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Honored Advisor
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Registered: ‎01-10-2012
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Re: Optimism takes a dive

I'm at a slight loss to fully understand your second paragraph.

 

A self sustaining farming entity does not always require debt sustained growth.

 

Any business entity is no better than the person/people in charge. 

 

Very few survive the third generation.

Honored Advisor
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Registered: ‎07-18-2011
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Re: Optimism takes a dive

I'm at a slight loss to fully understand your second paragraph.   And I might have a difficult time explaining it.  But my perspective is that a business should not have an end game--that does not mean an end will not come..  The decisions should be based on adapting and changing rather than surviving profitless conditions by depleting asset values until profit returns..... 

 

A self sustaining farming entity does not always require debt sustained growth.  Right, especially after years of growth.... and one has to recognize the hidden cost of borrowing when buying over priced assets....(the result of government guaranteeing low interest through bad fiscal policy).  With low interest comes inflation to what the market will bear.

But when purchasing assets as in another 80 acres.  If the cost is what it is, then using cheap money at say 3%, makes more sense that selling an asset that returns 5+%...  Government policy has made using some debt a good choice in wise choices.... Not borrowing may cost more.  

reminds me of this....... there can be no sacred cows...... an asset that is too expensive to provide return should be avoided....... Land included....  That is what I meant earlier..... One should never buy or value his land at a level that is not returning a competitive RoReturn.  Even if self farmed...   I think there are farms out there that could rent out their land and be a walmart greeter and make more money.   I just have never been comfortable with just surviving.... We are either improving or falling behind... and if the latter, changes are in order.

 

Any business entity is no better than the person/people in charge. A great statement and the basis for another personal belief--- I totally disagree with the family farm concept, it is immigrant status and very 1920's and 1930's....  It is a business, or a pastime.  But not a family heirloom.  Every business manager or "head" should spend some years grooming a successor that can handle it or change it to an updated position which includes the disposal of the business if that is the best move at some point in the future.

 

Very few survive the third generation.  Noted above, but I'd like to add two things....

1.  Generational changes are too limited if they are tied to only relatives with the same mental framework.  Times change and every business should as well.  It is a business and should not be considered a "burden" or a "Gift" or something that is owned beyond the grave........ Every business should change enough for each manager to see something that is uniquely his in a short time.  

2  And more important...... I responded to the survival as success comment for this reason as well......

We blame everybody else for not having young couples who want to be farmers and learn from an existing farmer, but at the same time when it takes two or three generations to put together enough assets to provide a retirement that is comparible with that of a city or county employee, gas company retiree, or any other potential career a young person should consider, we should reevaluate our accounting when we are feeling good about surviving a tough ten year stretch when others did not... or will not.

After all time is our most depleting asset.

you understand that better than I probably.

Honored Advisor
Posts: 15,212
Registered: ‎05-13-2010

Re: Optimism takes a dive

I think if you look at businesses not surviving past 3 generations doesn`t necessarily mean that the younger generation squanders everything.  Just look how farming and businesses have changed in the last 100, 50 or even 10 years.  100 and 50 years ago a farmer could have talents and skills to be most successful in the county, such as being diversified cattle, hogs and grain.  But in the last 20,10 years you need more "people skills" hiring a couple semi drivers, a grain cart operator, going to the banker every year and asking for a million dollars to put the crop in, kissing 20 landlord`s butts, going to hospitals and funerals trying to score more land to rent. 

 

Well, that isn`t everyone`s bag, maybe the 3rd generation sees that and becomes a doctor or lawyer, works harder and becomes more successful than they ever could have had they followed in dad and grandpa`s footsteps.   Farming is almost unrecognizable in so many ways from the 1980`s and 90`s....it might as well be 1890`s  Smiley Happy

 

That can be the case too in a small town grocery store or hardware store that competes with Menards and Walmart....and Amazon.

 

 

Honored Advisor
Posts: 7,659
Registered: ‎07-18-2011

Re: Optimism takes a dive

[ Edited ]

BA my dad saw that as well.  He said when he was young ---late 40's and 50's a new farmer needed to be a blacksmith (welder/fabricator) because machinery was not available..... "these days to begin farming you need accounting and Law....."  that was 1974.....

It exemplifies your point and mine.... change and adjustment is a constant for longevity and too often the older, better financed, leader stays in the power seat too long.  Looking back, if you mis 5-10 years of change the business looses ground competitively.

How many cases are there where two farms struggle and succeed(survive) side by side, but could be much stronger financially if working together....... The rapid advancement in equipment the last 15 years is overwhelming to see for us older guys.....

I did my younger years(lets call that my later younger years) on a spray coupe when "no-til" was the new thing....and the change from that to the stuff ECIN drives now and its 20,000 acres of capability and precision (and comfort) ------- that change happened in about 4 to 5 years.  and economically for a while........

 

The accelloration of technology has been so rapid..... and it is not just helping the big..... Hobby is a prime example.... His farm is smaller than some, at least what I have seen of it, but his real hobby appears to me to be engineering.  He applies nearly every concept we are working on in the larger farms sw.  I cannot present any new concept to him over a dinner table that he has not tried or is not working on to some degree.  He is a friend, but in many ways he is a reference point for me on the production side.  

A small farm has to find ways to keep up, IMO, they are tempted to live in the past to survive, but that is a trap.  As you say change and adapt......... we all do.

