I can't afford trump

[Canuck_2]

deasmatt; you remaking the assumption most farmers are business people.

Few are. Witness the record of investments they make in machinery as well as land.

They think they have cash so they spend it without looking at return on investment.

Many are lucky and are able to work hard enough to make the payments and then inflation comes along to give them a nice retirement 

Those who can not keep up with the cash flow to make the payments find a job at the Co-Op or driving truck somewhere and if they are lucky they are able to hang on to the base land.

Few can tell you their actual cost of production especially if they have to figure in actual machinery cost including return on investment.

[deasmatt90]

I was one of those with another job for awhile. It's almost impossible to start any business and cashflow in the beginning. It's. It like it was two and three generations ago. Most Everything is priced out of reach for someone starting off with nothing in any sector. However once that self sustaining cashflow is built, its would seem wise to I guess a way of putting it hedge outside of the main sector your invested in. Shouldn't the main goal once you get to that point would be preservation of capital? Thoughts?

[ihmarty543282]

We`s big bad people..flying by the seat of our pants...Not a clue as to handle the added zeros as we grow.......willy/nilly, if you will........Canuck, your ego seems to be larger than the universe.....

[deasmatt90]

I'm not saying a wouldn't have done the same thing if I was row cropping in 2011 probably would have at that time. I've just seen the effects of others that did during the last boom. I did the same during the last real estate boom with houses however very cautiously and was able to survive and put a little money in my pocket. I realize now, that even though I was cautious it could have been bad. Maybe it's something for us all to think about. And when the next bust does happen then be ready to scoop up cheap land and equipment.

[deasmatt90]

And I also disagree with the statement that farmers are not good businessmen. For those who have been able to stay afloat during these times are great businessmen with the dimished profit margins. However the farmer has a disadvantage as any other proprietor does when put up against a publicly traded corporation. The proprietor has to actually pay back the principal of money he has borrowed from banks. The publicly traded company sells stock collects liquidity for its asset and never has to pay it back. That's why Walmart put the small merchant out of business they didnt have to operate by the same set of rules as the proprietor they could break even year after year. even Sam Walton starting out before Walmart went public, his solution to debt was take on more debt, open more stores and increase cashflow. He only went public when his debt load exceeded proprietorship ability to handle the amount of debt owed. If Walmart hadn't went public they would have wound up like a lot of farmers that's out of business, but once they went public they never had to pay back principal. The owners became employees who deciddd their salarys and bonuses and still kept control of the company.

[deasmatt90]

I'm not saying I would want to go public lol but I would like to be in the position that if my farming operation saw times of break even it would not be a burden. The only way I see that happening is diversification outside of the agriculture sector. I want to see a time when I can say no I'm not growing anything this year because of prices when y'all get hungry give me a call. Right now I have to pick the best crop according to potential cashflow none good. I want to be able to sit out of everything without worry, but who doesn't. And maybe there are some who can position themselves that way with the next market cycle😀 That's my goal. I want to be in the position to make a little from a lot of things, not a lot from one thing.

[deasmatt90]

I want to predetermine my risk in business ventures the way a successful stock trader predetermines his risks in stocks thereby most importantly preserving my capital so when I lose I'm not out of the game just moving on to the next hand. Thoughts?

[BA Deere]

Well farming is a strange "business".  A pure businessman would lease land and lease machinery and get volume …..however, in many cases land rents for MORE than any profit can be obtained, some rent it at a loss to just control the acres...no rhyme or reason.  If 90% of your business competitors are of that mind set, you can throw out any graduate degree in business that you might have

Then machinery, a construction contractor might run a 1960 D-9 Caterpillar and think nothing of it and plan on using it until he retires, putting 10s of thousand hours on it and overhauling numerous more times.  But a farmer "Oh my combine has 500 hrs I better trade that sucker off!   My pickup is 2 yrs old, I gotta trade before it starts falling apart!   My tractor comes of warranty next yr, I gotta trade that!"    It makes no rhyme or reason, throw away machinery, they put 300 hrs on a combine in the month of November and think of trading for a different $600,000 machine every year or every other year. 

But if you have shiny new machinery, that says you`re successful and potential landlords slobber over themselves to rent to you, so there is a little method to the madness. 

But buying $10,000 land, there`s pride and ego of course.  Justification is "They ain`t making anymore of it, as long as I own it, I get to farm it without kissing landlord`s butts, land is a good investment it`s my nest egg" .  On and on with emotional reasons, but they have a 100 year track record of being ahead doing it as opposed to making logic based business decisions, so who am I to argue?   🙂

[deasmatt90]

Ba Deere I agree it's an ego decision not a business decision, and your right about the landlords too. They will go with the one that paints the prettier picture of success true or not.and I guess it's like cash flowing a new business they are all losers at first. Interesting take. Thanks!