SW Financial Literacy
Keeping Up with The Joneses
One of the most viral tweets I have ever posted on x.com (@gwiesefarms): The most profitable operations I see are running equipment between 5-15 years old. Yes. This includes the planter AND combine. Yes. This works for operations over 2,000 acres.
Running a farm takes A LOT of money. To operate at any size requires you to pour a lot into equipment, regardless of if it has shiny paint or is nearly worn out.
And technology is a good thing. The attachments and add-ons we put onto the equipment do save us real dollars and create a more efficient operation. We get better seed placement, moisture data, etc. which pay off in a big way with better yields.
There is also efficiency in scale. Big equipment is needed when rural communities and labor forces willing to work are shrinking. We need to cover more ground faster to optimize our growing window and kill the pesky weeds with growing resistance.
Don’t get me started on repair bills either. Gone or the days when you could cut a new slab of angle iron, bend it to the desired shape, and keep working. Every repair seems to require a visit from a service rep and those bills grow every single year, especially on the dated equipment.
So, nothing about this article is a knock on:
buying new equipment
investing in technology
gaining more efficiency through size
getting newer to avoid untimely breakdowns
All these reasons to upgrade equipment are valid and have a place in the operation. I get it.
There are 2 points I do want to make:
1. Do it for the right reason.
This is the ‘Keeping Up with The Joneses part. Any equipment (or vehicle) purchase and decision needs to be vetted to fit your operation, not to impress the neighbors. If the biggest factor for you not being able to grow into more acres which are available is the lack of a sufficient equipment lineup, then solve for that problem. If you want to do a better job with the ground you have, maybe the focus needs to be more on improving your technology to do a better job.
Have a farm plan in place for your operation. Think 5 years ahead and make sure all farm decisions align with the future operation you want to build.
Ironically, any equipment you buy today will probably go on a 5 year equipment loan, which will impact your cash flow for at least the next 5 years. A wrong decision today, not motivated by the right reasons of pursuing your operation’s financial goals can very easily set you back 5 years or further.
Focus on the operation you want to build, not the way others are doing it.
2. Many large, profitable operations are running equipment 5-15 years old. Yes, even the combine and tractors.
The second point is just as the tweet reads. It seems the secret ingredient in my area (Central Nebraska) is to not always be replacing and revolving your equipment, but not letting it get too old either. There seems to be a sweet spot with financial success.
These producers can keep their equipment payments lower with maybe only 1-2 equipment notes being paid on at a time. They are also able to keep their repair bills lower than average because they DO A LARGE PORTION OF THEIR OWN MECHANIC WORK. Either they learned themselves, or they hired a mechanic. They save on expenses by having less equipment payments and fewer repair bills than the average producer.
This does take work, and they are often in the shop all winter long keeping their equipment in tip-top shape, but it seems to benefit them financially.
After all, hard work pays off.
Have a great day,
Grant
All views expressed on this site are my own and do not represent the opinions of any entity whatsoever with which I have been, am now, or will be affiliated. Information provided is authentic to the best of my knowledge, and as such, is prone to errors and the absence of key details. The content of this blog is for entertainment and informative purposes and should not be seen as professional advice to finances or any other field.