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Farming w/ Passion

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  IN THIS ISSUE                             OCT/NOV 2012

Industry Q&A

Question:

With water management becoming more and more critical, do opportunities exist for the traditional machinery dealer to get involved with irrigation equipment sales, either directly or by subcontracting with other local companies?

Answers (Leave your own thoughts in the comments section below):

“I decided in the mid-80s to take on a leading brand of center pivot irrigation equipment and add it to my traditional farm equipment offerings. There is a lot of irrigation here on the eastern plains of Colorado. I thought that there would be quite a few synergies with a farm equipment operation, and I thought the diversification would be healthy as well. I was wrong. It took a whole different set of competencies than the farm equipment business. The crunch times are exactly the same and the margins are no better, despite what the irrigation sales rep said. I know a handful of semi successful examples of this marriage working, but I know of way more scenarios like mine where dealers have tried it because they thought it would be advantageous and it turned out not to be the case. I would be glad to share what
I learned in greater detail if you wanted but the bottom line for me
is don’t do it.”

— Howard Wickham,
Wickham Tractor Co.,
Ft. Morgan, Colo.

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“We think irrigation and equipment dealerships go very well together. At HFEC, we have had an irrigation department since the 1960s. We serve the tree fruit industry and the hay and cattle producers of North Central Washington. Since our location depends on irrigation for all of our crops, we started out selling hand lines of aluminum pipe with Rainbird sprinklers and then have continually evolved through permanent set cycles of overhead watering, drip irrigation and micro sprinklers. Because we purchase large quantities of pipe, fittings and sprinklers for our agricultural customers, it was easy to become the primary source for homeowner irrigation systems also. We have better prices and deeper inventory than Home Depot. Currently our irrigation sales are split about 60% agriculture and 40% homeowner.”

— Greg Hamilton,
Hamilton Farm Equipment,
Okanogan, Wash.

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“Yes, however the water source must be wisely chosen.”

— John Dick,
All Terrain Truck & Equipment Inc.,
Anchorage, Ala.

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“We added Reinke Irrigation to our conventional farm equipment lines about three years ago. Our company added the line because of increasing interest from seed producers and specialty crop farms. Our area is blessed with fairly easy to obtain water supplies. What we have learned is that it takes a huge amount of time to sell each pivot. Every pivot must be custom built for the field size and shape, gallons of water available, availability of electricity, end-boom options, and sprinkler options. One of our precision specialists, Jon Studebaker took a big interest in irrigation and threw himself into the project. Jon and a few of our people have built one pivot, but we have contracted with an out-of-state crew for erections. Jon is working with local well drillers, electrical contractors and generator suppliers for additional help. It is like anything else, the mainline farm equipment dealer must have the personnel available who are willing to put in huge amounts of time to make it fly. If it continues to grow, we will probably add an assembly crew. It is easier to sell tractors and combines. We installed several pivots in the 2010-11 crop years, but the drought in Ohio this year has exploded interest, and led to many new sales this summer.”

— Todd Channell,
Farmers Equipment Inc.,
Urbana, Ohio

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“Our dealership has been in the irrigation business for the past 50 years. It has worked well for us. It requires dedicated service people.”

— Gerald W. Heim,
Hoxie Implement Co. Inc.,
Hoxie, Kan.

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“That’s a great question. In this area we had four years of trying to manage too much water, and now we are coming off the worst drought on record. That leads me to believe that one year out of five would have been good for irrigation sales. Ag machinery dealers are certainly no stranger to seasonal activity, but trying to manage a business with those kinds of peaks and valleys would be too much of a challenge. In addition, we don’t have products that compliment traditional irrigation products. For example, our GPS components work well with managing the removal of water. With the exception of grade irrigation, which is not relevant in this area, we don’t have any easy way to integrate the two industries. There is also a very high demand for well-trained technicians that specialize in irrigator repair. With the demands on our shop right now to keep up with Deere’s technology push, I think we’d be spread too thin. Short answer: If we considered it, we would need to subcontract or consolidate with and existing irrigation supplier/retailer.”

— Chad Lyon,
Heartland Farm and Lawn,
Higginsville, Mo.

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“We are busy in our main line of business and with numerous other water specialists in our area we would fight it out with them and the prices would drop and nobody would make any money. We leave it up to the experts. Although Deere is getting into drip tape which sounds interesting, there are more and more people selling it.”

— Wally Emery,
Colusa Tractor Co.,
Colusa, Calif.

