Updated March, 2023
Farm Machinery Joint Venture Worksheet
Some farm operators prefer to own and operate machinery jointly with other farmers. Such agreements can reduce overall costs significantly as well as increase labor flexibility. An explanation of how to form and manage a machinery joint venture can be found in Farm Machinery Joint Ventures. However, joint ventures also increase the need for good record keeping. This publication contains a worksheet that can help to organize a record of the initial capital contributions made by members of a machinery joint venture and calculate the annual payment each member will make to the joint venture for its services. It shows an example set of values for four farmers, P.J., Roger, Kim, and Carlos, who formed a machinery cooperative.
Table 1 shows all of the equipment items contributed by each member when the joint venture was formed. Ten separate items were contributed. The table shows the agreed on beginning value of each item and the name of the member who contributed it. The members agreed that 10% of the value of each item would be considered to be an initial contribution of equity capital to the joint venture. Further, the members decided that the joint venture needed to have an initial capital fund of $50,000, or $12,500 from each member. The last line of Table 1 shows how much cash each member had to contribute, after receiving credit for the machinery equity contributed, to make up the $12,500 initial capital contribution.
Table 2 shows the annual payments that the joint venture will make to each member for the equipment items they contributed. They decided to pay each member 90% of the value of each item, amortized over five equal annual payments at 7% interest. The payments to members total $59,375 each year. Table 3 shows the equipment items the members agreed to purchase from machinery dealers, and the annual payment for each one, to be made from the joint venture account. Table 4 shows the items that the joint venture agreed to lease, and the annual payment for each one, also made from the joint venture account.
Table 5 shows the other related expenses incurred by the joint venture during the year. This information was recorded in a separate location, and the totals were transferred to the worksheet at the end of the year. Each member supplied the fuel for the field work done on his or her own acres.
Table 6 shows the total hours of labor contributed by each member. Totals were carried forward from the labor log sheets kept throughout the year. Field labor hours were valued at $20 per hour, and time spent performing repairs was valued at $25 per hour. In total, the members contributed $132,280 worth of labor to the joint venture.
Table 7 summarizes the total crop area that each member had that year, 3,294 acres. The total of all the annual payments to members, dealers and lease companies, plus other expenses and the value of labor contributed, came to $555,456, or $168.63 per acre. Multiplying each member’s acres by $168.63 gives the total that each member owes the joint venture for services provided. Next the total payment owed to each member for the value of equipment items sold to the joint venture (Table 2) is subtracted, and the value of the labor contributed by each member (Table 6) is subtracted. The remainder is the net amount each member needs to pay the joint venture that year for its services.
This worksheet can be modified or expanded to show additional information, but the example illustrates a basic procedure for recording and calculating each member’s contributions and obligations. The spreadsheet version of the worksheet is available at: Farm Machinery Joint Venture Worksheet, www.extension.iastate.edu/agdm/crops/xls/a3-38jointventfarmmach.xlsx.
This worksheet can be modified or expanded to show additional information, but the example illustrates a basic procedure for recording and calculating each member’s contributions and obligations. The worksheet is available as a PDF or as a Decision Tool spreadsheet.
William Edwards, retired economist. Questions?