Does anybody at this magazine have a calculator?
Craig Knapp 08/01/2010 @ 4:56pm
I've been reading Farming magazines for most of my life, or at least since I was old enough to take in interest in the pictures of all the big neat equipment, and sadly took some the the advice of the "experts" the magazine featured in numerous articles. But this article in the proverbial "Straw" that begged for some realism, instead of the pie in the sky attitude could get a lot of young producers into trouble.
The quote: "Buy land, then machinery. you can always get someone to do your spraying" is an example of absolutely stupid advice in this article. A simple pull-type sprayer is exactly what a young farmer needs. Compared to the cost, and many times the quality of custom spraying. I bought my sprayer for $15,000 fifteen years ago and have sprayed 3000 acres a year with it. At $5 an acre custom spraying would have cost me $15,000 a year. Hence the title of my article: Does anyone there have a calculator?
Secondly, The entire premise of "Land First" doesn't stand up to any financial scrutiny whatsoever. Taking into consideration the current prices of land, a 20% down payment(and where is the young farmer going to get that cash?) and a 15 year note with 5% interest, a purchase of land will be a negative cash flow situation. Which means that your yearly payment will be more than the net revenue you'll receive off of the land. In my area, for a 160 acres, non-irrigated will run about $55,000 a year, with net income off that same 160 acres at about $40,000 a year. Huh, does add up does it. Which means that you'd need to be renting at least 2 acres for every acre you which to purchase above and beyond the minimum about of acres to cover machinery depreciation, living expenses and growth in equity and cash. No mention of any of this in this article which belongs in Town & Country Magazine, and not in an industry magazine.
This business model will end in disaster, with the young farmer struggling for the next 20 years to simply make the payments on an overpriced piece of property. They'd better hope for hyper-inflation to bail them out(which could happen) and then they'd think that they where geniuses. But lets not confuse an intelligent business model with luck.
Re: Re: Does anybody at this magazine have a calculato
Morgan mcneal 09/13/2010 @ 3:04pm
I have to disagree with some of what you said. Your assuming that the young farmer is no-till, thats not always the case. If you are only farming 160 acres and you have no equipment then a sprayer is not going to be your primary concern to begin with. Most of these young guys have no equipment, they need to focus in on getting primary equipment first. Tractor with enough horsepower to do the job, disk, drill, if they are in livestock business, then pens good fences, loader, feeding equipment come first. Spraying and harvesting are secondary items just for the fact it is relativly easy to find someone to do it, where as getting field work done by custom work is not,. It dosent do you any good if you cant spray the ground but not drill it. Should a sprayer be a focus for the future, yes it should be. But you also run into problems with pull type sprayers because you will be running over alot of crop with your tractor when doing post emergence spraying, these guys cant afford a different tractor that is set up on row spaceing just to pull a sprayer, again thats another thing on down the road. As far as land before sprayer, if the opportunity comes up to purchase more land, then go for the land and put off the sprayer. You cant live on 160 acres of ground forever eventually you have to build upon that. Im not sure why you are figureing only 15 year loan notes. I would figure closer to 20 or 25 years, there is no sense for a young farmer to do shorter term notes at the start, Expecially now when money is pretty cheap as far as interest goes, if possible lock in that interest rate for a longer period of time. You can always go back and refinance to a shorter loan or if the cash becomes available make double payments and reduce the loan time by half. And since you didnt specify what your local land prices are its hard to actually calculate what your saying. As far as im concerned you made numbers up out of the air,. Here land is going for around 800 acre for farmground so for 160 acres that is around 128000. Now if they purchased their first 160 acres with the FSA program they can use that program for ten years, after that they are not considered a starter farmer anymore. But with that program you can make a down payment of 6400$ or 5%, surely they would have that sitting around, otherwise they need to rethink what they are doing. If they can get a 20 year which is common with FSA that would be payments around 9630.12 and thats with 5% interest which FSA is actually lower then that at this time. on 160 acres of decent farmground which at 800 an acre you can get that in my area you could drill wheat on that 160 for around 11,500 dollars or a cost of roughly 71$ an acre. if the price is at 4.14 which is what FSA has for their numbers this year and it makes a low yeild of 35 bushels to the acre, that would be an income of around 23000, with a Profit of 11500, which is enough to make the payments with room to spare.
Even though, in most cases you cant make land pay for itself, perhaps with the best ground and perfect years for 20 years you can, but usually thats not the case. Hopefully in these cases these guys can farm the 160 acres and get a few decent pieces of machinery paid off, and cant start makeing a profit that can be put away in the bank. They can use that money to make a decent sized down payment. Also with the contacts that they are makeing through this program, i would think they should be able to pick of rental ground that would help them achieve this.
But going back to the sprayer, if you have a reliable sprayer that is available when you need him that i would stick with him for a few years untill you have gotten some of your other primary debt payed off before going out to look for a sprayer. Now if this is not your situation and perhaps this was the case for you then relook your options perhaps there is another custom sprayer that can do a better job.
My final thought, dont get all your advice from the same basket, just because a magazine or farmer told you to do something one way because it worked for them dosent mean its going to fit your operation, this is what it sounds like the poster im responding to did. Get information from different sources, analyze that information, look at your individual needs and wants and see if it ties into what you are trying to accomplish.
Re: Re: Does anybody at this magazine have a calculato
Gil Gullickson 08/26/2010 @ 10:57am
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