Never farmed, want to farm, am buying. Advice?

[Ranchman]

I don't want to rain on your parade, but you really need to talk to some farmers/ranchers in the area regarding your plans - along with your ag extension agent. If you are doing this as simply a hobby and not as a livelihood and have a source of income to “dump” in to your project - hey, knock yourself out! [img]/forums/images/icons/smile.gif[/img] It’s a lot of work - but a lot of fun too.

BUT, if you plan on trading job descriptions believing you can make enough money from your property to live a comfortable life - well, don't count on it. [img]/forums/images/icons/frown.gif[/img]

I'll ignore the whole herbal foodstuffs thing since (a) I know nothing about it, and (b) it sounds a LOT like the whole emu thing from a decade or so [img]/forums/images/icons/crazy.gif[/img] I wouldn’t doubt someone will post that they’ve had great success doing this (herbs or emus [img]/forums/images/icons/wink.gif[/img]) - but everyone I know who did the “emu thing” were all “rainbows & lollipops” at the time but all of them eventually lost their proverbial shirts. The point I’m making is that “Get rich quick” schemes rarely work out.

The other reason I say to talk to local ranchers/farmers/ag extension agent is not all property has the same production capacity - it will differ dramatically. These folks are the ones who will be able to give you real numbers and ideas about how profitable your crop can be and how well suited it is to the land you are contemplating purchasing. Too often people have delusions of grandeur as to how much their land is capable of producing - seen it happen ‘round here.

Anyway, now - I'm NOT saying you can't sell what you grow/raise - I'm just saying that by the time you put the sales against the costs (i.e. mortgage, taxes, herbicides (organic?), pesticides (organic?), vet bills, tools, implements, diesel, repair bills, etc. etc.) you will most likely be at a net loss (and a substantial one at that.) The fact of the matter is that you’ll be LUCKY to make it a zero sum game until the property is paid for, and after that, your profit margin will most likely be very small.

I also want to be clear - I am NOT putting down farmers/ranchers - far from it - it takes a lot of guts to risk everything year after year. But don’t think you’ll become the next cattle baron (or Ginsing baron [img]/forums/images/icons/crazy.gif[/img]). Fact of the matter is around these parts, the standing joke is that the only people (newbies) who get in to agribusiness are (1) nuts, (2) rich, and (3) have a strong desire to loose money. (I know several of these folks and fact is that they admit to all 3 parts of the joke!) The only farmers/ranchers who make any real money (i.e. enough to live on) are the ones who have minimum costs - and a mortgage on XYZ number of acres ain’t no low cost!

Perhaps there is a niche market you can serve and potentially not loose tons of money, but if you are looking to make money to live on in the short term (i.e. before the mortgage is paid off) - I seriously doubt it. Think about it this way - if it were easy to make money to cover all your expenses year after year, the farms that have been in the same family for several generations (i.e. no mortgage, no startup investments like equipment, etc.) wouldn’t be going the way of the do-do. (It's all well and good to say that "X" crop is worth $18,000 per whatever, - but that is theoretical - show me the contracts! Until you have signed contracts for your crops, they aren't worth anything. Doesn't matter if futures say they're worth X amount - you gotta find a buyer willing to take your product. Again, the whole emu thing is at the forefront of my mind currently.) From an economic perspective, you have enormous hurdles to clear. [img]/forums/images/icons/frown.gif[/img]

I’m not saying all this to discourage you - just to make sure you “look before you leap” and have realistic expectations as to the economic part of the picture. Again, if you're serious about doing this, talk with the right people - people who do make a living off the land in that area. They should able to give you some applicable facts so you can run the numbers and set your expectations accordingly.

[austi012]

Actually, that kind of frank talk is most helpful.

I know farming isn't a cakewalk. When there are 80 acre farms on good land, with a house, barn, machine shed, milking parlor, etc.etc.,, going for 160K complete, you know something bad is happening in farm country. And the idea that a newbie could walk in and make an overnight success at something that has defeated good, smart, lifelong farmers, would put that newbie squarely in the "nuts" category.

