farming size to be profitable?

RonR · Jul 29, 2004

Doc, I used to work at a major ag manufacturer for five years and I've spent my whole life being around farmers. A lot of the old generation flew by the seat of their pants. Get a good crop, buy a tractor and pickup. Bad crop, don't buy nothin'.

I saw very few of the older generation that would really do a cost benefit analysis; oh, some did it in there heads, but it seemed like a combination of good crop/higher prices meant they "had to have the new _______". That's where I'd see the brand new JD combine sitting next to the house, so he could cut his 400 acres of wheat when it was ready.......

The other part must be the labor thing; having a good tractor sit idle 10 hours a day while the farmer does something else just doesn't make good biz sense.

Growing up, I worked for a farmer doing general farming and custom hay work. He seldom drove a tractor! He could hire kids to do that and he'd go figure out how to make more money. The only down side to that was sometimes the kids tore stuff up, but he figured it was a cost of doing 'bizniz'.

I was offered a sweetheart deal in the early 80s--going into partnership with an uncle on his 1500 acres of wheat/cattle. He would let me use his equipment and I'd buy the new stuff as needed, he'd help some, and we'd split everthing 50/50. We were close enough he dug out 10 yrs of tax returns. Best year he netted $25K, and some of the years, he netted minus......... We loved the ideal of that lifestyle, but the money just wasn't there.

slowzuki · Jul 29, 2004

Cowboydoc, I don't want to make it sound like he's not a farmer. That is what a farmer is in New Brunswick. Even the 2000 acre potato farmers in another parts of our province find other things to do in the winter. We have 5 months of non-farmable weather.

This particular guy does not do snow removal, he had tried it when younger and found it unrewarding. I consider growing strawberries farming as well, the soil has to be prepared, planted, weeded, harvested, marketed, transported etc. Not any different than vegtable crops. Higher risk but more profitable too.

I'm trying to think of any farmers who do not do some type of logging in the winter here and can't come up with any. It is even written into our tax laws as a farm activity...

Hmmm, I'm guessing forestry isn't a huge activity in your area? Here it has to be done frequently or the fields get taken over. 5 years and the fields are growing trees as tall as a person. Farmers log their own property, loggers here log public land or privately held woodlots.

On my property, 50 years ago it was completely cleared, now only the half that were good fields remained clear. We now have 70 ft tall trees all over the rest.

cowboydoc · Jul 29, 2004

Ken,

There is alot of logging both here in Iowa and especially at home in Idaho. Logging for us is a completely different occupation though. There is so much logging in Idaho that it's a profession. On most of our land you could maybe log it every 50 years. Once it's logged that's it. It's usually cheaper just to have the pros come in and do it compared to tearing up our machinery. They don't even use tractors. It's all done with dozers and special logging equipment. Certainly not a viable source of income every year.

Sure strawberry picking is farming as well but it's more a labor intensive project and not much equipment involved. I would consider it specialty farming but yes still farming.

What I see mostly is exactly what Ron explained. Farm a thousand or two thousand acres, raise livestock and whatever else. But even at that like he said the best year his uncle had was $25k. Other years it was a loss. Personally, and this is just me, I don't call that making a living. It's no way to live and it's incredibly stressful. Don't get me wrong my hats off to those that do it but what a hard life. And I guess if the best year in 40 years you have you make $25k well I don't think that would buy too many of the lifestyles on this board for sure.

OrangeGuy · Jul 29, 2004

A farmer finally took a much needed vacation. He took his wife to Las Vegas. Won a million dollar jackpot. Asked what he was going to with the money he replied... "I'll just keep farming 'til thats gone too".

OrangeGuy

slowzuki · Jul 30, 2004

Cowboydoc, logging is certainly a proffession here too, something like 70% of our economy is forestry. Logging with tractors is pretty common in the Northeast and in Europe.

