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Honored Advisor

Rich Farmer Poor Farmer

Robert Kiyosaki wrote the Rich Dad Poor Dad book over 20yrs ago,  I`ve tried drawing parallels to farming.  But farming marches to it`s own drummer, commodities crashed in half , yet land (the yard stick) climbs higher, used machinery held it`s value.  I mean a +35yr old 4440 bringing $30,000, that`s strong.  

One BTO gets in trouble and the land doesn`t go begging for a tenant, the leases of thousands of acres are exchanged like a pack of cigarettes in a prison yard by another BTO.   There hasn`t been the "buying opportunity" that other industries have had, in other words agriculture hasn`t had the 2008 "Big Short" moment yet, similar to the housing crash.  

I`d love to pick Kiyosaki`s mind on agriculture, farmers as a whole have seemed to defy gravity and been able to "spend themselves rich" even in the face of much lower net farm income.  Agriculture has had an infusion of cash along the way somewhere that did not come from the selling of $3 corn.  From what I`ve observed is if a brother becomes wealthy in say a chemical business, he buys farmland as an investment  (at whatever price to get it bought) and the farm brother operates it.   The "nose to the grindstone" days are gone and just as there`s no properties available in Tuscany, there are no poor farmers.

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Veteran Advisor

Re: Rich Farmer Poor Farmer

A lot depends on whether a person is "farming with money", or "farming for money".  In other words, agriculture may be (is) a good place to park your dollars for the long term, yet the returns are such that borrowing one's way rich does not work.  ROI less than interest rates does not work.  but if you can get to where you pay the interest to yourself, it's good.

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Honored Advisor

Re: Rich Farmer Poor Farmer

Hey Clayton, my stint in spending myself richer (just sticking big toe in pool) left me with payments that had to be made with after tax dollars in paying for $7 corn sins using $3 corn to make those payments.  My education cost me a big toe, I could`ve dove in head first and it`d be my sale bill hanging up on the elevator wall. 

Farming will financially take care of itself, you just have to make other employment arrangements for your grocery bill.  It`s a big hobby like collecting classic cars or sailboats.

Seems like those that got in on the ground floor of manure application made all kinds of farm buying money.  But now the bloom is off the rose and those farms bought by pumping manure for 1¢/gallon now better have windmills each paying $20,000 in income to keep the freight train rolling.

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Advisor

Re: Rich Farmer Poor Farmer

BA, changes are going on in farming....thinly capitalized operations are selling land, being sold out completely (aka "retirement auctions" where the bank is actually retiring the guy), etc.

Had a 1000 plus auction go soft here....rumor was that it was a bank sale....best pieces went for about $6400, poorest for $4100...ouch. Wasn't 95 cpi land, but close...high 80's on most.

Its not the $10,000 per acre market anymore, and probably has a ways to go down yet. Still a few operations that banked their $8 corn and have yet to bite, and this will support prices for another year maybe.

And the "Trump Dollars" probably have saved half the operations from seeing a lot of red ink...huge cash infusions....how long will that continue?

I know I spent all of mine, and didn't bank any and still could have used better prices or higher yields.

The best scenario seems to be over insured and have hail, but it's pretty hard to start a hailstorm. That's the old joke where the guy that burned up his worn out combine to collect the insurance is talking to another guy that got hailed out and asks him....wow...that sounds like a really good way to make money farming...how on earth do you start a hailstorm, anyways?

 

 

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Honored Advisor

Re: Rich Farmer Poor Farmer

Hey RSBS,  there`s a small time 10,000 acre BTO that bought 300 acres and rented more ground, without batting a eye, this is pretty much from his farm income, wife stays at home and they have small seed dealership.  He is kind of "self made" came out of Iowa State chuck full of ideas in mid 70`s, lived in a trailerhouse on his dad`s place. 

He had a some what shooting fish in a barrel opportunity in the late 70`s still many guys farming a 80 or quarter and he`d combine for them, then "I might as we chisel it for you too" well after 2,3 years that the small farmer said "You`re doing most of my work, I might as well rent it to you" that was the start of an empire.  He lost his first 100 acre farm in "the farm crisis" but with salesman skills that could sell ice to a Eskimo he renegotiated the contract at a lower price and I`m sure debt write offs at the bank and low interest too.  He was going along under the radar and about 10yrs ago I looked at the new platbook...."Holy crap Batman!  he magically owned 1600 acres out of the blue" now with recent acquisitions he`s well over 2000 owned acres.   Nox would hate the guy, his wife is a prom queen  Smiley Happy 

But now everything is on autopilot, he goes south in the winter and spends the summer at the lake with kids handling things.  I don`t know how buying that amount of acres is possible since the bank only borrows a max of $3,000 and even if you run that gauntlet you still have to make payments with after tax dollars and add to that farmers are going broke at today`s prices.  I`m guessing he has owner financing with a balloon payment 20yrs down the road, only paying interest and modest principle payment?  rolling the dice that in 20yrs that $10,000 land will be $50,000 and "9 billion people to feed yada yada" .  

But there seems to be a glut of 65yr old farmers that successfully navigated the 80s farm crisis and have basically "spent themselves rich" over the last 30 years.  I`m just saying if any of them ever write a book, i will pre-order a autographed copy, cuz I don`t know how they do it.

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