Experience with machinery syndicate

Press, 24 October 1980, Page 17

Experience with machinery syndicate

/'lt is ditticun .u say just what my financial position would have been if I had not joined the group. I d<? know I would have had to employ’ more labour, work, longer hours or let other aspects of my farming practice suffer, and replace my • tractor and probably other equipment ... 1 fee! that the formation of‘ the group has been amply justified.” Mr. D. J. (Don) Davison, of Te Pirita. said this this week speaking at a field day at Methven. on the subject of farm machinery ownership organised by the Canterbury-Westland branch of the New Zealand Society of Farm Management. He belongs to Te Pirita Enterprises with eight other farmers in the Te Pirita-Dunsandel area who jointly own and operate a range of farm machinery. Mr Davison was the first chairman of the organisation.

The farmers in the group, which was established in 1976, farm a total of 2720 ha (6800 acres). They run in excess of 27,000 sheep and while six of the farms are almost exclusively sheep farms the other three have varying amounts of crops. The group employs a working manager and his house and depot are centrally situated with all farms in the group being within a radius of 15 kilometres of the base. Each month the members of the group meet in one of their homes with the manager and sometimes the accountant, Mr Pita Alexander, who initially brought the group into being. Mr Davison said he felt that.-these meetings had helped to form the harmonious base on which the. group was built.

The group was set up as a partnership with each member making an equal contribution of capital.

At the beginning of each financial year every member prepared an annual work sheet, listing as accurately as possible the work he required to be done and the month in which it was to be carried out. From these the approximate work load for the year could be worked out.

By the beginning of each month every member supplied the manager with, his monthly work sheet which detailed the. exact ■work to be done, and the

date it was to be done by. The manager and chairman then correlated the total area of each type of operation and with well established conversion rates the total number of working hours for the month were calculated, and if extra labour was needed this could be planned for in advance. The manager recorded each day’s work and at the end of each month met with the secretary to bill each member for work done during the month.

Each year charge-out rates were reviewed in the light of increased costs and the amount of work likely to be done. Sometimes there, was resistance to increased charge-out rates to cover increased costs, especially when other high priority areas existed, but in retrospect it had been a wise decision to do this to avoid a later shortfall in cash for replacements. The main items owned by the group are a tractor in the 130 horsepower plus range, a seven-furrow plough, 16ft grubber, 16ft chisel plough, 18ft harrows, two 10ft heavy rollers pulled in tandem, a mower and a shower sheep dip. A rotary hoe is hired from a member when required. Mr Davison said that most members still owned their own smaller, older tractor for raking, feeding nut. Cambridge rolling, and drilling, as well as the usual plant like utility vehicles, motor-cycles and chain saws. In the first four years all cultivation had been done by the syndicate except for drilling, which was done only on a limited scale w'hen time permitted using drills hired from members. In the course of a feasibility study prior to the establishment of the group, it had become clear that it could be very difficult for the group to be responsible for the total drilling acreage because of the critcal climatic conditions required for this operation in the district.

However, because of the increased cost of energy, the concept of direct drilling and minimum tillage had become attractive and a sub group of six members had recently bought a 20ft air seeder. Hie average area cultivated over the . last 'four years' had been just over 7000 acres per year. Working expenses had

increased rapidly from $lO per. acre in 1977 to over $24 this year, but part of this was due to the increased maintenance required on such items as the plough and grubber, which they had decided to retain longer before replacement. The fuel cost had increased from 52.76 to $4.40 per hour. The whole idea of cooperation between farmers was foreign to many’, said Mr Davison. Naturally they had been the subject of much discussion and initially many had been waiting for the whole venture to fall aoart. But cynicism about the group had now practically disappeared.

There were of course disadvantages and some of the most obvious of these were (1) a certain loss of independence or individuality although he thought it was more imagined than real; (2) there could be some inconvenience depending on the operation and the managerial expertise; (3) there was some loss of control — the individual was free to change machinery at will, whereas the group member must of necessity be tiec. by stricter rules, which usually demanded a capital appraisal before a decision was made; and (4) the peak and slack periods tended to become more accentuated. However, given the right manager and harmony bemembers of the group these disadvantages were not insurmountable and were decidedly outweighed by the advantages of syndication . Some of the advantages that he had found were (1) higher capacity and

more specialised equipment had been purchased; (2)' increased financial strength and creditworthiness; (3) increased time for strategic planning and leisure; (4) increased job interest for employees; and (5) a considerable saving in energy had been apparent After the initial euphoria wore off a person was able to step back and reflect on the successor otherwise of the move, he said. A highlight had been the bonding of the members'of the ' group into a team. Most • problems which arose were dealt with quickly and there was a sense of achieving something worthwhile as a group While he did not seem to have- much increased leisure as a result of joining the group, Mr Davison said that he had been able to devote more time to sheep management resulting in an improvement in animal performance and quality. The boredom of long hours spent on the tractor no longer existed as some drilling and cambridge rolling were the only jobs that he did himself.

At regular intervals it had been the policy of the group to review the need to replace the tractor. There was no hard and fast rule to guide them, and invariably the price gap was looked at in the light of what it was likely to b<- in a year’s time. After their initial experience of owning a sec-ond-hand tractor which had performed . well, they had experienced their first major pain of a replacement cost gap. which was accentuated by a poor trade-in value. Their ex-

penence had.shown that a wise choice of make could be a great advantage when the time came for replacement.

Although all syndicates in Canterbury put money aside for future replacements, inflation, had made it a difficult area to budget for. Because of high repair and- maintenance costs they endeavoured to buy new’ equipment, but when this was not possible suitable second-hand machines with some warranty had been considered. Although it would .be ideal to be able to replace the tractor on a regular basis, because of the incredible rise in prices the feeling of the group now was that if the machine was’ performing up to standard there migh' be a case for replacement at longer intervals and accepting a higher repair and replacement bill.

With scarce resources and high costs in farming today, Mr Davison said it was/essential that efficiency. should be increased. He felt that one of the mosteffective ways of achieving that was the sharing o'’ high cost machinery through the formation of syndicates, and the further development of this movement would be done by informed people conveying the fundamental rules that had stood the test of time, but there were too few of these poeple in New Zealand.

•‘The adjustment to taking group intsead of individaul decisions and learning to operate in a board/manager/executive structure is a new experience for most of us and education is required,” he said.