Farm Industry News
July 1, 2006Pg. 9 ISSN: 0892-8312
COMBINES ON STEROIDS
By Jodie Wehrspann
I'M NOT a guy. So I won't pretend to fully understand the rush of testosterone you guys get when you stand next to a new Class 8 combine with a power rating of 375-plus hp. And I won't even factor in the adrenaline that must come from seeing the one and only Class 9 machine rated at 462 hp.
So I'll defer to Paul Lasley, rural sociologist with Iowa State University, who likens the thrill to the rush a young man gets when he revs a motorcycle or takes the muffler off his car to hear the roar. "It's the same reason many of us as youngsters build hot rods or elevate our 4-wd trucks," Lasley explains. "It's power. It's machismo. It's not unlike driving a big combine."
He says that these large machines give many farmers a sense of identity that he refers to as "rural values." "You might say, 'Gee, this is the wrong direction for farming,'" he says. "But those of us raised in agriculture will always be fascinated with these big machines, even though many of us will never own one."
I got a sense of that fascination in February when I scored a front-row seat at AGCO Corporation's first public showing of its Challenger 680B. With a 35-ft. header, 140- x 31.5-in. rotor and 350-bu. grain tank, it is large enough to consume an entire township with 36 sections in a season.
With the pending introduction of the Gleaner and Massey Ferguson Class 8 combines this fall, all of the major equipment manufacturers will now have a Class 8 combine. And Claas Omaha paved the way for a Class 9 in 2004. These milestones beg the questions, Who can justify buying one of these big machines? And how much bigger can they get?
Propelled growth
Self-propelled combines have up-sized at a rapid rate since they first emerged in the 1950s. "The early ones were two-row pickers that had what we in Iowa call bean heads on them," Lasley says. "So in 50 or 60 years, we've gone from two-row, self-propelled combines with 10-ft. heads to these new models of enormous proportions. They're huge."
Classifying their size has long been a source of discussion among manufacturers. According to John Hinkle, a combine product manager for New Holland, combines used to be categorized according to grain tank size and horsepower. But because of the wide variation in grain tank sizes, a new classification system was developed.
Currently there are nine classes of combines. The two largest, Classes 8 and 9, are still relatively new. "It wasn't until two years ago that the definition for Class 8 was agreed upon," Hinkle says. Class 8 is defined as combines with 375 or more horsepower (see table). Claas's Lexion 590 has unofficially set the benchmark for Class 9.
Class 7 combines have been around since 1980, starting with the Gleaner N7 combine. Hinkle says it is currently the fastest-growing category. "Two or three years ago we saw the largest single-year jump in a class we've ever seen, and that was in Class 7," he says. "But we're also now seeing Classes 8 and 9 starting to come up."
The recent jump in class size is tied to the growth in farm size and a need for a timely harvest. According to a 2003 study conducted by Purdue, large commercial farms are expected to grow an average of 31% in the next five years.
Can you justify?
Gary Schnitkey, extension economist at the University of Illinois, recently conducted a study on the cost and efficiencies of different-sized combines. He says growers need at least 3,000 acres to make a Class 8 combine that costs about $325,000 worth the investment. Anything less than that and the grower's costs per acre increase dramatically. He estimates it costs $19.25/acre to combine 3,000 acres with a Class 8 combine versus $24.15/acre if the farm size drops to 2,000 acres.
If you farm fewer than 3,000 acres, Schnitkey recommends you consider partnering the purchase of a large combine with a neighbor. "As these combines get bigger, sharing combines over multiple farm units becomes part of the play," he says. (See "Buy big jointly.")
Another option to spread out the cost of a new machine is to do custom harvesting. But if you decide to do custom work, make sure you charge enough to cover your costs, Schnitkey cautions. "We see a lot of farmers take on acres at high cash rent or do custom farming at pretty low rates," he says. "It doesn't make sense to combine if you're not covering your costs, which in Illinois are running $25 to $30 an acre."
