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Harvesting Profits From the Farm/Agricultural Market
By Jim Walbolt
When we last visited the subject of the opportunities in the agricultural market, (Engine Builder, March 2006) we discussed the diversity that may not have been apparent to everyone. While many would immediately think about tractors, combines and maybe, grain trucks, most would not have realized that the farm and agriculture industries are much more diverse than that.
Agriculture in the United States generally falls under the following commodities: Animal products (that would include aquaculture, cattle/beef, dairy, hogs/pork, poultry and eggs, and sheep/lamb and mutton) and crop commodities (including corn and feed grains, cotton and wool, floriculture and nursery, fruit and tree nuts, peanuts, rice, soybeans and oil crops, sugar and sweeteners, tobacco, vegetables and melons, and wheat).
Just browsing through that list of commodities show just how diverse agriculture is. Different methods, equipment and practices of planting, growing, harvesting and delivery are used depending on where or what the commodity is. Yet one thing remains the same. While the equipment may be different, internal combustion engines power much of it.
Which of these commodities are produced in your area? Perhaps it’s time to get out of the shop for a little while, take a ride, and even visit with some of the farmers in your area. Find out what their needs are!
Butch Gilger, owner of Met’s Machine Shop in Mansfield, OH, is in a unique position to see both sides of the story. In addition to being a shop owner, Gilger is also a farmer. “20 years ago we could work on small block Chevrolets all day long. We still do a good number of small blocks, but it’s really starting to slow down.”
Jeff Harvey, the parts and sales manager at Met’s agrees, “The industry has changed from rebuilding to parts changing. A lot of the work we did 20 years ago just isn’t being done any more.”
Gilgar continues: “But there are plenty of opportunities out there (in the Ag market). You need to know your diesel, the different specs…it’s no different than your regular machining, you just need to pay attention to the details.”
Met’s is a very diversified machine shop and Gilger believes that diversification is critical to his shop and may keep you going as well. Met’s will work on virtually anything that comes in the door and takes advantage of the diversity in the market. At Met’s, agricultural work is grouped in with industrial after all, there isn’t a lot of difference. A skid steer loader, whether used in a factory or on a dairy farm, is the same machine.
Agriculture isn’t just limited to the stereotypical Midwest cornfield and Farmer Bob in his bib-overalls out on the tractor. There are dozens of other agri-businesses out there that also use Ag type equipment. It could be a fertilizer application company using big three-wheeled Terra Gators we have all seen zooming across a field. It might be a cotton picker, cotton stripper or cotton gin in West Texas, or it could be a self-propelled swather such as a Massey- Ferguson 9000 Series with a Cummins 110 hp engine.
One of the growth areas that Gilgar can see is in the power units that run gensets on poultry operations in his area. These are needed to run the fans and vents should a power failure occur. It wouldn’t take long for a building with 100,000 chickens or turkeys in it to overheat, most probably resulting in a huge loss for the farmer.
These genset power units could be just about any type of engine, but are nearly always diesels, with Detroit’s becoming popular in Gilgard’s area for the power source. These power units are used everywhere; just the application is different depending on where you are in the country. They may be used to operate irrigation pumps or cotton gins in Arkansas, Mississippi or Texas; aeration pumps in Alabama, Idaho or Maine; gensets in Ohio, South Carolina or Georgia; or in any state for that matter, in any one of dozens of applications.
When you really start to think about it, you can be overwhelmed that there is much more to agriculture than the farmer out plowing a field. Agriculture has become a worldwide adventure. What your neighbor grows on his land could wind up anywhere in the world, and delivered in any one of hundreds of products.
Of course, farmers need to get their products to market and that means trucks of one kind or another. While many farmers still use single- or double-axle trucks in the 1-3 ton range, the trend on many small and corporate farms has been leaning toward semi-trucks and trailers. Many shops will find quite a bit of work from this segment of agriculture. It is common to see 40-50 year old trucks still in use by smaller farmers to get their crops to the local elevator, although many farmers are hauling their crops further for either marketing or price considerations.
Many farmers also use some sort of “hybrid” truck to haul grain. These can be haulers that the farmer has built out of maybe a 15-20-year-old cab and chassis with a mounted gravity box or other type of container. In many cases, they have put a lot of time and hard work into creating these hybrids to meet their specific needs, so they may be more apt to repair them rather than replace them in the case of engine problems.
To get these products to other markets require other types of transportation, all requiring the use of internal combustion engines. While trains are probably most responsible for getting crops from the local elevators, semi-trucks and trailers also do a fair amount of the hauling. Hopefully, you are already getting your share of work on the big rigs, but if your shop is located near a rail yard, have you approached them about possible work?
What you may not realize is that besides the diesel engines that provide the power to run the locomotive, railroads also use power units of many shapes and sizes and they just might have something for you.
While the rest of the world continues to increase its agricultural output, many countries such as China, are fast outgrowing their ability to feed a population that is growing by more than 8 million a year. The need for additional housing and the growth of cities is fast consuming much of the arable land needed to produce food.
