- Published On: September 7, 2021
- Author: Bryce Irlbeck
Profit potential is a compelling reasons farmers go organic. But even though price premiums are high, it’s still possible to end up in a financial hole.
How could that happen? One of the most common reasons is overspending on organic farm equipment.
Investing too much in organic farm equipment, too soon
Good news: you have a lot more control over your input costs than conventional farmers do. That’s because organic producers don’t use chemicals. The cost of organic seed stays pretty consistent. And while the cost of organic fertilizer can fluctuate, it’s not as volatile as conventional prices.
The challenge for organic farmers is machinery. It’s easy to invest too much in your organic farm equipment, and to do it before you’re ready.
Most new organic farmers start out on smaller acreage, which we recommend. However, this means the per-acre cost of equipment purchases can be unjustifiably high. If you spend too much too soon, you may not be profitable enough to continue.
That doesn’t mean you shouldn’t buy equipment — even brand-new equipment! You just need to make sure your management plan is realistic and matches your long-term profitability goals. Once that’s in place, you can invest in organic farm equipment. Your goal is this: spend dollars on the right equipment at the right time to produce the most bushels for the least amount of money.
Here are 6 tips for making smart decisions when buying organic farm equipment:
1. Run the numbers
Before you head to your local equipment dealer, do the math.
If there’s a piece of equipment you’re looking to buy, calculate its per-acre cost. If you have 300 organic acres and a machine that’s going to cost $150,000 over 5 years, that’s $100 per acre. Don’t forget to include depreciation as well as the cost to use and maintain the equipment when running the numbers
Then determine when you’ll likely see a breakeven and return on investment (ROI). Remember, it’s always smarter to be conservative in your yield estimates, especially if you’re just starting out.
2. Accept that more organic farm equipment is not always the best solution
Did you have a successful organic transition? Managed your time and weeds well? Then you’ll probably be successful with only a rotary hoe and cultivator.
We see a lot of farmers buy equipment that just creates a more expensive way to deal with a problem, rather than actually solving it. For example, buying a row crop flamer to deal with a weed issue on an 80-acre soybean field is a patch, not a fix. That weed problem started well before and the pricey equipment may not be your answer to successful weed management over the long term.
3. Don’t make organic farm equipment purchases out of despair
Buying a row crop flamer because weeds are overtaking your soybean field is a good example of acting out of despair. It’s an emotional reaction, not a rational decision.
That’s why it’s so important to know your numbers before you get into a tough situation. Do a root cause analysis to determine where the problem started and evaluate if you could address it with better planning and execution. This way, you’re not tempted to make a rash purchase.
4. Design your crop rotation to maximize your equipment
One way to avoid overspending and maximize the equipment you have is through your crop rotation.
Create a crop rotation that allows you to balance your equipment with your workload. Aim to keep the workload for one third of your organic acres on a different schedule from the other two-thirds. A good crop rotation can also do more for preventing weeds than a high dollar piece of equipment.
5. Consider outsourcing the work
You don’t need to own a piece of equipment to reap the benefits it provides.
Instead, examine your strengths and weaknesses to determine if there’s a task you’d be better off outsourcing. On our organic operation, B&B Irlbeck Farms, we hire out a lot of our hay work. We’re often doing other tasks while the hay work is getting done. And the custom business we hire uses highly efficient equipment that would be too expensive for us to buy and run on our own. So it makes the most economic sense to outsource the work.
6. Spend when it makes sense
A cost-effective organic producer knows when it’s time to invest. How? By running the numbers and understanding how the spend is going to benefit you in the short and longer term. And you should make sure the equipment is the right fit for your operation.
That may mean investing in brand new equipment. For example, if you have a labor crew that’s not experienced with cultivating, it could be worthwhile to buy a newer tractor that comes with a camera system. Or maybe you’re not good at fixing equipment. In that case, you could lease it and let the dealer handle the maintenance.
On the other hand, if you’re good at welding and fabricating, buying older used equipment can be a great investment that saves you money in the long run.
In short, there’s no one-size-fits-all approach. Choosing the right organic farm equipment goes back to knowing your strengths and weaknesses. Think it through, run the numbers, and buy the equipment that’s going to help you become the most cost-effective organic farmer you can be.
Crunch the numbers with AgriSecure
If you’re struggling to determine whether organic farm equipment is a wise investment or a waste of money, AgriSecure can help. One way to make this decision is through your execution capacity. With our MyFarm platform, we can show you how your equipment will or won’t cover your acres in the time you need to complete your fieldwork. And our team of experienced organic farmers can also give you personalized feedback. Contact us today for a free consultation call.
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