Agricultural economist Howard Doster reports a similar message after working with some 7,000 farmers at Purdue University's annual Top Farmer Crop Workshop. "If you are operating the same number of hours, your per-acre machinery costs for different-size combines are slightly less for the biggest combine," Doster says. "That's been true since at least 1968, when we held the first Purdue Top Farmer Crop Workshop."
At the workshop farmers use a linear program model to test the feasibility of various machinery sizes, crop rotations, tillage systems and farm sizes while factoring in harvest yield losses and dryer costs. Doster says since one crew can combine more acres with the biggest machine, per-acre labor costs are the lowest. Therefore, a farmer's business opportunity is to figure out how to spend the 27 to 30 timely Corn Belt harvest days using the biggest combine. "The question is not just how big of a combine do I need," Doster says. "The opportunity is to figure out how to spend your crew's time using the biggest combine."
Beyond buying
If you can't afford to buy a bigger combine, consider a managed lease. Mike Shuter, a farmer from Frankton, IN, leased a combine from MachineryLink last year in addition to using his own machine. "Last fall we leased a combine for 100 hours and kept our old combine to try and size up our grain-handling system," Shuter says. "This year we signed a lease for 225 hours and we're in the process of selling our old combine."
Shuter says the reason he decided to lease is because he needed more corn harvesting capacity while moving toward a strip-till program of two-thirds corn and one-third beans. "We are adding a faster wet grain receiving leg for increased dumping capacity because of what we saw from leasing the combine last fall," he says. "That was why we leased it last fall to evaluate the rest of the system for this fall." Shuter also is adding more storage capacity to the system.
He figures leasing will save him $4,000 to $5,000/year over buying a new combine. And he says using one larger machine will lower his per-acre machinery cost. "One day last fall we harvested 155 acres of corn and put nine separator hours on the John Deere 9760 machine which cost us $8.95 an acre for the combine use that day," Shuter states.
MachineryLink offers what is called a managed lease as opposed to a conventional lease to provide farmers more flexibility. In a managed lease, the grower contracts for a certain number of combine hours each year. The hours may be adjusted annually or the combine sized up as the grower acquires more land, says Doug Ballou of MachineryLink. He says a large segment of the company's customer base consists of farmers who need a newer or bigger machine but can't afford to buy one.
MachineryLink's fast growth in its six-year history shows the demand for this type of lease. The company has grown from a having few combines to owning a fleet now approaching 300.
How much bigger?
So how long will it be before the other major makers join Claas in producing a Class 9 combine? And will we ever get to Class 10 or 11?
Bob Malcolm of John Deere says there is a limit to a combine's physical size because of road transport restrictions. "We have customers today who are reaching out 50 to 100 miles," Malcolm says. "So transporting on the road is a key customer demand." As a result, he says, manufacturers must add productivity in combine threshing, separating and cleaning technology rather than increase the size of the machines.
Iowa State's Lasley has another perspective: "I remember as a kid hearing there is absolutely no reason that you would ever need more than a four-row picker. That combine was supposed to do everything you needed it to do. And now, I don't know if anyone makes them that small."
BUY BIG JOINTLY
Splitting costs can make a large combine more affordable
DON'T HAVE the cash to buy a bigger combine this year? Consider purchasing with a neighbor. That's what Scott Odle and Dave Virgin did in 2002. "I bought the combine box and Dave bought the two heads," says Odle, who farms roughly 3,500 acres with Virgin in northern Montgomery County in Indiana.
They determine the ownership cost of each piece of machinery and divide that cost by the number of total acres. They charge each other ownership costs for the part they bought when used on each other's farms. Their machinery costs average around $17/acre.
"Our motives aren't for profit," Odle says. "They're for machinery efficiency by having both a newer and bigger combine than if we were just farming our own acres."
Being able to pass on their expenses lowers their harvesting costs without increasing labor costs. "And it's an easy tax issue because we don't have to combine our assets," Odle says. "I don't have to sign for his heads, and he doesn't have to sign for my box."