Tag Archives: row crop

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. 

 

Regenerative Farming

One of the best educational conferences, Missouri Livestock Symposium, in the state of Missouri, with an outstanding lineup of speakers every year is free to attend and a free lunch sweetens the pot.  But all that aside, it is an excellent opportunity for farmers/ranchers/beekeepers/horse owners/stock dog enthusiasts to learn, not only from ‘experts’ but mostly from each other.  Like most industry, farmers learning and networking with other farmers often results in more improvement.

Of the many takeaways from the symposium was a brochure that hubby, Allen, picked up from the ATTRA-NCAT booth on “Building Healthy Pasture Soils.”  While the bullet points they make have been known for millennia, it doesn’t hurt to revisit them to see if a return to the old ways will be profitable and regenerative for today’s farming.   The answer is already a resounding ‘yes’ for the hand’s on land owner, but is debatable (short term anyway) for the renter or absentee land owner.  As my son’s fiance pointed out, it takes at least 4 years of regenerative farming practices to turn that soil health around.  Renters will not want to invest in a long term fertility strategy; absentee landowners are typically only interested in immediate returns in the form of annual cash rent.

Excerpt from article:

Strategies for Building Healthy Soils
Let’s consider the agricultural practices that help build healthy soil. In essence, we want to increase aggregation, contribute soil organic matter, increase biodiversity, buffer soil temperature, and minimize soil compaction and disturbance. Sounds like a lot, right?

Well, not really, if we break them down into six basic principles. Let’s take a quick look at the principles that will define our soil management practices:

  1. Minimizing tillage preserves soil structure, encourages aggregation, and keeps soil carbon in the soil profile where it belongs. Tillage brings a flush of oxygen into the soil that spurs microbes into a feeding frenzy on carbon molecules, resulting in CO2 release. We reduce tillage through the use of perennial pasture and minimum or no-till of cover crops.
  2. Maintaining living roots in the soil for as much of the year as possible feeds soil microorganisms all year.
  3. Also, by maintaining living roots and leaving grazing residual, we are covering the soil all year, forming an “armor” to protect it from loss of moisture and nutrients.
  4. Maintaining species diversity is achieved with cover crop mixes and the use of diverse perennial-pasture mixes. Try to incorporate warm- season and cool-season plants, both grasses and broadleaf plants, in the same fields.
  5. Managing grazing is accomplished by planning for an appropriate grazing-recovery period on your paddocks, keeping in mind that plants need various recovery periods depending on the species, the time of year, and the soil moisture content. Overgrazing (not allowing adequate recovery) reduces root mass, photosynthesis, and the amount of carbon sequestered into the soil, decreasing soil life. Proper grazing builds soil.
  6. Finally, utilizing animal impact and grazing impact provides nutrient cycling in pastures, and contributes to soil organic matter. Additionally, the grazing action on forage plants encourages root growth and root exudation of plant sugars that feed soil microorganisms.

For livestock producers, this boils down to a combination of perennial pasture, cover crops in rotation on annual fields, and good grazing management. These simple concepts are described by ranchers Allen Williams, Gabe Brown, and Neil Dennis in a short video on how grazing management and cover crops can regenerate soils. View the video Soil Carbon Cowboys to get their take on soil health practices.

Managing means planning AND implementing.  All the planning in the world will not enact change or improvement; action and motivation drives profitability and regeneration.  If you are not motivated, not able to get things done in a timely manner, then get someone to come alongside you and map out a plan – yet YOU are the one to ‘git ‘er done.  Too many times, i see people with excellent plans stymied by their inability to get out of the chair and off the paper – i call that analysis paralysis.  Don’t be a victim!

Cheers and happy farming!

tauna