I will have my city job for at least another 12 years. That's when my last child leaves the nest. By that time, I am hoping to have a farm that generates enough cash to pay its mortgage, and a lot of my own food. That's all. I'm not doing it to get rich. I'm doing it to get independent.

Keep it coming, folks. I want to hear the sceptics and the non-skeptics as well.


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[MikePA]

<font color="blue"> I'm doing it to get independent. </font color>
Based upon Ranchman's post, which I totally agree with, odds are you won't be able to accomplish even this. [img]/forums/images/icons/frown.gif[/img]

[Ranchman]

I think when you "run the numbers" with realistic expectations, you may be disappointed. For example, around here, based on land prices vs. production value, it is impossible to get cattle to cover the cost of the mortgage - much less the other expenses associated with their production (forget profit!) [img]/forums/images/icons/frown.gif[/img] Other crops/livestock are similar. Also remember that when buying raw land, financial institutions generally only offer shorter term loans (~15 yrs). There are some places you can find longer term loans (I've seen 30 yr), but they are not as prevalent. Buying farming/ranching land is not like buying a house - expect to put 10-15% down. I'd suggest getting more info from a your local Federal Land Bank.

You will also have to be very careful on the whole property tax thing when you get your land. I have NO idea how it is done up North, but here if you want to maintain an agriculture exemption (e.g. substantially lower property tax), your land "...must be devoted to production at a level of intensity that is common in the local area." That means that planting 1 acre of 40 ain't gonna cut it with the tax man. Again, I don't know about up there, but here if you take a piece of property out of ag production (e.g. you don't meet intensity requirements), you have to pay 5 yrs backed taxes at full appraisal value with interest (I think it was something like 7% last time I checked) plus pay full appraisal value taxes going forward. All of the tax ramifications are something you'll need to look in to as they may add expenses you never considered initially.

Don't forget about the whole "mother nature" thing too. I've seen many a farmer loose his entire crop due to drought, flood, hail, etc. I've seen ranchers give away calves because they couldn't afford to keep them due to drought. Sad thing when you see someone hanging out at the local feed store simply trying to give his "inventory" away because he doesn't want them to starve. [img]/forums/images/icons/frown.gif[/img] And don't think that just because it happens this year, it won't happen the next - it does. Again, I've seen folks endure multiple years in a row where nothing came to fruition - so to speak. Just something to remember.

Now, with all those "negatives" - I do want to try and be a bit more "helpful" if you choose to make the leap. That being said, I've put a couple of links below. The first is the Texas Cooperative Extension Service (Ag Ext.) It has a number of publications (downloadable) where you can read up on various aspects regarding agribusiness &amp; agriculture methodologies in general. Yes, they are focused from a Texas perspective, but the vast majority are applicable to other parts of the country as well (especially in the Agribusiness section.)

Texas Ag Ext. Service

This next link, from Texas A&amp;M (Whoop! [img]/forums/images/icons/wink.gif[/img] ) is a page down several levels from their main agriculture page (BTW, A&amp;M &amp; the Ag. Ext. are intertwined). Anyway, it may have some applicable info for you as well since it is geared toward the entrepreneur.

Rural Business


Another Aggie link...
Agropolis

More ag eco stuff...
Ag eco.

Root page for A&amp;M Ag info...
A&amp;M Ag page

Again, all of this stuff is Texas based, so you should check to see what you have up there in the form of agriculture resources. Never the less, I think that you will have enough reading to learn a bit more about what you are contemplating biting off. [img]/forums/images/icons/wink.gif[/img]

[austi012]

Keep it coming! Any other landmines?

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[austi012]

Downloaded, and am reading, the Wisconsin Tax rules on Ag land.
Seem kind of convoluted. [img]/forums/images/icons/confused.gif[/img]

[gws]

I am sure you been told to "have your head examined" but besides that good luck. Farming is hard work, usually not apprciated work, Not for those like to fancy lifestyles.

