Tag Archives: Property

Thoughts on Lease Cropping vs Grazing Your Own Stock

There is something wrong with me that leasing and renting properties never seems to work out.  Even when there is a contract with goals and procedures laid out life, weather, resources change and stuff just doesn’t happen as plan.  But, by and large, my disappointments seem rooted in being too accommodating.  Or maybe it’s a lack of communication though for sure i don’t hold back giving my opinions and expectations – to a fault, i’m afraid.  Nevertheless, things never turn out quite the way i want.

Currently, i’ve leased 120 acres for organic farming for 4 years.  My goals are to eliminate or drastically reduce endophyte infected toxic fescue and build organic matter through the use of cover crops.  I knew going in that my renter has no intention of ever letting cattle graze the cover crops, so i can’t be unhappy about that, yet, the more i see happening and the more i read, it is clear that my soil is lacking due to the removal of animal impact.

Our contract was spelled out and ends after next year’s crop (it was a 4 year deal).  I had hoped that it would be successful and that then we could move forward with working another piece and removing more fescue, but it doesn’t work.

Here are some bullet points i have:

  1. animal impact is essential to making cover crop and soil improvements financially viable as well as building organic matter and tilth.
  2. in a lease situation, the owner doesn’t have the power to make certain that soil is covered.  This past year, the soil did not have anything in it from November until June (except volunteer ragweed growing in the spring) and now that it’s been worked and readied for more soybeans, it still lays open to the sun, wind, and rain with prevented planting.   Cover crops simply don’t get planted even though that was the written goal.
  3. I knew going in that i was incurring some opportunity costs by leasing vs grazing my own cattle on the property.  I weighed that against the possibility of getting better control of the toxic fescue and giving my friend an opportunity to expand his organic cropping endeavor.  Bottom line, from a purely income/expense perspective, I make more money with grazing vs leasing the property for row cropping.
  4. Lessees do not care for your property as you would.  Trees and brush are growing rapidly in fence rows and untilled portions of the land.  I still do the labor of keeping them under control and since the crop is organic, i must follow the rules of how to manage.  In other words, i can’t chemically treat the plants or stumps if they are within 20 feet of the crop – So they grow and grow.  It will be 7 years from the time i cut brush and treated and the time i regain control of my property.  A lot gets big and away.  More work at the end of the organic regime.
  5. This experiment was worth the pain since i now know that it simply is not the way i would ever do this project again.  I’m especially glad I went with the organic approach despite the stumbling blocks since a conventional farmer would have slathered the soil with toxic chemicals year after year and farmed fence row to fence row and through the waterways.  My friend is careful to leave ample grass strips in waterways and leaves 20 foot buffer from the fences (organic rules).  At the same time this leaves at least 20 acres that is not be utilized for any purpose since he won’t allow grazing at any time.
  6. The weather immediately turned into drought mode for these 3 years and I’m having to downsize my cow herd drastically to accommodate since my acres for grazing is reduced.  Incredibly, this has turned to be a blessing since i’ve culled deeply (after this fall, it will have been about 40%!), no cow gets a second chance and i’ve sold a lot of older cows that i would typically try to ‘get one more calf out of.’  This year’s calf crop is the best I’ve ever had.  Now if only market prices weren’t in the tank.
  7. If i had my own farming equipment and the desire to run it, i think there is opportunity to improve the soil, increase tilth and organic matter, create better wildlife habitat, create another employment opportunity, and increase profit with combined cropping/grazing especially if a value added food crop market is developed.  We actually do have all the equipment, but not the time or energy to develop the plan, work the plan, and market.  The equipment mostly sits in the barn and serves as depreciating assets against income.
  8. At the end of the day,  we do the best we can and then we die.  The hope is to leave a legacy of some sort – be it a physical asset, money, or wisdom.  A friend recently sold his rather large farm he had promoted, taught, enjoyed, and improved with holistic, organic practices for all his life yet it sold to conventional farmers who are likely to plough it all under and row crop until it is degraded. That is sad, but life goes on.

At the end of the day, I’m looking forward to bringing the 120 acres back under my management even though i will only graze it once i get it seeded back down.  With managed grazing and some brush/tree removal, the pasture will be back hopefully making money for me soon.

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You can see the worked field which has now been bare soil since harvest of soybeans last November.  That means 10 months and counting of open, unprotected soil.  

