In regards to your article on custom rate pricing (Flexibility Keys Successful Custom Strip-Till Business), I am sharing with you some of the work we did at the inception of our custom strip-till business in 2017.
We do refer to the Iowa State values as a benchmark, but find that only partially useful. These numbers are based on leasing all or most of the equipment. We will own the equipment at the end of the lease with buyout options.
Conversely, as our business grows, we may choose to lease lesser hours on tractors. We do own a truck, which makes suppliers happy as they do not need to tie up a truck in their busiest seasons. These costs and pricing are evaluated annually.
I was the poster child of your article so to speak. I have been practicing strip-till for 15 years and the operators, (mainly co-ops) were discontinuing strip-till. We took the opposite approach and formed Liepold Farms LLC and Liepold Farms Precision Ag for strip-till.
My farm pays the same custom rate as any of our customers and my acres are the last farm we do, with the exception that we ask our customers to allow us to do up to 20 acres to tune the machine, fertilizer delivery and technology. That is not something I do with a customer staring over my shoulder. Beyond that, the customer comes first.
This fall was challenging, in our trade area. We had a late, wet start, froze twice and had to end the season with 2,350 acres left to be done. Other custom tillage operators had the same problems. We ended up covering 850 acres.
I am in the process now of surveying customers to discover their interest in spring strips with zone fertilizer. Regarding fertilizer application in the strip, be it a band in the fall, or zone in the spring, it’s a no-brainer.
Even if the producer does not cut the rate, we are placing fertilizer where the plant wants it. We charge $20 for strip-till operations and $15 for spring strip refreshing, so basically we charge $5.00 per-acre for the opportunity for 1 pass of variable-rate fertilizer application.
Add to that, our capability to apply 4 single products or blends or cover crop, any of which are static or VRT applications, I believe we are affordable. I can’t say we will hold that price for next year, but we will for spring 2019, because that is the contract we will honor.
Co-op's are charging up to $80 per load of fertilizer delivered to the field. We charge $40. They can carry twice as much as us, but will not leave a truck in the field for the farmer to unload as needed.
As to the philosophy of purchasing the equipment to do a few neighbors acres to make the payment, I have had that conversation numerous times. The reality is different, because many times, they do not realize the amount of time it takes to do it correctly.
Coordination is needed with agronomists to get prescription rates created, emailed and loaded, communication with fertilizer suppliers to get trucks there the same time the machine is empty and just waiting until the field is harvested.
Sometimes there’s the need to just slow down so fertilizer is accurately delivered to the knife or simply creating a berm, especially when rain or snow is on the horizon and corn is still in the field to harvest.
My most loyal customers have discovered that being able to accomplish high return operations of planting or applying pre-emerge herbicide instead of needing to till fields in the spring is a better value for and more efficient use of fertilizer.
What surprised me were the external costs. For example, when we bought the tender truck, we insured it through my farm for about $160 per year. When we went to the custom application and formed the LLC, it is now over $700 per year.
We put less than 1,500 miles on per year. Liability insurance as well, very little additional cost when added to the umbrella farm policy, but escalated to $2,700 for the custom operation.
I do know that the underwriters conduct their due diligence if they do not know what it is that we actually do. I was contacted by our insurance company if our RoseLily Boer goat operation was included, because it seems they did a search and discovered that enterprise on our shared website. For some reason, show goats, were a deal breaker for them.
Add to that, a Minnesota state fertilizer plant inspector picked up our flyers at a co- op, emailed us that we required a handler’s license. I checked with the state earlier and was told it was not necessary. I have the security now that we are covered, although it makes me wonder how the neighbor to neighbor herbicide applications are structured for liability.
That being said, as more producers embrace strip-till and purchase their own equipment, we went into this knowing we could be out of business in 5 years. We approach that timeframe as 15 seasons — fall strips, spring strips or refreshing and summer sidedress — three seasons in a single growing year.
You can get a better idea of what we do by visiting our Facebook page and website. I enjoy your Strip-Till Strategies daily email every morning and the magazine. Our goal is to build awareness first and business second. If we are out of business in 5 years, great for the soil. Fundamentally, that is what is important.
- Larry Liepold, Liepold Farms, Okabena, Minn.