Friday, November 13, 2020

Farm Economics: Part IV (Guest Post by farmer friend0


Farming has a systems engineering aspect to it.
You have to look at your operation as a complete system.
As an example, I'll use our farm, during harvest.

Start with this concept...
The Combine is the most expensive piece of hardware on the farm, so you want to keep it running, you don't want it sitting idle during harvest.
Therefore you develop as system approach to harvest
  1. The combine picks the corn in a non stop operation...
    • In our case, on our farm, with a 6 row corn head.
  2. The grain cart pulls up beside the combine to let him unload his grain internal bin on the fly, while still picking.
  3. The grain cart then unloads twice into a semi trailer before that semi departs
  4. The semi then travels to the bin site.
  5. If it's a dump pit, he turns on the leg, dumps his entire load into the pit, and leaves, letting the leg catch up automatically
  6. If it's an unloading pit, he has to slowly unload, matching the leg's immediate capacity, so it takes a longer time 
  7. Semi driver then returns to the field, just as the grain cart finishes filling the 2nd semi, so he swaps trucks and leaves with the next load.
  8. To allow for problems at the bin site, or a slow leg, you add a 3rd Semi truck and trailer to serve as a buffer in the field
  9. The driver will have a chance to catch up, when the combine stops mid day for a 30 minute maintenance stop.
So what I've tried to capture, is a balanced, optimized system.

So what happens if you purchase or rent more land.
You might decide you need a bigger 12 row combine.... which picks more acres per hour...
....... however, that would only be true if he's running all the time....
That's where you've upset the cart by changing only one part of the system.
  1. The combine is now picking twice as many acres per hour.
  2. So one grain cart can no longer keep up
  3. So you get a second grain cart, and 2nd tractor, and 2nd grain cart driver.
  4. But now the semi driver can't keep up, so you get a 4th semi, and a 2nd semi driver
  5. But now the leg at the grain site can't keep up
  6. So now you have to upgrade you bin site, or least convert your one unloading site to a dump site, and then have drivers deliver to both bin sites instead of just one.  Which isn't ideal, because you like to have all your harvest from one field in the same bin, or at least at the same bin site
The point being, that you can't just change just one facet of your harvesting system.... you need to address all aspects, otherwise, you just move the constraint to another location.  And spending big money on a bigger combine that sits half the time waiting, and in the end only harvests the same number of acres per day as your old combine because of other constraints..... is a bad investment.

Have fun Joe.
The problem your looking at is a whole lot more complex than you might imagine.
There are just so many variables.
And a key issue is that today's money isn't tomorrows money....... i.e. Money does not equal Money..... which makes it hard to grasp.
Risk takers can win big
Risk takers can lose big
  • Some will succeed
  • Some will fail
  • Some success is good business planning
  • Some success is luck
  • Some failure is bad business planning
  • Some failure is bad luck
i.e. If there is a major crop failure that hits 70% of the farmers, (hail, wind, fungus, blight)
   - Price of crop goes up because of the reduced overall crop
   - If your part of the 70%, the increase price doesn't help..... you have none
   - If your part of the 30%, the increase price gives you a banner year.
I've tried to touch on what I consider important aspects of the problem, but I'm sure there is much more.


  1. The first rule is there is always a bottleneck (constraint) that sets the max output of the system. Finding the current one nd figuring out how to work around it is half my job at work.

    But, as soon as you clear one constraint the next one in line crops up and now you are spending even more money and time.

  2. Great posts on the Farm economy, I was involved in the Pork Industry from high school until the Hog Crisis of 1998-99. Not very far from Eaton Rapids, for a time in the '80s.
    Livestock does add a couple more variables that the crop farmer does not have. As there hungry mouths that like to eat every day. And that nutritionally balanced feed at the other end of said livestock, becomes a waste product. And that is well regulated!

  3. And there are the farmers in South America doing the same thing. And no matter how well you do their production affects your price when you harvest 6 months later.--ken


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