Too Many Farmers & Ranchers?

In these slow times made so by inclement weather (snow, cold, ice, wind, mud, rain), my energy level increases because i’m not working as physically hard.  These past couple years, too, i’ve begun going to our local YMCA at 5am to walk and lift weights for a couple hours.  All this contributes to a restless feeling that i’m not accomplishing all that i can.  My children, now grown, are good at reeling in my ambition and crazy ideas a bit, which is good because i have a natural tendency to get too many irons in the fire.

However, the perspective of age has tempered and honed those expansive ideas as either increasing work or increasing investment.  The latter is much more attractive to me now as my physical strength wanes.

All that shared to relate an irony of agriculture in the United States.  Although, some would cry ‘save the family farm’ few actually have a real look at what the family farm is.  Are we dooming the modern family farm by idolizing the farms of the past?  or those small holdings in distant lands?  The reality is that farming/ranching has never been financial lucrative in the sense of ‘getting rich.’  Margins are slim, startup is pretty much insurmountable now, and i never thought i’d say it out loud, but i fear there are too many farmers/ranchers in the United States.  That is to say, that despite the average age of farmers is 58 or 59, farming of the agrarian sort (actually farming/ranching – not some related field) is more competitive than ever!  Outside investors and to an even greater degree, neighbouring prudent and successful farmers with disposable income bid up land to amounts beyond production value which keeps new farmers from entering.  Oh, yes, i know that mantra is that you don’t have to own land to start in farming, that is absolutely true, but at least here in north Missouri, you’ll be hard pressed to find anything to rent – pasture or crop land.  And, to be honest, most of the land in our county is not crop land, yet it’s been under the plough for decades and much has washed down the creek.

How did this happen?  Technology, bigger and better equipment, government support programs, and the never ending pressure to produce food cheaply.  All these contribute to fewer farmers necessary to farm the massive number of acres to produce crops with slimmer and slimmer profit margins.  Often, the only profit is the check collected from the federal government (you, the taxpayer).  But don’t blame the producer!  It’s just our system.

For some time now, interest rates on saved income has been lower than the inflation rate, resulting in outside investors hoping to get some return on their money, whereas farmers buy land to spread out the equipment costs.  Consider that for a row cropper here, land to purchase (it’s a rarity to find) will cost upwards of $4000/acre. (a small parcel just sold in the county next to us for $8000/acre!)

Thank A Farmer Kitchen Farms wheat harvest in Missouri by Finney Aerial Photo

There are a few farms asking less than that, but most are worn out (soil loss, erosion, and fertility may take decades of proper farming/ranching to reverse or restore) and should never have been cropped in the first place (steep slope, poor production indicators, etc).  Yet, the asking price is out of reach for anyone wanting to raise livestock.  One such farm near me would take at least $400/acre up front cost to restore it to even marginal pasture.  Add that to the asking price, and already it’s over $3500/acre! (Racks & Tracks listing)

So, is land more expensive now than in the past?  Consider my property just across the road from the above listing and of similar topography.

1857 – $1.83/acre – Today’s dollars = $53.19/acre

1870 – $13.41/acre – Today’s dollars = $258.87 (this buyer lost the farm)

1872 – $3.90/acre – Today’s dollars = $80.84/acre  (appraised value was $64.67/acre)

1875 – $4.79/acre – Today’s dollars = $110.12/acre

then several surveys and set aside for Morris Chapel Church and cemetery – finally back together in 1945

1945 – $11.97/acre – today’s dollars = $168.17/acre

1949 – $26.95/acre – Today’s dollars = $286.36

1966 – $92.81/acre – today’s dollars = $724.39*

2018 – $3100/acre – today’s dollars = $3100/acre (asking price of farm across the road)

Working backwards – what would a $3000/acre farm bring in 1949?  $282.34

*1966 is when my grandparents purchased the farm, it shows, too, another reason land owners won’t sell property – basis.  Since this farm was gifted to me, the basis from 1966 remains in place.  In other words, if i sold the land for $2100/acre, capital gains tax would be paid on the difference between $92.81 and $2100.  This tax could be as much as 23.8%!  However, if i die and the land passes to my heirs, it can be appraised and establish a new basis.

