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Be Money Smart!

While purchasing a drill or planter is the right way to go when transitioning, it may not always be the most cost-effective option.

By Katherine Meitner

DICK WITTMAN is one smart cookie. Nothing that's remotely involved with his 11,000-acre operation passes across his desk without his personal, careful examination. And its paid off in a big way.

Working in partnership with three other family members, this Culdesac, Idaho, no-tiller crops 5,500 acres that encompass every kind of soil imaginable, from black silt loam to red gumbo clay. Wittman also battles tricky slopes on his land.

"There's one flat spot on our land," Wittman says, "and that's the kitchen table. Equipment design is a challenge to cater to our slopes. Nothing tracks because gravity is working against you."

With 6,500 acres in range and timber, the family no-tills the remaining 5,500 acres with wheat, barley, peas, lentils, alfalfa, garbanzo beans, chick peas, canola, grass seed, safflower, flax and buckwheat. As if this weren't enough, Wittman helped start the Northwest Direct Seed Association earlier this year to help promote the benefits of no-till to growers in the Pacific Northwest.

Wittman is very busy, to say the least. But not too busy to make sure other farmers are making sound financial decisions, especially when it comes to no-till equipment.

MAKING THE TRANSITION. "When you're trying to promote the transition to no-till, you're talking about major strategic changes," Wittman explains. "There's nothing more controversial than one member of your team who wants to change while everyone else is satisfied staying the same. How do you get that team moving together?

"This is an issue that applies as much to the soybean grower in Wisconsin as to the lentil grower in Canada. It's worldwide!"

One of the major barriers is deciding what to do about no-till equipment.

Be_Money_Smart-2.png"Most people don't want to change because they have conventional equipment," Wittman says. "They think they have to use what they already have. They aren't looking at the big picture and aren't realizing that no-till may be the least-cost approach."

SELF-ANALYSIS. Part of sticking to the cost-effective approach, Wittman says, is running an analysis on which option is cheaper: purchasing equipment, renting, leasing, custom hiring or subscribing to a joint venture no-till equipment situation with your neighbor.

"I can show my neighbors that I can put their crop in the ground for less than they would pay out in variable expenses for fuel and labor," he says. "But most don't like to write a check to anyone. So they'll get on their tractor, spend a month longer than it should take getting the crops seeded and bust up their equipment."

The real barrier for making this kind of assessment is the basic fact that farmers are independent and want to remain so. Most farmers aren't too keen on the idea of paying someone to do something they've been doing for years.

"The financial issues of making the transition to no-till are not talked about enough," he says. "The number one question shouldn't be, 'Should you no-till?' Instead, it's "Do you have the management climate in your business to make sound management decisions and changes?'

"The most successful no-tillers take management just as seriously, if not more seriously, as the actual farming practice. You must take a systems approach!"

RENT, BUY, LEASE? To assess your own no-till equipment situation, Wittman says there are simple steps you can take to ensure you're getting the most bang for your buck:

  1. What is the optimum financial and economic decision?
  2. What is the availability of equipment when you need it?
  3. Will one no-till drill or planter configuration meet the bulk of your seeding requirements?
  4. What is your compatibility with joint venture no-till equipment partners?

Next, Wittman suggests using the equation in figure 1 to determine your "break-even" level for renting or owning a piece of no-till machinery. This will tell you the amount of acres you'll need to no-till to "break-even" when purchasing a no-till drill, thus indicating if renting, purchasing or leasing is your best option.

CHECK THREE OPTIONS. After you've found your needed break-even no-till acreage with the analysis information found in figure 1, Wittman suggests comparing the cost of purchasing, leasing and renting the equipment, also taking into consideration the timing for annual cash inflows and outflows.

Once you've completed the math this far with figure 2, the next option might be to utilize a computer software program that calculates your projected after-tax cash flows for each option. A program that was designed specifically for this purpose is BUYORLEA version 2, available from Washington State University, SU, Dept. C, P.O. Box 645912, Pullman, WA 99164-5912. The cost is $25.

This program indicates that, with this John Deere 750 no-till drill buy or lease option, the present value of after-tax cash outflows would be:

Purchase $38,536
Long-term lease $44,043
Short-term rental $35,142

BREAKING THE BARRIERS. In this case, renting a no-till drill is the most economical choice, as it would save this farmer $3,394 compared to buying the rig. There's a savings of almost $10,000 compared to a long-term lease.

"It's just one factor in the transition," Wittman says. "You try to remove barriers and get rid of the excuses or barriers that are keeping people from making a full commitment to no-till. Once you do that, you'll have a winning program."

Of course, Wittman admits the financial barrier is only one of many things keeping people from no-tilling. Other barriers include management skills, commitment, communication and education.

"We have a breakfast group that meets frequently," he says. "These guys are all skilled in no-till farming. Education is very important and the more we learn about direct seeding, the more we realize how little we know."

Educating others isn't an easy task. Wittman makes it a personal mission to help farmers increase financial and management skills by working as a keynote speaker at conferences and events and by organizing agricultural financial workshop programs.

The Wittman family farm's four-person management team is made up entirely of family members who are just as excited about no-till as Wittman is.

"A lot of the work we're trying to do is create a vision of how to farm in an economically and environmentally sustainable fashion," he says.

That's not something he takes lightly. In fact, it's so important that the Wittman family recently won the "Millennium Farmer Award," a national award given to a farming operation that's contributed to building environmental and stewardship efforts.

"We have made and stuck to a commitment," Wittman explains. "It's essential to making no-till work."

Figure 1: Determining Break-Even No-Till Equipment Analysis

Break-even acreage = Annual ownership costs
Custom rate per acre - operating costs per acre

Annual costs
= depreciation, interest, taxes, insurance*
= and housing
= $6,450 $3,870 $572 $0 $0

Rental rate per acre
= $14 per acre - Operating costs
(equipment maintenance) = $3 per acre.

Break-even acreage
= $10,892 = 990 acres
$14 - $3

* Insurance costs of $197 are not included as this is a common cost of owning, renting or leasing no-till equipment.

Figure 2: Buy, Lease, Rent John Deere 750 15-Foot No-Till Drill

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,750
Down payment (30%) . . . . . . . . . . . . . . . . . . . . . . $16,125
Loan repayment period . . . . . . . . . . . . . . . . . . . . . .5 years
Annual payments (10.15 % interest). . . . . . . . . $9,963.44
Salvage value (after 5 years) . . . . . . . . . . . . . . . .$22,500

Length of lease: . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years
Annual lease fee: . . . . . . . . . . . . . . . . . . . . . . . . . .$11,854
Short Term Rental:
Rental fee (per acre): . . . . . . . . . . . . . . . . . . . . . . . $14.00
Annual rental cost (w/800 no-till acres seeded) . $11,200

Short Term Rental:
Rental fee (per acre): . . . . . . . . . . . . . . . . . . . . . . . $14.00
Annual rental cost (w/800 no-till acres seeded) . $11,200

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Hire no-till planter
Posted from: Kathy, 4/8/13 at 6:15 PM CDT
I have about 10 acres of hay grass that needs to be replanted and I would like to hire some one rather then invest in equipment
Posted from: Kwesi Opoku-Debrah, 12/28/10 at 12:58 AM CST
How can the Witman family help young people begin no till farming in US or Africa?

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