Over the last 5 years, more of the progressive operations that I work with — the high-level, high-management operations — are starting to utilize strip-till as part of their system. Strip-till can play a really important role in the future of production agriculture.
About half of my time is spent within our Peoria, Ill., area farming operation, which is 100% strip-till, and the regional seed business that we run with my wife’s family. The other half of my time is spent with Ag View Solutions doing consultation work. We primarily work with farm operations across the U.S. and Canada on cost of production analysis and long-term farm business decision-making. We want to have a 30,000-foot view of what’s going on in your farm operation and really dial in these costs so that you can manage your farm more like a business.
Set Strip-Till Goals
The key thing to growing your farm operation is having actual, written goals. Set a clearly defined path on what you want to do with strip-till and why it’s an important part of your system. This will steer your ship as you move forward on your business decisions.
Are you looking for reduced erosion? Do you want to improve fertilizer efficiency or field pass efficiency? Do you want to have a 1-trip or 2-trip system for your operation? Is it simply having good seed bed preparation so that you have the highest-quality product coming out of that ground and the best capacity for yield? Is it simply bottom-line profitability? That’s OK.
When it comes to other financial planning, we all have needs and wishes. Unfortunately, the amount of working capital that we have in our businesses might only allow for a couple of those. But strip-till would provide an opportunity based on the financial outlook on cost, efficiency and fertilizer savings for growing a highly productive crop.
As consultants, we want to look at real numbers and what makes sense for your operation. Capital, how many acres you are going to run the toolbar over, what you have time for and what level of management you are comfortable with are all crucial to strip-till implementation.
I spent 5 years in the military. We never shot down range without a target. We knew what our objective was. If you don’t know how long you’re going to be running your equipment, your trade plan or your long-term investment strategy, take time to get that figured out.
The no. 1 thing is to be honest and truthful on your timeline. Running a toolbar for 3 years vs. 5 years could be a $14-15 an acre difference in those 4 years. Are you charging accordingly? I’m not saying that equipment 100% has to be a standalone. We have blended relationships between what our farm operation looks like from a cash flow perspective and the profit that goes into it. As we segregate these elements of our business and start to manage them better, calculate appropriately to make sure that the equipment side of your business can stand alone outside of what it’s costing you from a cash flow perspective on the operational end.
Make sure you charge enough. If you have a principal and interest payment that you have to make on this machine and you’re not charging a rate high enough to pay that principal and interest payment, you might want to reconsider or understand that you’re subsidizing other areas of the business to make it cash flow.
Custom Rates from Universities Don’t Matter
Shay Foulk dives into why custom rates compiled by universities don’t matter and how to calculate rates based on your individual operation in a presentation from the 2023 National Strip-Tillage Conference. Click this link to watch the presentation.
Think about your 3-5 year equipment outlook. Lay out all your pieces of machinery and think about your plan for each in the next 3-5 five years. If you go through this exercise with your farm operation, it puts the numbers in the limelight. Because what happens is you say, “Well, I’m probably going to make a change on a planter in 2 years,” and “We’re probably going to need to replace that corn head in 2025.” Then all of a sudden it’s 2025, and you have $750,000 of changes that you need to make. You don’t want to be making all of your changes in one year.
Farm businesses that figure out equipment fleet management by 2030 are going to be the operations that will still be here in 2050. Equipment is either the 1st, 2nd or 3rd largest line-item expense in an operation, and it is easily the most misunderstood and undercalculated. We need to do a better job as farm business managers for what our long-term equipment fleet strategy looks like.