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Written by David Smith, Business Consultant

Grain farmers typically have two peak labour requirement times being cropping and harvest each year. Labour can be sourced for those peak times on a short-term basis, or permanent labour can be employed and utilised over the full 12-month period. One way to utilise labour when not cropping or harvesting would be to deliver grain grown on farm direct to port or end user throughout the year.

When considering the addition of a truck to your plant and equipment base there are some aspects that need closer examination.

  1. Economics:

Owning a truck and delivering grain can increase total income by transferring an existing cost (freight paid to others to get grain to end user) into an income for the farm. It is important to compare the cost difference between owning a truck and using a contractor.

Refer to Table 1 to calculate the cost of owning and running a truck.

  1. Logistics:

If you own a truck, it can complete other tasks such as shifting grain throughout the season, filling the seeder at cropping, carting hay back to stacks, or end point, a crate for stock etc.  These jobs are important and very inconvenient if you do not have your own truck.

To make harvest as efficient as possible header capacity needs to be maximised. Carting to a home base can be faster than delivering to the local silo or end user, thus making harvest more efficient.  Having a truck and matching carting/storing ability to header capacity assists with maximising harvest efficiency.

  1. Labour:

Owning a truck provides opportunity for labour utilisation in the off-peak times.

If the decision is made to purchase a truck, the business may need to source a competent and willing driver with suitable qualifications and work history.

Many farms employ extra labour for cropping and harvest, this labour unit could be utilised driving a truck delivering grain when not busy with farm tasks.

  1. Other factors include:

Owning a truck allows the business to have greater control over when they plan extra internal freight such as shifting grain on-farm.

Owning a truck can assist you to develop a relationship with end users.

Case study: Cost of owning a truck

A grain farm produces 8,000 tonne of grain and/or hay. If storing 5000 tonnes for delivery during the year, and using a B-double, then 120 loads are available.  If averaging 4 loads/week then the truck driver is occupied for 34 weeks. This means the driver is available for 10 weeks on farm to assist during peak workload times.

Estimated truck costs of $4.17/km outlined in Table 1 assume that the truck and trailers are valued at $300,000 and complete 100,000 kms per year, 50,000 kms per year loaded.

Table 1: Estimated costs of truck ownership

Expenses per year for delivery as above
Overheads                                                                                                                                             Costs $
Insurance % capital 1.00% $3,000
Phone per year $600
Registration (Primary Producers) per year $5,000
Admin 2 hours per week 52 $2,600
Inputs
Fuel use km/L 1.6 625,000
Fuel price $/L $1.50 937,500
less on-road rebate 0.12 75,000 $862,500
Repairs
R & M Tyres per km .3 x 1000000 $30,000
Labour
Wages $ per week 34 weeks $1,500 $51,000
Finance
Depreciation 10% capital cost 10% $300,000 $30,000
Total Expenses                                                                                                                               $208,450
Dollars per loaded kilometre $4.17 

 

This dollars per loaded kilometre of $4.17 is comparable to current contract rates.

Add to this any extra income that could be budgeted as a result of:

  1. Marketing advantage by delivering direct to end user
  2. Improved efficiency and flexibility at harvest and during the year
  3. Additional labour unit available for cropping and harvest.

Should a business decide to purchase a truck of different value to the case study this will change the truck cost per km.

Conclusion

  • The cost of running a B-Double truck worth approx. $300,000 and doing approx. 50,000 kms per year loaded will be similar to the cost of a contractor.
  • Financials, lifestyle and resourcing all need to be considered when making a decision.
  • Carefully weigh up other factors such as employment of a driver and timeliness.
  • All machinery should fit the whole farm production and labour plan.

If you would like help to put your own figures into this scenario give us a call and we will step you through the process.