I understand even in the middle of Canada and in the west tractor logging is uncommon. Commercial loggers here use skidders, harvesters etc like everywhere else and some tractors.

What lets tractors do well is the winter. The deep snow lets you work from clean skid trails. This winter I was working the woods a bit, had a skid trail beat down that I used a lot. Was as smooth as could be and took the car up to were I was cutting even. Come spring, it all melts and I found I had been crossing a stream and a swamp, rockpiles, fallen down trees and big rocks! I could hardly walk up the trail.

Also, pulp wood here grows on 20 - 30 year cycles, using poplar (aspen) and other softwoods. Much thinning activity that the tractors are good at.

om21braz · Jul 30, 2004

Some folks here still make it on tobacco, barely though what with gov. regulations, etc. and there's not many of them left. Probably all of them have had the land, equipment passed down to them. In the eastern part of the state - some cotton, soybeans, corn, potatoes and tobacco - much larger farms there - 100 up to thousands and I'm sure some corporations. Like previously mentioned, some folks around here farm say 5-50 acres as a sideline - they do pretty well what with a regular job paying for insurance, etc.
My cousin purchased some of what was my great-grandfather's farm land and built a nursery on it as he was already in the landscaping business and does well with that.
The newest local venture is grapes - Richard Childress is building a vineyard to eventually supply his new winery. That won't be a good example though - probably does'nt matter whether he makes a profit or not for a while and most likely has plenty of help bankrolling the business.
I'd say there is no one answer to the original question though. Depends on where you are, what you have paid for (land, equipment), crop types, etc.
My hat's off to all individuals who still do it cause that's what they know and love !

Yankee · Jul 30, 2004

"some folks around here farm say 5-50 acres as a sideline - they do pretty well what with a regular job paying for insurance, etc. ... My hat's off to all individuals who still do it cause that's what they know and love ! "

I agree, and would add that a lot of people disparaged as so-called "hobby farmers" contribute a lot of goods to the system. It frosts me to have them dismissed automatically as only doing it for tax reasons. Some people have no clue how much work it takes.

slowzuki · Jul 30, 2004

I think the problem is hobby farming has connotations of doing it for fun. Our venture has a net gain so it is for income too. It can be fun but mostly it is time consuming and stressful.

The problem I have with people doing hay for "fun" is they don't charge fair market value for their product and undercut the people who actually need to make money. People think they should get good delivered horse hay for 1.50$ a bale here because one person sold 200 bales of it for that price!

I'm sure Cowboydoc can relate here.

Same as plowing driveways, just because the retired farmer or nice neighbour did it for 5$ a shot doesn't mean I need to get up at 5 am every snowstorm, maintain equipment, try to avoid damaging your property and be glad to be offered 7.50$ for 3/4hr of work.

Then listen to you complain when the dog chain left in the snow wrapped in my auger and blew a shear bolt and made me use the loader which scrapped your flowerbed.

Sorry, just venting! /forums/images/graemlins/tongue.gif

cowboydoc · Jul 30, 2004

People think they should get good delivered horse hay for 1.50$ a bale here because one person sold 200 bales of it for that price!

Yep been there and done that. That's why anymore if I have extra feed I'll buy more cows. I'd rather lose money on cows than deal with selling hay or any other work with people that don't have a clue and think everything should be cheap. That's why to me and alot of other people that farm or ranch you don't really want the headache of dealing with the smaller stuff. Not because you don't want to do the work but because of the hassle of dealing with people and unrealistic expecatations.

Egon · Jul 30, 2004

A little extra hay on hand can come in real handy next year if there is a hay crop failure.

Egon

slowrev · Jul 30, 2004

Yep, even if the hay is old it is still better than feeding them showballs.

