estimate, Schuiteman says. He owns both his corn and bean heads, so that's reduced his MachineryLink fees, too.
So far, Schuiteman thinks his new arrangement is a perfect fit for his farming philosophy. “I don't know why you'd want to own a depreciating asset. You have to pay for repairs when you own, not when you lease.
“I like the whole leasing idea. Too often, owning equipment is like having a white elephant setting in a shed for six months when you don't use it,” he says. “Now I have more shed space to house other equipment inside. We're like just-in-time manufacturing these days. We get our combine just before we need it.”
If this arrangement works well, Schuiteman is already talking about looking into leasing tractors seasonally through MachineryLink. “We like GPS aspects of the combine and would like to stick with John Deere to move it (GPS) from one piece of equipment to another,” he says. “If they (MachineryLink) can fill a tractor gap in the spring or fall, I'd probably go with it.
“Everyone wants to cut costs and stay up-to-date. This lease arrangement fills that need,” Schuiteman says.
By going with MachineryLink's combine deal, four farmers from Nemaha, IA, are now using newer equipment than they could afford to buy on their own.
In a machinery sharing unit called Ag Share, this group started three years ago with a 200 separator-hour lease on a John Deere 9610 combine.
“As a group we didn't want to spend money on a new combine, but we could afford this arrangement,” says Damon Mooney.
What the group likes is that MachineryLink does whatever it takes to keep them going. “If we have a bad belt, we call them and they call the local dealer. We just go in and pick it up,” says Mooney. “The next day MachineryLink will call to make sure we got the part. They're really good at follow-up. And we really like being able to use our local dealer.
“Also, if we need the oil changed, they send someone out from our dealer to take care of it,” Mooney adds. “All repairs are included in the lease so there are no surprises.”
Originally, they were scheduled to get the same model number combine each of the three years. This year, however, they opted to upgrade to a bigger combine and now have signed a new lease.
The only worry the group has, and they say it's minor, is whether they'll get their combine delivered on time. This year it was scheduled for a Sept. 15 delivery, but it didn't arrive until the 20th, due to a delayed wheat harvest in the West where their combine came from.
“But since we're last on the list, we can use it until we're done with it,” Mooney says.
Do Your Homework
Since 50% of your non-land crop production costs can be tied up in machinery, Kansas State University farm management specialist Terry Kastens says to make intelligent decisions about what you buy or lease, especially when it comes to combines.
He says to ask yourself three questions:
Can I put a combine crew together to harvest?
Do I want to own or rent and do I need new or used equipment?
Do I have enough acres to meet minimum leasing hours on equipment?
To help you work through the numbers, Kansas State University has developed a tool to evaluate the economics of owning and operating a combine. Log on to www.agmanager.info and click on “farm management,” then click on “machinery” and go to “own combine.” Also, check www.farmdoc.uiuc.edu, click on the tool bar at the top of the page, then click on “Illinois Combine Cost Calculation Tool.” Check with your local Extension agent for additional information, too.
Kastens also recommends checking with your local equipment dealer for leasing packages, especially hourly rates that don't require minimums. And, inquire about leasing from larger, custom harvesting operators.
Growth Spurt Continues
MachineryLink began in the mid-'90s as a program whereby the company helped farmers find other farmers who were willing to share equipment, particularly combines. “It was sort of like a dating service,” says Gary Brummels, northern business manager for MachineryLink in Des Moines, IA.
Today, MachineryLink has a different face. After incorporating in 2000, they began buying combines and leasing them to farmers. Initially, Brummels says they had about eight combine leases in 2001. This year, they'll lease nearly 130 combines and they're still growing. About a year ago they also got into the tractor leasing arena.
Leasing combines — John Deere and Case IH — is the mainstay of their program. Leases are offered under three-year contract arrangements. Costs range from $120 to $150/separator hour, depending on the make and model of the combine.
“I think we've been successful because owning a combine is a huge investment, especially for something that's only used a few weeks out of the year. The rest of the time it sets in a shed,” says Brummels.
The holdup some farmers have for signing on the dotted line is what to do with their existing combine, Brummels says. “That's why we've initiated a remarketing program to help customers sell the combine they now own.”
Getting a combine delivered on schedule is the other concern farmers have. He says, “Typically, we're on time or a little ahead of schedule. Either way, we communicate with customers 30 days prior to their delivery date.”
For more information about MachineryLink, go to www.machinery link.com or call toll-free 888-272-3323.