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Feasibility of Machinery Cooperatives

Phil Kenkel

Summary

Machinery ownership costs are an increasingly important cost category for most producers. The purchase price of new equipment limits a small producer’s access to technology and may prevent crop diversification. The formation of a small-scale machinery cooperative provides the potential to reduce ownership costs by over 35%. A machinery cooperative feasibility template and related educational material were developed by Oklahoma State University with support from USDA Risk Management Agency. The template was used to compare individual versus cooperative machinery ownership for a representative Southern Plains wheat producer. Ownership costs, operating costs and probability of completion within available working days were analyzed. The impacts of cooperative size, geographic dispersion and set-up time were also considered. A three member cooperative reduced machinery expenses by 14% relative to individual ownership. A five member cooperative was projected to reduce costs by up to 41%. The three and four member cooperative structure were projected to complete field operations for all members within available working days with a 95% level of confidence. The five member cooperative could not meet working days restrictions in some regions. Cooperative ownership of spraying and no-till planting equipment appeared to have the highest potential of cost savings. Related educational material developed by Oklahoma State University addresses organizational, procedural and structural issues

Details

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