Custom Farming for More Profit

Using Custom Farming to Boost Profitability

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• Online review: “What a great format you have put together for any business person inside or outside of agriculture to listen to and learn from!”
• Answer questions
  • How can I boost my farm’s profitability through custom farming?
• We will attack this as our topic of discussion today.
• What’s working for Ag – listener or farmer feedback
  • Moville, Iowa - Hungry Canyon - Cards and gifts for those who work in acres not in hours
  • Melissa Keyes Nelson @MelNelKeyes www.hungrycanyondesign.com
  • Originally from Nebraska and transplanted to NW Iowa where she lives with her Husband Mark and son Roy. She started her Agriculture Educational Non-Profit. She has a background of being creative and entrepreneurial spirit and is able to put a unique spin on everyday items. Melissa takes pride in creating authentic and accurate agriculture-based cards, gifts, and home decor.
  • How did you decide to start this business to compliment your family farm?
    • Valentines Day for her husband
  • Do you do all the creating yourself?
    • The designs are made by Melissa and the products are made by a company that employs individuals with developmental disabilities.
  • How does having this business help your family’s farm succeed?
    • …
  • What is the most difficult challenge about running an online retail business?
    • …
  • What advice would you have for the listener who is thinking about starting or expanding their online retail business?
    • …
  • What are you and your husband most proud of on your farm?
    • …
  • Please share any final comments and how our listeners can find you for questions or any interest in ordering your products. Thank you!
• Main Topic- How can custom farming work for your farm and increase farming profitability?
• Custom work as defined: Custom farming services means the performance of an activity, defined as farming in this section, for a farmer for a fee. The fee may include a cash payment, a share of the harvest or other valuable consideration.
• This means you could be using custom farming practices to benefit your farm in 2 different ways. Either by performing the tasks for others or by hiring someone else to perform the task for you.
• You will need to step back and do a 360 review of your farming operation before making this decision. As we said at the beginning of the podcast that we know time is the most valuable resource, so part of this review will be to consider:
  • How much time do you have to devote to performing custom farming tasks?
  • Do you have staff or employees that are under employed?
  • Have you struggled to get a part of your farming done timely in the past?
  • Do you know of others in the area expressing a need for tasks to be completed?
  • Are you adequately equipped to perform more tasks, need to upgrade, need to buy?
  • Is there a practice you want to learn, try, or improve but want to try before your buy?
• Once you do a 360 degree review of your farm as it is now you’ll be able to take the next steps necessary.
  • Example: My family used to be a farrow to finish hog farm. My parents chose a time to expand their operation when I was a young child. They did a review similar to this knowing with a limited labor force they would need to incorporate some custom farming practices. Because they believed the breeding and farrowing processes were the most important they elected to perform those tasks themselves and hired other farmers to nursery and finish part of the production for them. They knew they didn’t have the time to do all the jobs well and this was the solution.
  • This could be the same when you look at getting the crops in the ground this spring. Possibly custom tillage or pre-emergent chemical application could be beneficial.
  • Example: Another hog example, had a client include me on a decision/fact finding mission. He has been taking care of ISO Wean pigs on a custom basis, sometimes getting double stocked at the beginning and other times not. We calculated the extra time it took to carry in brooders and mats, sort out feeder pigs etc… and arrived at the determination he was more profitable in the process to take only feeder pigs with a $1.50/space pay cut. He’s now going to make less gross revenue but net more income.
• Could custom farming be the entry door into upgrading a piece of equipment?
  • Sprayer, manure equipment, high speed planter, feed wagon/truck, semi & trailer
  • Target enough work to make the payment or reduce the costs of the equipment
  • Entryway to a farm manager that gets access to more rented or crop share ground.
• How do you charge for custom work?
  • Most farm managers who hire all processes custom will base the payment on ISU or another university survey and use the average or a multiple of the average rate. Is this fair? Too much competition?
  • Calculation
    • Starts with an equipment appraisal then continues with an appraisal annually to get a true depreciation value. Target a market value and wholesale value. Salesman, auctioneer, appraiser.
    • Overhead costs on a per acre basis: Road time, RTK, Insurance, etc..
    • Establish Tractor Value and establish the cost based on use (50% of planter and grain cart) and the cost of planter + wages/acre + fuel/acre + overhead expenses/acre
    • Wages are different for each operator including yourself.
  • Niche’
    • High clearance spraying, cover crop seeding, silage chopping, baling, heavy haul equipment, excavator work, tiling, ISO Weans
  • Location
    • How far from your home base? How far from your last customer? How many acres? Can you charge a premium? Will it become a long term relationship?
  • Experience
    • If you have been doing the same task since you just started farming…..don’t you think you deserve a raise for experience and efficiency?
• What could hiring custom operators do for you?
  • Pre-emergence, fungicide, Y Drops, cover crops, lawn mowing, putting cows out to pasture, expanding livestock herds, baling waterways (50/50)
  • Your farm gains: speed, efficiency, precision, focus, diversity, and profit
    • Ex: Hiring someone to help you combine beans when its fit to go rather than picking at high moisture yourself
  • Is it included in the price of the purchase: Spreading litter when bought, buying chemicals or fungicide
  • Maybe someone is doing it for less that you could do it for by yourself???!!!
• Lastly, sometimes the best answer is to say “no"
• Challenge
  • Do that 360 degree review of your farm to see where custom work could be a fit.
  • Then if you are performing custom farming tasks get down to the real costs involved in performing the task. Your time isn’t free or worthless.
• Please remember to like, rate, review, and share the podcast
  • Submit questions and topic suggestions
  • @farm4profitllc
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• Thank you

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