How do farmers make any money?

[ArlyA]

I have family members who do square miles of acreages and do not buy crop insurance and see no government subsidies. I asked him about crop insurance once and his answer was "it cost about the same as the profit we'd see if its an average yield, so why buy it?"

 

[Stuart122]

We just lease the land now, and take our cut as the landowner. But, when we did actively farm it, we didn't get subsidies, and we didn't buy crop insurance. We have a 1000 acres, but the farmer that leases our row crop land farms 5000 acres. The family that handles our 200 acres of Almonds farms a couple thousand acres of Almonds. Similar numbers for the guy doing the Olives. So they own and lease enough land to make enough, and they do pretty well. No mortgages. Buy it for cash, 1031 it, lease it, or inherit it. Don't borrow against the land, ever, that way a couple bad years might leave you broke, but not out of business.

 

[Green Acres Homestead]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

This topic you started was very interesting and had some great responses. I’m just a hobby farm so have nothing valuable to contribute to the conversation other than to say this was interesting and the replies were great and informative.

 

[ultrarunner]

Please tell me how works.?

The plan might require being large enough to spread the costs over enough acres so revenue is enough so that everyone gets paid…

The incremental costs typically diminish with volume.

 

[ultrarunner]

That's why i repair and maintain all my own equipment, all it cost me is for parts and oil and filters. I farm nothing out.
It's for me the only way to keep farming by cutting out the insane repair labour costs.

The big guys may lease everything having enough volume to make leading viable.

In theory, no repair costs and less down time and less sunk cost tied up in equipment.

My grandfather thought the world of the co-op as mechanization came to the family farm… things he could not afford to buy were still attainable to use through the co-op.

 

[LHF2019]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

You mention meat. Think about dairy. Just take what you pay per gallon of milk. The dairy farmers just get cents of that milk you bought. I think class III milk is around $20 per hundred weight currently. When I quit in the early 2000’s it was around $8. But probably cost $13 to make that 100 weight. Imagine the uproar if your food doubled just so the farmer could get a little more. We can’t have that though.

 

[ultrarunner]

M

Sold the 20 beef cows and related equipment 25 years ago; tired of maybe breaking even in a good year. I was out for a year when a friend asked if I wanted to partner in an established Christmas Tree farm. After 2 years I sold my half to my partner (good partners are hard to find) then grew trees on my home acreage; still at it. I'm never going to get rich doing this but the venture is profitable most years.
Before you jump into Christmas Trees realize that it takes about 8 years before you have your first tree ready, then all you have to do is develop a customer base for your product. That takes time. For the first 8 years you are bleeding money on equipment, seedlings, chemicals, property taxes and on and on. I work on the trees part time 10 months of the year, and have very good employees that return every Christmas season, probably because I pay them exorbitantly. I lost one employee (died), another has been with me for 25 years, others are newer as business grows and more help is needed.
Trees are a lot easier and less time consuming than livestock

Brother bought what remained of a 65 acre Christmas Tree Farm with no intentions of going into the business… Land had been in the pioneer family since 1850’s and brother and his family fell in love with it.

Folks would drive by and ask if they would be open this year with many buying for decades…

A quick survey said let’s give it a go… and it did ok with the u-cuts and my brother said maybe it’s viable given it was well known as the place to go.

Now they grow on 95 acres split between California and Oregon selling 3300 trees annually in California.

The alternative is buying a netted tree in the Home Depot parking lot and most folks will make an afternoon with 3 generations coming out for the perfect tree at the farm and there are a lot of hardworking high school and JC kids on the payroll that come back year after year…

 

[Hay Dude]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

The price at the store includes the middleman’s markup. What you see selling for $10/lb retail may have been bought for $5/lb wholesale.
But I get what you’re saying.

I started out selling small bales wholesale to a guy and he would sell them for 2.5X what he paid me. I said hell with that and sold them for retail myself. I learned that doing that extra work was harder than I thought.

This topic you started was very interesting and had some great responses. I’m just a hobby farm so have nothing valuable to contribute to the conversation other than to say this was interesting and the replies were great and informative.

 

[oldbones]

I'm not a farmer, never have been, and never will be. But I'm fascinated by youtube videos of farm operations, in particular larger operation, and I can't help but wonder how they are able to survive. Maybe the answer is they aren't surviving? On the surface it looks to me like the people making money are John Deere (and others), Monsanto, and ADM. I see massive investments in equipment, and very expensive equipment at that. Multiple row crop tractors, all sorts of planters and other implements that I expect are very expensive, combines and all the different heads, specialized carts for mixing or hauling product, huge bins with auger systems to load and unload them, several tractor trailer trucks with specialized trailers, etc. Oh, and huge storage and workshop buildings, Denali trucks for everyone, few side by sides, and one or two tele-handlers. Probably a couple of skid steers too.

Can anyone help me understand how this works? What does it cost in equipment payments and operating costs plus seed, fertilizing, weed control, and proprietary seeds? How many acres typically get planted? Then what are the harvest costs, gathering, storage, and ultimate transport to a buyer? How does this break down per acre, and what is the final crop value per acre?

Pretty sure this will draw some fire, but so be it. I'm a crop farmer, corn and soybeans. Used to raise hogs from feeder to market.
There is good money made farming, and has been for at least the last 10 years. Before that it was still profitable, just not as much as now. That's why land is in demand and the price stays high. Crop insurance will take a lot of the gamble out of it. Sure, if you have new equipment and more than you need, you're going to have trouble staying afloat. If someone is actually having trouble, there is a reason for that, but it won't be made public here.
Don't use YouTube for a barometer of the farm economy. Those guys need views to keep their money coming in their account, and nothing draws views like a doom and gloom story. Like I said, if it was as bad as you're hearing, land would be cheap, but right now every land sale is a bidding war, and it's farmers bidding against each other with stupid-high bids.
It's no different than any other business, and you have to run it like a business, and be smart about it. Period.
But livestock guys earn every penny they make. But, again, if there wasn't money in it, they wouldn't be doing it.

 

[Fixastuff]

We got some real romantics here thinking all these people are farming just to break even or lose money. lol.

I know many farmers and rent land to one I have know my whole life. They specialize in farming and talking about being broke, while buying more land, houses to rent out and send kids to private school each year. (this is just southern va don’t have a clue about other areas)