How do farmers make any money?

[hayden]

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?

 

[oldnslo]

The bigger farms are amortizing equipment over more acres so cost per acre for equipment is lower. With out storage or grain bins you are either selling straight out of the field or paying someone else to store your grain.

Around here costs are around $700 - $800 per acre for corn which includes fertilizer, seed, fuel, and normal harvest costs. Get a bad fall where fighting mud, high moisture corn those costs can increase significantly due to added fuel, more break downs, drying cost, etc.

Farmers are the biggest gamblers in the world. You spend thousands of dollars planting a crop hoping that weather will cooperate so you get a crop and that prices for that crop will net you enough to gamble again next year.

 

[hayden]

The bigger farms are amortizing equipment over more acres so cost per acre for equipment is lower. With out storage or grain bins you are either selling straight out of the field or paying someone else to store your grain.

For certain. This is why I asked how many acres.

Around here costs are around $700 - $800 per acre for corn which includes fertilizer, seed, fuel, and normal harvest costs. Get a bad fall where fighting mud, high moisture corn those costs can increase significantly due to added fuel, more break downs, drying cost, etc.

OK, but it sounds like that doesn't include the cost of equipment?

And what is the market value of that crop?

Farmers are the biggest gamblers in the world. You spend thousands of dollars planting a crop hoping that weather will cooperate so you get a crop and that prices for that crop will net you enough to gamble again next year.

Yes, I agree. I'm equally astonished at the value of the equipment that they must be financing.

 

[big bubba]

maybe wait a year for a more accurate answer to your important & relevant question to see the effect of across the board tariffs & federal spending cuts. overall, i agree & sympathize with your complex question, regards

 

[part-time-Farmer-NC]

As with any business you have to juggle taxes along with other operating costs. Uncle Sam gonna get his part no matter what. Many businesses would rather buy more tractor than they need to offset paying that or similar amount income taxes. Then after its amortized they can sell it and get a little back.

Also Farmers around here use to be able to take out low interest loans to purchase more land for farming. The land of course only goes up in value. BUT.. when they sell land that ole piper is hanging around the corner for his more than fair share (capital gains).

And of course they do (at least in nc) get a tax break on the land (called deferrment) if they mee the requirements.

Most have told me there ain't no money in farming. MY neighbors are up before dawn and work past sunset during March-November. So their hourly rate must not look too great. ??

 

[MapleLeafFarmer]

I have been in agriculture all my life. Without Government / taxpayer support our industry would look much much different. We are thankful for all the support.

Farm Programs: USDA Financial Assistance to Agricultural Producers for Fiscal Years 2019–2023 GAO-25-107174 Published: Dec 17, 2024.​

The U.S. Department of Agriculture (USDA) provided $161 billion in financial assistance to agricultural producers from fiscal years (FY) 2019 through 2023, the last year for which data were available.
Texas, North Dakota, and Iowa, in that order, received the most assistance.

Government Accountability Office (GAO) an independent, non-partisan agency that works for Congress.

Canada is about similar.

 

[ArlyA]

My family members own lots of storage and do contract sales. That means they plant, grown and harvest to major company for a contract price. They do part of there acres that way so as to guaranteed a modest income while the other things they grow can be more a risk. It is big business and everything there is big, yet it is family owned operation. Here is the harvesting crew. We do have a thread here called "how Ag works"

 

[hayden]

As with any business you have to juggle taxes along with other operating costs. Uncle Sam gonna get his part no matter what. Many businesses would rather buy more tractor than they need to offset paying that or similar amount income taxes. Then after its amortized they can sell it and get a little back.

It's sounding like people don't understand that if you spend $100k on a tractor and deduct it, you aren't saving or getting back or saving $100k in taxes. You are only saving the taxes you would have paid on that $100k of income. The less you are making, the lower your tax bracket and the less savings. The higher the tax bracket, to more you save. Realistically the savings is in the $0.15 to $0.30 per dollar. And of course if you aren't making a net profit from the farm, your savings will be zero.

Also Farmers around here use to be able to take out low interest loans to purchase more land for farming. The land of course only goes up in value. BUT.. when they sell land that ole piper is hanging around the corner for his more than fair share (capital gains).

Ah, I forgot the mortgage on the land, so that adds more to the per-acre cost.

And of course they do (at least in nc) get a tax break on the land (called deferrment) if they mee the requirements.

That's a break on the realestate taxes, right? That seems pretty common and helps, but it's yet another cost per acre.

Most have told me there ain't no money in farming. MY neighbors are up before dawn and work past sunset during March-November. So their hourly rate must not look too great. ??

 

[Jstpssng]

When it comes to crop failure, many farmers buy insurance.

 

[oldnslo]

Farmers are the only business that I know of that buys everything at retail and sells his crops at wholesale prices dictated by some pencil pushers that guesstimates crop production and fluctuate prices accordingly.