Agricultural machinery leasing model gains traction among farmers

Brazilian agriculture is increasingly dynamic and present in a challenging scenario, which provokes innovations. Continuous evolution and the emergence of cutting-edge technology are essential for agribusiness. From this, new solutions, techniques and products emerge all the time to boost farmers' results. Companies that rent machines and solutions for the field are an example of a new business that is gaining strength in Brazil as a low-cost alternative for producers in the segment. 

The first most valuable asset after the land itself, agricultural machinery is a priority topic in day-to-day rural life and is also a market that is gaining a new face. In conversation with a great friend and experienced agricultural producer, Fleet and Mechanization Manager at RZK Rental, Alex Johann, commented on the business model, which can be quite advantageous for some producers. Rental is part of the RZK group, founded by Mr. José Ricardo Rezek, which has other companies linked to the sector. One of them, the Primavera concessionaire, present in the Vale do Araguaia region, in the north of Mato Grosso, and in Goiás. 

For producers, the group's companies provide an advantage in the machinery rental scenario, as they act in the acquisition, management, logistics, maintenance and transfer of models. This way, you can offer an excellent proposal to your customers.

Despite being a new business model in the grain production segment, it is being widely used in sugarcane production and in construction. With the expansion of machine rental, it is possible to notice the development of the activity, professionalizing each link in the production chain. The traditional farmer, who uses his own machines in production, is generally unable to master modern machines and their advanced technologies. Reflecting further, shouldn't this knowledge be among the responsibilities of a grain, fiber or energy producer?

The machine rental activity is nothing more than an advancement of the business model that has existed in Brazil for a long time, which is the provision of services. An example is producers from states that have already finished their activities in the field, due to the difference in operating windows, they leave for other regions to provide services. This model is also going through a period of professionalization, with exclusive providers emerging, with a fleet of larger and modern machines. 

When renting, there is also the advantage of the producer already having mastery of the operation of the agricultural machine. This function is essential for you to have knowledge of every inch of land on the property and also to decide how to operate the equipment when dealing with your crops.

Today, new customers are beginning to appear on the Rental scene, in segments such as coffee, citrus, fruits and even smaller producers with specific needs. New forms of contract, called SPOT or opportunity, have grown to meet specific needs, such as the delay of a newly purchased machine, the lack of equipment due to an accident, etc.

With a continental productive area and extraordinary diversity, there must be several solutions to problems. If you ask me if the Rental business can replace the traditional purchase-to-use model, I believe not. We think that business models will coexist, undergoing nuances according to the needs and advantages they offer. The good side of this is that the producer can count on another alternative to be more efficient in his rural activity. And the answer to the burning question: “should I rent or buy?” is always the same: consult experienced people in the area and do the math. 

Advantages of the machine rental model

1. Reduction in maintenance costs: depending on the contract, maintenance of the agricultural machine is the responsibility of the renter. Today, for a producer who has his own machines to keep them in operation requires a workshop, tools, maintenance equipment and qualified people. These are costs that if we ask any agricultural producer, they would not want to have, as they are not directly correlated to their main activity: grain, energy and fiber production.

2. Access to cutting-edge technology: We often see crops with a large number of volunteer plants (guachas, as they say here in the South), and this is often due to the operation of machines that are more than 10 or 15 years old. These are old, obsolete models that cannot reduce grain losses. Once the producer chooses to rent a machine for harvesting, he will have access to new machines, or machines with very few hours of use, which have more advanced technology that prevents grain losses. These are costs that directly impact the last line of the balance sheet.

3. High operational productivity: new machines, in addition to being equipped with sensors to avoid losses and unnecessary stops, have connectivity systems and can be monitored 24/7. This way, production is monitored, avoiding significant losses.

4. High availability: new and modern machines have fewer maintenance stops, that is, they are available for operation within the demand window. This reduces the risk of losing a crop ready for harvest considerably.

5. Non-immobilization of capital: this is one of the factors that weighs in accounting. For example, companies that are publicly traded, if they manage to reduce the volume of assets while maintaining profitability, are more attractive to shareholders because they have greater profitability. In other words, it produces more profit with a smaller inventory. 

6. Utilization rate: Due to the seasonality of machine use and short operating windows, the machine utilization rate can be quite low, taking the payback time to a longer period. The producer knows that the machine that produces more pays for itself sooner. Therefore, the more hours or acres the machine does per year, the sooner it will pay for itself.

7. Access to specialized technical support: rental companies offer technical support and specialized assistance, ensuring that the machines are always in good working order throughout the contract.

*Per Fábio Schavinski, from Schavinski PD&I