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July Guest of the Month : Assoc. Dr. Cihat Yıldız
AGRICULTURAL MACHINERY CONTRACTING
The mechanization of agriculture involves a production technique used in various agricultural operations, which traditionally require human muscle power or animal traction, performed in crop and livestock production using modern agricultural equipment and machinery, as well as the design, manufacture, repair, and effective use of such equipment and machinery. The mechanization of agriculture not only increases the amount of work done in a unit of time, but also ensures a uniform quality of the work done. Therefore, the mechanization of agriculture today is an indispensable factor of production for crop and livestock production.
According to calculations, the share of agricultural mechanization in input costs in Turkish agriculture is about 40%. The mechanization of agriculture, which has such a high proportion of inputs (land, seeds, energy, fertilizer, irrigation, labor, etc.) compared to all other inputs, can only fulfill its purpose with a conscious investment and management.
Otherwise, if such a high input cost cannot be utilized adequately, the emergence of unused mechanization capacity is inevitable. Considering that the average farm size in our country is about 70 decares and 80% of farms have less than 70 decares of land, it becomes clear how important it is to consciously plan the mechanization of agriculture.
The small average farm size makes it difficult for these farms to raise enough capital to invest in agricultural mechanization, and does not allow for the efficient use of agricultural equipment and machinery, which are acquired with great financial difficulty. For this reason, the use of community machinery is considered the most rational solution in countries or regions with a small average farm size.
There are two basic methods for the use of agricultural equipment and machinery. The first is private ownership, and the second is the method of community machinery use. It is considered more realistic for farms that do not meet these conditions to rely on community machinery, while farms that have a high level of land ownership and capital and can effectively use the equipment and machinery at their disposal throughout the year are more inclined to private ownership.
It is an undeniable fact that the use of community machinery in agriculture brings economic benefits, especially for small farms. However, the social and cultural aspects of the use of community machinery are more prominent than the economic aspects. Social and cultural issues are more crucial in this partnership than financial issues, such as who is responsible for the machines, who uses them, in what order they are used, and who takes care of the repair in case of a breakdown. Even if the farm owners are partners in the machine, they generally have the attitude that the machine should be under their own responsibility, that the machine should be used by themselves or an operator, that their work should be done before the other partners' work, and that the person who caused the breakdown should fix the breakdown.
The model of community machine use that best fits this mentality of farmers is machine contracting. The procurement of machinery, especially self-propelled machinery (combines, silage machines, cotton harvesters, sprayers, etc.), which have a high purchase price, have a limited annual useful life due to the type of agricultural work they perform, and require special knowledge and skills to use, for all agricultural work (plowing, planting, tending, harvesting, threshing, product processing, etc.) by way of machinery contracting is economical for both the machine owners and the service recipients in view of the shortage of land and represents the most appropriate model for eliminating the abovementioned social and cultural concerns.
The machinery contracting model is a method that has been used successfully in our country for many years, especially in combine harvester operations. In this method, there is no partnership for the machine, but a commercial activity is required. Farmers or entrepreneurs who have sufficient capital acquire a fleet of machinery suitable for agricultural activities through commercial investment. For example, in the combine harvester business, an owner or entrepreneur who invests in a fleet of machinery consisting of at least one combine harvester, two tractors, and two hay transport trailers is also responsible for the use of that fleet of machinery by specialized operators, the maintenance of the machinery, and the repair of breakdowns. As can be seen, it is the responsibility of the service provider (investor) to acquire the fleet of machinery, maintain the machines and repair any breakdowns. Farmers who use the service benefit from these machines by paying the price for the service based on quantity (tons, stocks, trailers, etc.), area (decares), or time (hour, day, month, season, etc.). The initial investment costs for the machines, the provision of operators, the maintenance of the machines and the elimination of breakdowns are not the responsibility of the service recipient.
The machinery contracting model is based on the principle of mutual benefit. The investor receives a fee for the provision of services and converts the investment into a benefit with the fee received. The service recipient, on the other hand, engages in an agricultural activity by paying only the price for the service received without making a new investment. Therefore, the machinery contracting model is considered to be a more sustainable model compared to other community machine use models (neighborhood cooperation, machinery partnership, machinery cooperatives, machinery fleets, machinery associations, etc.), which better fits the social, cultural and economic structure of our country.
The successful practice in the combine harvester business has begun to create an exemplary model for other agricultural activities. Machinery contracting is becoming more popular every year, especially for agricultural activities such as silage harvesting, transporting and packing, cotton harvesting, transporting, baling, sugar beet harvesting, loading and transporting, and spraying, which are usually carried out with self-propelled machines whose purchase prices are high, whose agricultural functions are limited, and whose use requires expertise or a team.
In addition to service receiving from machinery contractors at a certain stage of agricultural production, machinery contractors who have sufficient machinery in some regions undertake agricultural work from tillage to sowing, from maintenance to irrigation, from harvesting to transportation, so that there is a mutual benefit between the service provider and the service user based on cooperation.
It is inevitable to mention some of the risks inherent in machinery contracting, whose positive aspects have been described above. Especially where the number of machinery contractors (service providers) is small, monopolization is the greatest risk. In such cases, the price of the service may increase because the number of service providers is smaller and the number of service recipients is larger. In other words, machinery contractors may move to increase the price. Or they may tend to avoid seemingly unfavorable orders and prefer simple, close and larger orders. Another risk is the inadequacy of the fleet of machinery. Even if the machinery contractor and the farmer using the service agree on all the terms, an inadequate fleet of machinery will cause serious problems if the work cannot be done or completed on time. For this reason, it is essential for the successful implementation of the machinery contracting model for the service recipient that there are a sufficient number of machine contractors and adequate fleets of machinery in the region.
The greatest risk for the machinery contractor, who is the service provider, is being unable to receive the full price for the work within the agreed time. In almost all agricultural works, the service fee is paid either in cash at the end of the work or according to a specific payment schedule. Forms of payment such as advance payment or prepayment are either not used in many agricultural activities or the amount of such payment is very small compared to the total amount of the service charge. Therefore, untimely payment by the service recipient is the greatest risk for machinery contractors. The conclusion of a written contract at the beginning of the work, the specification of the scope of work, the unit price and the terms of payment in a written text, and the signing of the text by the service recipient and the service provider are considered the most important precautions to be taken in order to avoid this possible problem in the future.
The positive aspects and some risks of the machinery contracting model, which is implemented in a sustainable way in our country, by reducing the cost of agricultural mechanization inputs, which correspond to a significant share among agricultural inputs, and by converting the capital invested by the farmers or entrepreneurs making this expensive investment into benefits, are mentioned above. This model can be further developed and successfully maintained by minimizing these risks and maximizing the expected benefit, by mutual goodwill of service recipients and service providers and by making written contracts with predetermined rules.
BIOGRAPHY
Assoc. Dr. Cihat YILDIZ completed his undergraduate studies at Atatürk University. He has a master's degree on the use of community machinery in agriculture and a doctorate on the mechanization of silage. He took part in scientific research projects at the Israel Volcani Center and at the University of Delaware, USA. He conducted scientific research projects and implementation projects in the fields of silage mechanization, agricultural machinery management and rural development. Dr. Yıldız is still working at Atatürk University.
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