By contrast, the U.S. farmer has continued to increase productivity. In 1900, it took four farmers to feed 10 people; in 2001, one farmer fed 130 people. Today, one farmer can feed 144 people. Agriculture in the United States continues to grow and to feed the world.
Exports of wheat, rice, feed grains, soybeans (and other oilseeds), cotton and linters and tobacco is projected to be the highest in history at more than 139 million tons in 2008. The top five destinations for these exports are Canada, Mexico, Japan, Europe and China.
But when you’re looking globally at the U.S. feeding the world, you can think locally on business opportunities. Regardless of where your shop is located; you do not need to be in the farm belt to get a piece of this business; you should be able to tap into this market in any part of the country
This means continued growth for anyone involved in agriculture, including shops that service the mechanical needs of agriculture. Since 1998, the United States has lost about 117,000 farms, and we continue to lose farmland at around one million acres per year. However, the average size of farms continues to increase.
Of course, the tractors, combines and other on-farm equipment still provide a large share of Ag work for many shops. Unlike everyday cars and trucks; the grain trucks, tractors and other machinery used on the farm will continue to be used for 20, 30, 40 years or more, and it is very common to see a tractor from the 1960s still used regularly on the farm. Nevertheless, this market will eventually dry up.
Manufacturers are building efficient engines that will last much longer; and these engines have become much more reliable, with most seeing 6,000 hours or more before any internal engine work is required. Manufacturers will continue to improve these engines and components.
While in the past you may have had a rod, piston or maybe a valve spring fail, these days the parts are so much better that the majority of failures occur in the electronics and fuel systems. It may look like a mechanical failure, but that is where the experienced technician can determine the difference between a mechanical failure and an electronic or computer failure.
However, while these engines are built better and will last longer, they are also built to be practically “throw-away” engines. Moreover, there will no longer be cores for many of these engines. Most manufacturers require the engine cores to be returned. Also, many of the parts that you could repair, such as grinding a crank, are no longer possible because of the manufacturing techniques. In many cases, they must be replaced.
That brings up another problem, because it is getting harder and harder to get parts for many of the newer engines. It seems the manufacturers are pushing farmers to use a factory-authorized remanufacturer.
The consolidation of farms means that more equipment is being used harder, and along with that are the opportunities for increased repair work on this equipment. As farms consolidate, so do many of the implement dealers. Where at one time there was an implement dealer in every town, now it is more likely than not, many of the implement dealerships in a region are now under one corporate umbrella.
What does this mean for you?
It might mean that you will get work from all of the shops under that one corporate umbrella, where in the past you may have only gotten work from the local one. If you have cultivated (sorry) a good relationship with a farm equipment dealer, it can easily carry over to additional dealers if they consolidate.
As the consolidation of dealers occurs and the manufacturers move more and more into electronic engine controls, the technicians that once did a lot of engine rebuilding and other heavy work are becoming more of a computer operator and parts changer.
That’s not to say there are not a lot of good technicians out there; it is just that many of these dealerships seldom get the opportunity to do any rebuilding work. As often as not, engines are “swapped” out with a “reman” from the factory or designated supplier.
Reman engines are getting popular with many dealers as well as other shops. They are getting extremely popular with the farmers in many situations too! Many times a farmer cannot afford to be without a piece of equipment for the time it would take to rebuild an engine. A reman engine makes a lot of sense in these situations. But you don’t always need to rely on the manufacturer to get that reman. What’s to stop you from keeping some popular engine combinations on the shelf?
Nearly every equipment manufacturer has a reman program, whether they do it in house, or contract the work to a rebuilder. It may even be possible for you to develop a reman engine program for your local Ag repair dealer. It not only saves time, it may also save everyone a little money.
The recent slowdown in the economy has created additional work for some shops. Joe Sylvester of Sylvester Repair in Lena, WI, does not work on the big tractors and combines but says he does a lot of work on the smaller equipment and trucks used by farmers.
“In the past, if a farmer or contractor had an engine go in a skid steer that they used on a daily basis, they wouldn’t repair it, they would replace it,” says Sylvester. “Now they are having them repaired even if it means a new engine.”
Sylvester says that he has tried to find a supplier of remanufactured engines for these customers, but he has not been happy with the quality. They prefer to rebuild the engines themselves so that they know the quality is there. Gilgar had a similar response to some of the remanufactured engines on the market.
Both Gilgar and Sylvester agree that the economy has made a difference in the type of work they are doing. Instead of buying new, many are opting to repair, even though sometimes it does not seem to make financial sense. Spending two or three thousand dollars to repair a piece of equipment that is not worth much more than that, does not make sense, but as a repair facility or machine shop, that should be a welcome trend.
For the agricultural business, green isn’t only what’s growing: it may be seen in the equipment that is reused or recycled. For you, the green may come from the very same place.