How do farmers make any money?

[Hay Dude]

When someone asks me “hows the money in farming”?
My answer is “Like soup through a fork”

I took a “bottom line” approach to it. When I started for real about 20 years ago, I was given the opportunity to mow fields. I had 2 tractors and just dragged mowers behind them and did a lot of light land clearing, too.

Then I got the idea that rather than a couple rotary mowings, which seemed like I was cutting viable hay and leaving it, why not bale it instead? Most of my land owners were happy to get rid of the field mowing costs.

I crunched the numbers. I bought mostly relics and junk and started. Then it just grew larger and I was able to afford a step up from junk.

I just took on an additional 170 acres in the last 2 years. It keeps on growing. One thing I will never do is pay rent for hay. I did one time and it’s just a waste of my money

Maybe someday I’ll own a Fendt

 

[ConawayFarms]

From what I've gathered, a lot of these farms are running on pretty tight margins and rely heavily on government subsidies and crop insurance to stay afloat. They also often specialize in a few key crops and use economies of scale to make it work. It's a tough business, and you're right, the equipment and input costs are insane.

 

[Hay Dude]

It’s nothing now to spend $5,000 on just fixing a few things on a decent size Ag tractor. Heck it’s $1,000 just to drain & refill a CVT transmission and replace the filters.

 

[Lineman North Florida]

Why does it matter who owns the farm?

It doesn't matter to me, but doctors and lawyers don't need a government payment to make their farm survive until next year, but a small farmer/farm family might, doctors and lawyers do pretty good at doctoring and lawyering. Point is when yearly government payouts reach the level that doctors and lawyers want in something is wrong and usually a little corruption and if left un-checked will ruin it for the real American farmers ( the ones who are actually sitting in the tractor seats ).

 

[Hay Dude]

It doesn't matter to me, but doctors and lawyers don't need a government payment to make their farm survive until next year, but a small farmer/farm family might, doctors and lawyers do pretty good at doctoring and lawyering. Point is when yearly government payouts reach the level that doctors and lawyers want in something is wrong and usually a little corruption and if left un-checked will ruin it for the real American farmers ( the ones who are actually sitting in the tractor seats ).

I sold a farm tractor to a doctor about 5 years ago. He said he was “vineyard farming” down in Galena, MD.

In other words, he is growing grapes to make his own wine and receiving monstrous tax breaks to do it.

 

[mikester]

Can anyone help me understand how this works?

There's three routes in general:
1. You inherit thousands of acres and a running farm business and equipment and enjoy being a business owner
2. You earn too much income from another source and enjoy the farming and losses to offset your taxes payable
3. You won the lottery, spend all your cash on equipment and land, now you can keep farming until it's all gone.

 

[Hay Dude]

There's three routes in general:
1. You inherit thousands of acres and a running farm business and equipment and enjoy being a business owner
2. You earn too much income from another source and enjoy the farming and losses to offset your taxes payable
3. You won the lottery, spend all your cash on equipment and land, now you can keep farming until it's all gone.

Don’t be so negative. Especially when you don’t farm.

4. You use your own money, take your own risk, and get zero handouts and still do ok farming.

It’s not just your #1,2 & 3.

Some people DO know how to manage a profitable farming business without being given a dime. Ask me how. Been doing it a long time, too. Was given nothing.

 

[chim]

One larger farming operation here thrives by knowing how to play the game and take advantage of any available programs and political connections. When they need to color outside the lines, they have friends in positions who can accommodate them.

 

[masseyrider]

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

I can only speak for Kanuckistan. Have you seen the cost of the insurance?
And their reluctance to pay if you need it.
You have to prove beyond a shadow of a doubt you did everything possible to salvage even a small part of the crop.
They deduct everything possible from your payment.
My parents never carried crop insurance. Pa figured if you saved the insurance cost every 6-7 years you saved the value of an entire crop.
About 35 year ago we were hit with a massive hail storm. It took the bark off young trees. We still had more than half our peach on the trees. Total write off.
The neighbour after all was said and done didn't even get the cost of the insurance back.

It's like when the government announces payments to farmers. City people think farmers are cashing in on their tax dollars.
Just before I retired from farming 20 years ago we had an issue with Plum Pox. It's a viral desease that affects the quality of stone fruit and slowly kills the tree.
Farmers recieved payment for pulling the existing trees, replacing them and helping them survive for the 4-5 years before they had a crop again.
I received a significant payment, yes.
Government doesn't announce publicly that it's taxable income.
The one time payment put me and all my other farm income into the 35% tax rate. They got back more than 50% of their money back.
If I had depended on farming income totally I would have been on welfare.

 

[lman]

For farming to be successful, the operation needs to continually grow by consuming the less efficient operations. My sister's family started out with a small dairy operation in northern WI that has grown to about 1500 milk cows. My brother in law told me that their financial planner advised them that they should double their operation every 10 years. I believe that was about 20 years ago when they were still trying to grow the operation for all of the family.
The farmer that farms the 150 acre field across the road told me that he's farming 4600 acres of corn and beans. I know another guy that farms about 700 acres and he told me that his semi truck has been draining their bank account, about $20,000 in the last year. He said that hurt but he's got to get his grain to the elevator.