Tenants compete for acres by bidding up rental fees because of their massive investment in machinery.  Absentee farmers and investors generally accept the highest rent bid (which is usually the one that will least take care of the soil) and hope the fertility and productivity outlives them, then the property will sell.

Change comes one funeral at a time.

Rather than me stumbling about putting together numbers, here’s a great article written in 2017 with sample startup costs for someone wanting to start and make a living farming.

Cheers!

tauna

HOW MUCH $ DOES IT TAKE TO BECOME A FARMER?

THIS IS WHAT IT TAKES TO GO FROM ZERO MONEY TO A FARMER.
I was talking with a couple of farmers recently, discussing the barriers to entry for new farmers. Some numbers were thrown out as to how much capital it would take for a young man or woman to get started into farming.“$1 million, $2 million, more” were amounts bandied about. This made me curious, so I decided to drill down on the actual capital requirement.

First of all, we need to decide what kind of farmer we are talking about here. For this article, I’m assuming someone with no family farm who wants to become a full-time grain farmer in Iowa, Illinois, or Indiana.

The first thing a budding farmer might do is get a degree in agriculture, since he/she would not have learned farming on the family farm. This will cost somewhere between $20,000 and $120,000, depending on where he/she goes and what scholarships are available. The average of those two numbers is $70,000, which will require student loan debt for most young people. Of course, a degree is not required, but it might come in handy for convincing banks to loan money or landlords to lease cropland.

The equipment requirement could be an extensive discussion; however, I’ll try to keep it as short as possible. One could buy all new machines, but to get started, let’s assume the acquisition of decent used equipment – about 5 to 10 years old.

The basic list would include: a combine with corn head and grain platform for $175,000; a big tractor for plowing and planting at 125K; a grain truck for 60K; a planter that runs about 75K; a grain drill for 40K; a disk at around 30K; a chisel-plow for 30K; a field cultivator at 25K; a pull-type sprayer costs 35K; a grain dryer is 30K; a utility tractor for brush-hogging/ditching/grading at 35K; a grain cart for 15K; a trailer at around 15K; an ATV for 10K; and a full complement of tools costs 15K.

The building requirement probably includes a couple of metal buildings ($200,000) and at least a few grain storage bins to hold 75,000 bushels, about $75,000. There is no hard-and-fast land requirement. However, the farmers I spoke with said that someone would need at least 500 owned acres and 1,000 leased acres to make a living.

The quality of the land certainly affects those numbers. For this article, let’s assume 150-plus corn bushel-per-acre land for about $7,500 an acre. If you bought 500 acres as a base of operations, the total land cost would be $3,750,000.

Add it all up, and we arrive at $5,157,500. Wow! That’s a big number, and it’s out of reach for most young entrepreneurs.

Because of the cost of land and equipment today, some farmers are concerned about who will be able to follow them into the industry. How will they fund the enterprise, even with family land and equipment?

Because of greater access to capital, more corporate farms are likely.

The problem is not just start-up capital but also surviving drought years and low commodity prices until they turn around. Unfortunately, even though you are already a biologist, engineer, equipment operator, accountant, carpenter, and mechanic, you have to become an expert financier, as well, to get into farming and stay there.

Written by Shawn Williamson, Certified Public Accountant (CPA) MBA in Missouri and Illinois. This article is designed to be a commentary on the amount of capital required for a row-crop farm in the Midwest. It is not meant to be a guide on how to get started in farming. 

 

Price Reduced and Offering Change

My farm in south Missouri has been recently split into two offerings to hopefully generate interest by people with different interests.

This link is to Whitetail Properties who is representing and showing the property.  This piece is 30+/- acres fenced pastures with two ponds, nice shade/timber, beautiful updated earth contact home, detached garage and one bedroom apartment.  Huge barn out back, horse arena, and round pen.  Horse property with home near Springfield, MO.

The other piece is 173 +/- acres just across a lightly used paved road and also includes an RV barn with electrical hookup, fenced, live water, several ponds, stunning views, mountain and mature timber with world class hunting opportunities.  Currently leased for cattle pasture.  Pasture/Timber

Of course, it is also available in its entirety.

Located in Christian County, Missouri

Share and reblog if you will – thanks in advance!

Cheers

tauna

Afternoon view from front door.jpg
View from the front porch of updated home.
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Farm View