40Kchicks · Jul 30, 2004

About 15 years ago when my friend got into raising chickens a person could make a living on two barns that held 20 thousand broilers each. His farm is only 10 acres. As cost went up and pay did not he had to increase the number of barns to four to make it. Now he is going to build barn 5 just to make it and remember he has owned the land for 15 years. Now I can tell you that 5 barns is much more work than 2 yet he makes the same or even less. In our area the growers have not had an increase in pay in 14 years. We are told if we want a raise we must lower our costs. Our processor is loosing farms left and right from bankruptcy and people just quitting because they can’t afford to pay to farm any longer. It got so bad this last winter that growers got together and requested an increase. They were turned down. This increase would have added a little over ½ cent per pound to their price but they wouldn’t do it.

I bought my 40 acres and two barns that raise 45k chickens four years ago. When I did financial research on the farm I found that the previous owner never paid over .75 per gallon for propane, most of the time the price was .50-.68. This year my price is $1.07. This is a huge problem for us since we use about 12500 gallons a year. We had a hard time last year paying .93 last year.

Back to the original question of earning a living farming. If you were going to raise chickens you would need to own at 20 acres outright, build 4 66X600 buildings (approx $1,267,200), a manure barn (approx $25,000), tractors and equipment (approx $ 50,000), autotransfer generator 100KA (approx 20,000), bulk propane tank ect, ect, and a place to live. So you would be responsible for 1,362,200 in dept not counting home and land but you would also probably net 60K a year as long as you didn’t hire any help.

Sorry this is so long.
Eric

cowboydoc · Jul 30, 2004

you would also probably net 60K a year as long as you didn’t hire any help.


And to make that $60k would you say 12-16 hour days 6-7 days a week would be about right? And out of that $60k you would have to pay health insurance and try to put a little back in retirement. And that would also be how many weeks of vacation a year? /forums/images/graemlins/grin.gif /forums/images/graemlins/wink.gif

twabscs · Jul 30, 2004

Eric, thanks for sharing those details.

Hmmm. Instead, put the money in 10-year Treasuries (4.5%) and make more while doing nothing and with zero risk!

$1,362,200 * .045 = $61,300 / year

Take on a little more risk with a basket of large cap corporate bonds (7.0%) and retire...

$1,362,200 * .070 = $95,350 / year

Of course, most don't have the money so they borrow and work for "free" in order to "build assets", but as your story shows, depreciation and increased input costs work against them.

I think that explains why it's so difficult to make a good living farming. In general you get about a 4-5% return on capital and thats AFTER you work 50-60/hours a week. (Sorry, just saw cowboydoc's post, make that 70-80 hours/week).

Kaliburz · Jul 31, 2004

What is this "vacation" you talk of? I do not know what vacation is? /forums/images/graemlins/wink.gif True farmers dont' take vacations. /forums/images/graemlins/tongue.gif

Well, skimming and reading posts, most of you are in the big acarage stuff (cattle/hay, so forth).

You are right, someone w/ 5 acres in a city can make money if "Certifided" organic. Any Joe Farmer can put an Organic sign on their stuff.... but being 'certified orgnaic' is different.

What is your definition of "profitable"? As long as you are in teh black, be it by $5.00 or $25K it is profitable. Depending how one set up their bussiness, they maybe taking a salary every month to live on.... or they just take it out. Depends. But you all know that.....

My area is orchards and vineyard, specifically apples and juice grapes. You ever buy Welch products? I grow grapes for Welch (which our copperative owns).

A while back, growing apples were very profitable. A little 30 acre plot could gross nearly 100K. Labor was cheap back then in my state, $3.00 an hour, chemicals were good (actually killed the target). But, then 60 Minutes had their story on "Alar". Some might recall that......

Chemicals changed, he 'hard' chemicals were removed from market for favor of 'soft' (so that means it cost more for something that you apply more often). Industry is also changing. Nurseries that grow apples are pumping out new varities faster and faster. They're also pushing replacing trees ever 5 years! And one tree is about $6.00 each, and sometimes you are planting 200 trees (cant' recall exactly) to the acer in the high density plantings. And the little grees need a trellis system (poles and wire), so there goes more into it.....