 

Hobby finds ways to apply concepts at a similar or (if I am not careful) cheaper cost per acre that we do...... the temptation for a larger farm is to "buy" the answer...... that is a trap as well -- as he and I often discuss.

Honored Advisor
Posts: 15,212
Registered: ‎05-13-2010

Re: Optimism takes a dive

SW, there`s a BTO in the neighborhood that has expressed "I want to get big enough that I never have to sit on a tractor seat" ...to me driving tractor and combining are the funnest job on the farm, so I don`t understand his thinking, but that`s why he`s a BTO and I`m not Smiley Happy ...but he is there, he has hired yahoos that do the "$20/hr jobs".    Then there`s a Des Moines city boy that came out and has a huge hog farm, very successful (now he`s eaten up with cancer, but that`s another story) but he has the people skills to hire and inspire those that make his hog farm profitable.  

 

Looking 5-10 years down the road (if things don`t all go to heck)  some of the most successful farmers won`t have been raised on a farm and maybe never sat on a tractor seat.  For the past however many years conventional wisdom is "you need to have family to start you farming and you need to love physical work"....weeeeell, maybe that`s actually a disadvantage.  Someone that has business sense and isn`t encumbered my "farm traditions" might have the advantage?

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Honored Advisor
Posts: 5,329
Registered: ‎01-10-2012

Re: Optimism takes a dive

Us little'ns adapt, upgrade, improve, just a level behind, but we're peddling as fast and hard as we can to keep up with the newest greatest mechanical inventions and equipment ...

 

Picture1119171159951.jpgPicture1119171212951.jpgPower steering , hydraulics, and pto, hi/low power shift, even a diesel. 

 

I feel all modern and everything. 

Senior Contributor
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Registered: ‎05-16-2010
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Re: Optimism takes a dive

Those pics bring back memories.  I was the last one in our neighborhood to have a picker.  I got to rent two farms because the owners wanted share rent and wanted to make use of their cribs.  One even had a son in law farming but he couldn't or wouldn't pick ear corn so I got to rent it.  Those days are mostly gone.

Honored Advisor
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Re: Optimism takes a dive

Smiley Happy I think everyone should occasionally  have to mow a tangled, wet gopher mound infested alfalfa field with non-live PTO H Farmall and no. 5 JD sickle mower, just to keep their perspective in life.

Honored Advisor
Posts: 5,329
Registered: ‎01-10-2012

Re: Optimism takes a dive

[ Edited ]

When I was a young lad, I started and was trained on a 8n Ford with a #5. Think I'll stay with my 1431 nh discbine just the same.

 

Many things around my farm don't make sense to many, the few old flare wagons and ear picker, grinder mixer left over from hog days in the seventies and eighties to mention a few. Not used much or often, still used as cost controls in the calf feed dept. They still add to the sweat equity around here. Almost all the neighbors just call the coop to bring out some overpriced something that is both expensive and not as good. Then complain about their feed bill. 

 

Want to make a great calf feed? 2/3 grinder mixer full of ground ear corn, bag of decent cattle mineral, half dozen buckets of soybeans, six little square bales of hay to fill mixer, fill bale ring with good hay. Bring them up on feed over a several week period. Salt and mineral free choice. Calling the coop is easier till the bill comes.

 

I'm in this for me not the feed salesman, not the seed salesman, not the equipment salesman. 

 

Not all the olden ways of yesteryear are bad, many just abandoned or forgotten about. 

 

Me and "Fred" (my aluminium dinosaur)  are both extinct or about to be.

 

SW thinks I'm burning equity. Actually I'm not worrying about it, so far every year there is as much or more in the bank, and lately more inventory around here, not sure how that is burning equity.  I will admit I've missed a couple of (in hind sight) marketing opportunities to maximize Uncle Sam's take around here...oh darn.

 

Also not real worried about the "end game"  the girls would not be able to get a for sale sign on this place fast enough and my son doesn't want my "old swamp."   The advent of  12 row plus planters and 200+hp tractors has been what has turned this farm into a money press. Based on this farms abstract and all the stories of the old timers, several lost the farm and  nobody seemed to get it paid off. Some off farm income during the formative years allowed profits to be plowed into improvements and debt retirement. I guess this is the end game, the score is lopsided and I'm doing OK. No payment books, 

 

 

Honored Advisor
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Re: Optimism takes a dive

None of us know truly how this will turn out, if we look at the past 6,000ys of farming, the innovators and those that stick their necks out and "pay too much" seem to win, generation after generation.  And people like me stand on the sidelines wondering "how do they do it????".  I see land selling for $8500...if I won the lottery and money was no object, I`d wonder if buying $8500 land and $2.90 corn at the elevator with a growing, no end in sight 2.5 billion bushel carryover is smart...but "they`re doin` it". 

 

With "burning equity" that`s about the way farming is a lot of the time, in 10yrs a couple you lose money and breakeven 6yrs and make money to beat hell the next 2yrs, that makes up for the other 8, but you have to stay in business to get to those 2 money making years.  And not be contracted so you`re delivering corn those 2 yrs a couple bucks cheaper than everyone else. 

 

But if you went on the "Shark Tank" show with a idea of getting the sharks to invest in a farming venture, they`d interrupt you after 30 seconds with "I`m out!   tooo risky!".   Smiley Happy