I’ll add more here shortly. For now, if you want to test your timeliness, or whatever, including renting more land, using my copy of B-21, call me at 765 412 1495.
B-21 FOR FIRST-TIMERS
TEST BEFORE YOU INVEST!
Purdue Top Farmer Crop Workshop, July 16, 2006 and July 22, 2007
D.H. Doster, Purdue Professor Emeritus
First, Be Timely. While no one can afford bigger machinery than he needs, if you are in doubt, get the bigger size. Why? It costs more money every year, but it also returns more every year, and, about one year in five, it more than pays its extra cost.
Second, somehow use the biggest available machinery. Why? When used the same number of hours, big machinery costs slightly less per acre than small machinery. Since one crew can farm more acres with big machinery, labor productivity goes up and per acre labor cost goes down.
Third, Test Before You Invest! Use B-21 today. Why?
Everyone starts where you now are,
With what you now have,
And what you now want most.
If you are good enough,
Motivated and financed well enough,
Figure out how to use big machinery now,
On your own, or with neighbors, or others.
If you’re not good enough to be competitive,
Get out now.
Everyone has a comparative advantage for doing something.
Find it, and do it, now.
Fourth, associate with persons who ask, “What can I do to be more productive?”
and not, “What do I need to do to be more competitive?”
I didn’t catch on to the economics of big machinery until after farmers in the first 1968 Top Farmer Crop Workshop started testing larger size machines. Already labeled a machinery economist, I was a slow learner, but I’ve stuck with it. Four-row or six-row combines cost less per acre in 1968, just as twelve-row or sixteen-row combines do now. In the time between our first workshop and the 2006 session, biggest combine capacity has more than tripled, and attendees average farm size has more than tripled. But, in 1968, 85% of the attendees had no more than one combine. Last year, 84% had no more than one combine, and only four used the biggest combine.
Although they should be able to pay the most rent, it’s hard for corn belt farmers to rent enough land to continue to be able to use the new biggest combine only on their own acres.
At the 2005 workshop, two young farmers, both my former Purdue “How to go home and start farming with Dad class graduates,” shared how they were then using a bigger combine and one set of individually owned bigger machinery to operate one’s 1300 acres and the other’s 2300 acres. Now, they’ve been approached by another young farmer, whose Dad also just retired, who has 3,000 acres and a big sprayer. He wants to join with them to double-shift using the biggest combine and one set of other machinery.
As we were starting this session for the 2004 workshop, I stated that everyone starts where they are, and we always have someone attend the workshop who is farming less than 500 acres. Just then, I recognized a frequent attendee coming in the door. I asked him, “How many acres were you farming when you first attended this workshop?” He responded, “460 acres.” My next question, “How many acres are you now farming?” He answered, “8,000 acres.” Wow, all of you can “jump” higher than I ever could!
Buying is only one way of gaining access to machinery. At this July, 06 workshop, a second and third generation workshop attendee team will explain why they leased a biggest combine for this fall, even though they’ll need it for only 20 days-two/thirds of the timely season, and they had to do major up-grades on their grain handling system to keep corn away from the big machine. Why are they doing this? Listen to them tomorrow. Perhaps they’ll share the following. They needed to trade combines. They got a good lease deal for just 20 days use. They want more land, and think they’ll get it. Once they have need for the big combine for the full season, they’ll somehow get it.
These examples, and many others in this audience, are
reasons why my “Test Before You Invest” speech, first
outlined in 1971 on a Holiday Inn placemat in
Now, let’s study the Green Machinery Economics paper for more specifics.
(I’ll add it shortly.)
Oh, if I forget, ask me why it’s important, and how to calculate the value of your scarce May 1st planting hour. In this workshop, it’s called a “Shadow Price”. We might also call it an “Opportunity Cost”, or, as I prefer, an “Opportunity Value.”
And, the opportunity value, or contribution margin for another acre of scarce land, farmed just after your last present acre, when expected yields are lowest, is per acre revenue minus variable costs. Note, this excludes rent and other so-called fixed costs.