I run only 80 acers. Most orchards around there are 150 acres plus. Vineyards, over 80 acres. Only have 45 in grapes and about 15 in apples. The rest is in access roads and a irrigation district drain on the south side of prop. and the house/barn area.

My equipment is old. Last "new" tractor was purchased back in the 80's by my late father and uncle. (We were in row crop farming for a long long time, then that took a dive, so we got out of it- but like most farmers, we still have most of the row crop equipment) The old stuff is actually better then some of the new stuff (ie JD 2640 orchard vineyard vs the 5510N). Do I buy new equipment, from time to time....and when I say "new", it's new to me, usually used. I tried a low volume weed sprayer that allows me to spray when wind is at 10MPH.... I try to make improvements to things to try to increase productivity and cut man hours.

I also work part time off the farm. Found a job that fits.... driving school bus. Pick them up in the morning and drop them off in the afternoon. And in between, farm.

American agriculture is changing. More regulations, BS lawsuites and other stuff. I read the lables in the store, this from Mexico, that from New Zeland, organic this, organic that.

I have no debts for the farm, other then the monthy charges for fuel, parts, operating material. I don't (and hopefully won't) ever take loans out for operating capital. I've seen to many others loose everything because they take out loans to operate.... sort of like the pay day loan thing.....I say. /forums/images/graemlins/grin.gif

I think the normal consumer, born and raised in the concreat, has NO IDEA how their food gets to them. Seldom care.... as long as its in the store and is CHEAP...... (my spray is not cheap, the labor is not cheap, as it goes up w/ cost of living, I'm in WA state, min. wage this year is $7.15/hr).

ugg....I thinkI'm ranting /forums/images/graemlins/mad.gif /forums/images/graemlins/mad.gif.... I'm sorry..... /forums/images/graemlins/crazy.gif

Edit - (a late night, early morning posting....) /forums/images/graemlins/confused.gif /forums/images/graemlins/confused.gif
Tell me, why did I go to college just to farm???? /forums/images/graemlins/confused.gif /forums/images/graemlins/confused.gif /forums/images/graemlins/confused.gif /forums/images/graemlins/crazy.gif /forums/images/graemlins/crazy.gif

LOL

MMM · Jul 31, 2004

Kaliburz, did you start from scratch with the orchard? Could you give insight to tax law concerning orchards? I've seen threads about IRS cracking down on hobby farms. I'd condsider that to be a horse and 2 goats operation, but not sure where IRS draws the line. I have a fledgling 10acre, 1/2 planted orchard that I won't see profit from for 5yrs minimum(if ever). It's a $25k(so far) early "retirement" plan and worry abouy the operating at a loss for that amount of time. I don't see anything on sch F concerning this.

rlee6 · Aug 1, 2004

I owe to farmers.

40Kchicks · Aug 1, 2004

And to make that $60k would you say 12-16 hour days 6-7 days a week would be about right? 
Work on a chicken farm runs in cycles with the birds age. The first week with the birds I watch them pretty close. The second, third, and forth weeks are really easy assuming you have invested in all the latest greatest computer automation for your barns. Week five and six the chickens are big and involve much more work. When we looked into raising chickens we thought that we would work for six weeks then have a couple off. This was wrong. The real work starts when the chickens leave. We work all day and sometimes late at night to get the barns ready for the chicks, maintenance on the equipment, and almost constantly upgrading something.

This kind of farming is a 24hr job. I’m not saying I’m working all 24 hrs but often we need to be down at the barns fixing something and it doesn’t mater what time it is. Last night for instance I got up at 2:30am because the feed lines were running. I quickly found the original problem but I worked on some other problems while I was up then I came back to the house and got a half hour sleep before the alarm went off at 4:30 to get ready for my regular job.

 And out of that $60k you would have to pay health insurance and try to put a little back in retirement. 
Most chicken farmers are hoping that the equity in their farm will pay for their retirement. I don’t think many get to put much away in the form of retirement investments.