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“Plenty of good irrigation dealers in our area. They are having a good year that is well deserved.”

— Heath Passmore,
Peabudys Inc.,
Sterling, Ill.

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“We are in southeastern Nebraska, which is about 98-99% dry land, so it doesn’t affect me with irrigation equipment. The dried up corn does though. But yes, it does affect the dealers in central Nebraska. I know a lot of dealers who sell irrigation equipment. Some sell and service center pivot irrigations systems and some probably only sell just the engine power units to runs the pumps. I think the dealers that sell the center pivots actually have separate crews just to work on and assemble pivots. But beyond that, that’s about all I know.”

— Stan Stutheit,
Stutheit Implement Co.,
Syracuse, Neb.

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“No I am not interested in irrigation equipment. There are already dealers set up in our area!”

— Lance Carlson,
Quincy Tractor LLC,
Quincy, Ill.

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“Probably not as it is a specialty unto itself and the dealer would need to actually be an irrigation dealer himself as there is not enough margin in the model to two-step it. What we are distributing is water management products that help our growers manage their dirt and the water that it has. We will let the irrigation manufacturer guys deliver the water itself.”

— Don Van Houweling,
Van Wall Equipment,
Perry, Iowa

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“Most machinery dealers in Nebraska are already involved with irrigation equipment.”

— Eldean Reinke,
Reinke’s Farm & City Service Inc.,
Neligh, Neb.

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“There are more opportunities now in irrigation, but there are also pitfalls. This business, speaking from 32 years experience, is different than pricing a combine or tractor. To be fair to the customer, one must understand soils, plant-water relationships, pumps, pipeline design, diesel engine capabilities, and have knowledge of electric motors and control technology. Very few dealerships have staff on hand with that capability. The manufacturers of irrigation equipment make it sound enticing, but it is similar to jumping into selling precision technology, only worse. And if you think it’s bad when a customer’s combine breaks down, wait until his irrigation system has a problem. I have followed behind several implement dealers turned irrigation dealers who didn’t have the proper background and understanding of the technology including safety aspects, and as usual, it’s the end users who pay dearly for 25-30 years (average life of an irrigation system) for the mistakes of an enthusiastic but ill-prepared salesman. And as with any business, the more competition, the more the margins grow strangely thin.”

— Donny Sanders,
Martin Truck & Tractor,
Columbus, Miss.

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“Irrigation has been a main stay with the specialty crops (tobacco/vegetables) in our particular area for many years now. The sale and service of this equipment is 99.9% handled through specific/specialized irrigation dealers/distributors. There is discussion locally of producers thinking about irrigation of corn and soybeans at today’s market prices, but only the producers that have the irrigation equipment already for other reasons have used it in a very limited fashion on corn and soybeans to date. Pivot irrigation is virtually nonexistent here due to limited ground water resources. Irrigation here relies on surface water (streams and creeks that are government regulated) and dug ponds as reservoirs. Water supply runs out quickly when there is a drought like we had this year, so broad acre cash crop irrigation in our area has not been practical. Irrigation is a very expensive operation in many ways and even more so if water is not plentiful and easy to obtain. Water itself is free today but is becoming increasingly more in demand and may not be free in the future. There are two retail dealers locally with one being the actual manufacturer. Between these two they seem to be able to look after the marketplace needs to date. So the answer would be there is no opportunity directly or as a subcontractor for us.

— David Vandenbrink,
Vandenbrink Farm Equipment Inc.,
Sparta, Ontario

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“I can’t speak for other dealers, but for us I would say yes, because of limited farm ground in Nevada, lack of crop diversity, and our very low rain fall. This would be something we would be very interested in.”

— Dave Ott,
Otts Farm Equipment,
Fallon, Nev.

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“I am a Valley Irrigation dealer and have been since around 1992.”

— Dan Cammack,
Unruh Foster,
Dodge City, Kan.

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“In our area, irrigation is an on and off need. One year you need it, the next six you do not. It is somewhat specialized requiring certain skills to sell and have it work. Many of the vegetable and fruit growers in our area already have some irrigation, but the bulk of farming is dairy-based and it would be difficult to irrigate the acreage required economically. You must also consider a source of enough water.

— Gene Saville,
Lamb and Webster,
Springville, N.Y.

