Every field on our snow-swept farm has a story, and every good story has many characters. One neighbour no tills our wheat in exchange for spraying. Another exchanges hay for baling, and for yet another we chop straw in return for manure.
Like most farms, our network of trustworthy neighbours (i.e. business associates ) is invaluable.
Swapping services and sharing equipment enables many farmers to squeeze a little profit out of those fields. Machinery sharing can help control capital costs per unit of production, or enable farms to adapt new technology or larger equipment.
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Most of this barter is informal, based on trust and two inherent properties of farming your neighbours aren t going anywhere, and everybody knows everyone.
We re seeing more and more sharing of individual pieces of equipment, says John Anderson of Collins Barrow Winchester in Kingston, Ont. For example, I m seeing similar group efforts with liquid manure systems.
Unlike breeding stock syndicates, where the members are looking for a return on investment, machinery syndicates are about sharing costs. As the value of the shared asset goes up, so does the risk.
So, generally, does the formality of the agreements.
Co-operative efforts like syndicates, joint ventures or partnerships are profit-driven, value-added strategies with higher equity investment, more risk and a limited membership, says Anderson.
An equity syndicate is simply a joint ownership structure, usually involving a small group of two or more people or businesses. Syndicates can be set up easily and quickly, since they have no legal status.
They re more common in England and New Zealand, and in North America when expensive specialized equipment is needed, yet not seasonally critical. For example, several farmers in a northern area could purchase specialized land-clearing equipment, or a group of medium-size farmers could get together to purchase grain-drying equipment.
From the 1970s to the 90s, collective ownership of equipment in Quebec was most commonly done through agricultural machinery syndicate pools.
With a syndicate, all parties own a portion of the asset and it s not a separate entity. So there are the tax implications and each member has to personally sign for the pool s full debts. If the pool took out a $100,000 loan to buy a piece of equipment, each member would need to sign a personal guarantee for the full amount of the loan.
When sharing equipment in a syndicated joint venture a portion of the depreciation (Capital Cost Allowance) flows down to the individual joint venturer. The allocation of things like depreciation and income are dependent on the ownership of the asset, says Ron Gamble, farm business specialist with the Ontario Agriculture Ministry. If a partnership owns the asset, then the depreciation is taken at the partnership level and the net income flows out to the partners.
More common today in Quebec are Cooprative d Utilisation de Matriel Agricole (loosely translated as co-operative for the use of farm implements), based on similar structures in France. Unlike other farm machinery co-operatives where entire machinery sets are pooled among all members, CUMAs allow individual machines to be shared among subsets of members. The machinery is owned by the co-op and members are committed to using the equipment through legally binding contracts. The liability of members is limited to their initial share investment; personal guarantees are not required.
With syndicates, the equipment doesn t belong to an enterprise, but is part of an agreement, so the consent of all parties is needed to modify the agreement, and that can be difficult. When a member wants to leave the pool, their share in the equipment has to be assessed at current market value or sold outright.
In very simple, general terms, the agreement should cover what everyone contributed. It should also spell out the operating structure, including how it winds up, how individuals get out and how shares are calculated. It should also cover what happens if there s a disagreement, and how to terminate the agreement and dissolve the assets.
One of the most important issues in any machinery-sharing arrangement is to clearly define how the equipment is shared, says Gamble. What if one person uses it more than another?
Although in a syndicate, the sharing is limited and has a selected membership, it can cause unforeseen headaches. Gamble suggests writing out and signing all shared agreements so there s no confusion or loss of assets. Open, honest relationships are very important, says Gamble. But non-written agreements? Never!