 And that would also be how many weeks of vacation a year? 
Years ago the standard time between flocks was two weeks in the summer and three weeks in the winter. Now we are getting one week in the summer and two in the winter. There has been no time for vacations in last couple of years but what make me most upset is that we are being paid the same as when we got that longer down time.

Eric

Kaliburz · Aug 1, 2004

( Kaliburz, did you start from scratch with the orchard? Could you give insight to tax law concerning orchards? I've seen threads about IRS cracking down on hobby farms. I'd condsider that to be a horse and 2 goats operation, but not sure where IRS draws the line. I have a fledgling 10acre, 1/2 planted orchard that I won't see profit from for 5yrs minimum(if ever). It's a $25k(so far) early "retirement" plan and worry abouy the operating at a loss for that amount of time. I don't see anything on sch F concerning this. )

The operation is over 35 years old (row crop first). The orchard was planted in 1969 and replanted 95-99. It was started by my father and uncle (partnership, not a coorporation). When they passed away, it went to my aunt and mother. I'm loosely called the "manager", but in all essence, I'm the 'farmer' (LOL aka slave labor LOL), as they can't do the tractor work.

Well, I'm not specific w/ the actual Tax code. All I know is what the pamflets the IRS have at the tax office during tax time. I do most of the crunching of the numbers, but then I bring the stuff over to H&R Block (their business tax office) for the end of the year stuff (partnership tax form along with the schedual F form). We have an IRS business ID number and state ID. We withhold SS, Income tax and Medacare from our employees. We fill out quarterly reports for the state Labor and Industires along with quarterly reports for the state employment security office. The above mentioned paperwork, I do. I set up a spreadsheet that helps calculate the deductions and such. We've never been hasseled by the IRS, granted, we are an old operation.

I know of other people who farm and they have 5 acres. Granted, their location allows them to sell next to a road side stand. And most if it is "cash"......

I'm not sure how big of trees (and spacings) you have or what kind of orchard. Or am I thinking of groves (in regards to nuts and oranges????) Any how, a 5 year to production would lead me to guess they are full sized trees (not a dwarf, but I could be wrong). Well, depnding on which method, cash or accurel (spelling) you use..... We do cash (hece Jan 1 to Dec 31) and then we see if we made anything. To my understanding, accurel you follow how much each crop earns/looses. If we did accurel, heck, the apples would be a loss for the last 8 years. Grapes are the only think making money to supprt the apples...

Depending what your orchard is, what is the 'average' time to profit for that kind of operation? Your local university ag extension office prob. has data on that. One of the local tax offices might also know. On a partnership and schedual F form, if there is profit, it gets divided by the number of partners and then that is added as "income". If the Sched. F shows a loss, it is noted as so on the individual income tax form. Everything is itemised and anything deductable is deducted.

I'm not sure where the IRS draws the line. I do know what you are talking about.... recall a 60 minutes or Dateline or something show talking about how a "farmer" who was a teacher constantly showed losses. And then the IRS went after him for something..... around here, I have not heard of anyone getting looked at by the IRS. I suppose if you show are trying (keep the records of expenses and such), they can't do much.

MMM · Aug 1, 2004

I had taxes done professionaly, but researched and found they weren't asking me enough questions. I was missing out on a lot of depreciation and started doing it myself. It's a real pain and takes too much time- plus peace of mind is worth something also. Now that I'm more awre of what to expect from preparer, I'm ready to try another one.
The trees are Mayhaw( ) and fruit is used in niche market jelly and wine and command good price( at present). I have grafted trees spaced at 24'x24' row with seedling root stock still to plant inbetween this fall for grafting next year(along with another 5ares of grafted). These are long lived trees and will be thinned back to 24' at crowding stage. Hopefully with spade if I can clear some more of my land by that time. If not, , they'll have done their job doubling early production.