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“Yes, I have given thought several times to whether or not to look into selling irrigation equipment. I do believe it is something we can do as equipment dealers, but I also believe it will have a learning curve. My other concern is that some geographic areas, such as ours do not have access to very much water. We have very few rivers or lakes in our county and the ones that are here help supply public water. We also do not have a big aquifer in our county. Therefore, with the very limited amount of water, I wonder how many potential customers we would have. Then I do not know how the business works in terms of things like, do farmers expect you to trade for used irrigation equipment? I could see a potential disaster in the making if trading is a part of the industry. Thus, I have a lot of questions to consider before getting into the business.

— Philip Brooks,
Brooks Sales Inc.,
Monroe, N.C.

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“We have no irrigation around Edmonton. There are a few systems at Fort Saskatchewan, some 430 miles northeast of Edmonton, but I would not get involved. Southern Alberta has many pivots and irrigation ditches, but I cannot speak for them.”

— Peder M. Lodoen,
Peders Agri Services,
St. Albert, Alberta

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“I think the cost to put an irrigation system in is about $1,000 per acre. I had a customer put a system in this year on 400 acres. He has a water supply most people don’t have, the Mawmee River. I think around here the setback would be water supply. I would not be interested in selling the system.”

— Jeff Stammen,
North Star Hardware & Implement Co.,
North Star, Ohio

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“Water is already an issue with my clientele who are all over the U.S. I deal mostly with vineyards and organic farmers of row crops. I do not try to compete with the three major suppliers in Northern California. The three major suppliers are Durham Pump in Richvale, Calif., Peaceful Valley Farm in Grass Valley, Calif., and Harmony Farm Supply in Sonoma County. The latter two are mainly mail-order houses and do a big business in drip and micro sprinklers and are very competitive.”

— EF Canale,
Ferrari Tractor,
Gridley, Calif.

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“This is just my opinion, but I think we need to leave the irrigation to the companies that sell and service that type of equipment. The major equipment companies want to sell combines, tractors and planters.”

— Steve Stemle,
Midsouth Ag,
Ownesboro, Ky.

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“Where we are located the average rainfall is less than 15 inches a year. The irrigation industry has center pivots sprinklers and the new underground tape drip irrigation, which at this point cost too much. Trying to get into these areas costs a lot and finding capable people outside of the industry is difficult.”

— Larry Moore,
B B Sales Co.,
Guymon, Okla.

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“In our case, we are east of a heavy seed corn area, so irrigation suppliers already exist and are now moving this way. We feel it is a ‘specialty business’ much like dairy milking equipment. So if you are not in it now, you are too late. It is a whole new commitment involving hours, staff, training and service vehicles. We are not pursuing the irrigation business.”

— Steve Wells,
Wells Equipment Sales,
Litchfield, Mich.

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“If a dealer feels he has the capacity to handle the work and do a good job this is one thing. However, it is very seasonal work and when the irrigators need to be installed and serviced we are very busy with the spring rush and its challenges. I do not feel that we have the time and expertise to do it right. As to the subcontracting, if a producer can go direct, I would encourage it. It is another headache we do not need!”

— Mike Loscheider,
Waconia Farm Supply,
Waconia, Minn.

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“Water management and irrigation will become a part of a variety of Integrated Solutions offered by many John Deere dealers in the near future.”

— Jim Hale,
Washington Tractor,
Lynden, Wash.

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“In our area of Ontario, there is some irrigation, but I do not believe it is significant enough for us as a main line JD dealer to expand into that business. This is a fairly specialized business, and I believe leaving it to the experts is the best plan. While we did suffer from this year’s drought in our area, these occurrences are very rare.”

— David Shaw,
Premier Equipment Ltd.,
Ayr, Ontario

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“We have four New Holland stores in southwest Missouri, started in 1969. We also farm and have cattle, which has helped to know what farmers need when adverse weather comes, and we have a lot of practice. I started our business by being a farmer seeing the need for grain storage. We put up storage on our farm, learned how to build bins and steel buildings, got the butler bin and building franchise, sold a lot of bins and buildings and now manufacture steel buildings. Next came irrigation. We had to learn from scratch. There was no irrigation in our area. We were the first to use the traveling gun irrigation, and we manufactured pump units and then we sold the pivot units. This is an addition to our regular farm equipment sales. There’s always opportunity, just think outside of the box.”

— Wayne Schnelle,
S&H Farm Supply,
Lockwood, Mo.

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COMMENTS: 1
pivot installation
Posted from: Tim Barnes, 11/7/13 at 4:44 PM CST
Been installing pivots since 1991 . Any body need a contractor call 2294262378

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