A farmer won a million dollars in the lotter and was ask what he would do with all the money. He said, Ill guess Ill just keep farming till all this money runs out.

[Ranchman]

<font color="blue">Any other landmines </font color>

Laws.

Although you say you want to be organic, you may very well have to comply with specific laws in your area regarding application of materials (even "natural" fertilizers for example.) Pesticides/herbicides often require training/certification. Gotta also think about the laws regarding to foodstuff production (e.g. laws that say how things can or can't be grown if they are going to ultimately be used for human consumption - and testing of such items.) Some of those publications in the link I provided will discuss these things, but your local ag agent will be able to help you with more specific info.

I mentioned property taxes, but then there's income tax as well. The IRS is very picky about "hobby farming" vs. "real" production. Basically, if you choose to try and take advantage of any tax breaks allowed a real farmer/rancher, be VERY careful! You are really opening yourself up to some potential problems. [img]/forums/images/icons/frown.gif[/img]

Hmm. What else comes to mind -- most of the other "landmines" that I can think of are really subsets within the other areas I already talked about (e.g. economics, weather, taxes, laws, production capacity, etc.)

I know that your goal is to simply try and have your land "pay for itself" and not become the new Bill Gates - I'm just saying that even if you focus all your efforts and treat it like a bonafide business --minimizing every possible cost, squeezing the last bit of capability out of every piece of equipment or tool, stretch your land to the absolute maximum of its capabilities, work your tail off, and are very "lucky" on top of it-- you still won't "break even" with the associated costs. After the mortgage is paid off you might clear a little profit, but I do mean a very little.

I'm not trying to crush an entrepreneurial spirit - far from it. I'm just saying that getting in to agriculture costs money, and the return on that money is going to be VERY low and require a VERY long time to realize. If you want a place, get it! [img]/forums/images/icons/smile.gif[/img] I'm all for that! Just don't have it foreclosed on and loose your entire retirement because you thought it would "pay for itself."

I honestly think 95% of individuals should approach small scale farming as a cost center and not a profit center. (I say 95% because there are some federal tax benefits you can exercise if you are in the upper income brackets and you need to reduce your taxable income). Think of it like cars - i.e. you don't buy a car because you think it will make you money. The reality is that all it will ever do is cost you money. Sure, if you are an independent cab driver you can make some $$, but how many multi-millionaire cab drivers are there? Fact is they make barely enough money to eek out a living and cover their costs - and there's a lot less risk to driving a cab! [img]/forums/images/icons/tongue.gif[/img] A small farm/ranch? After dumping in many years of interest payments (run some amortization schedules [img]/forums/images/icons/tongue.gif[/img] ) and finally getting the mortgage paid off, you may make a few grand here or there for some pocket change - but don't even think about buying that new car or tractor if that's your only source of income. You'll never get approved.

Again, I understand the desire for a "simpler" lifestyle - but just be careful or you will have far more headaches and stress than you currently do.

[Alan_L_Texas]

I'm not a farmer, I'm a CPA. My experience is what I see. Of the clients I have, and have had, those with part-time farming and ranching operations ALL lose cash money almost every year. I don't know if all the income has been furnished to me, and I don't know what other benefits are being derived, but none of my clients are making any money farming or ranching.

I don't have any experience with what you would call a real full-time farm.

I had couple of clients pay up to $8,000 each for ostriches when the meat was going to be a low fat replacement for beef. Now their birds are darn near worthless.

I have seen some moderate successes in raising horses, particularly race and Arabian horses. And good success boarding horses. Other than that, not much success in any kind of agricultural endeaver.

[austi012]

Let's just say I'm adjusting my expectations around any potential income I might ever realize. And maybe the safest assumption here is that it will be a cost center for a minimum of 15 years, until the mortgage is paid off. So I'll assume that. In fact, I'll assume now that I'll never net a dime, though I will try like hell.

I still want to farm.

I'm looking for one now. Is there anything glaring that I should be worried about in the purchase process? If you guys were going to buy a place, what non-obvious but critical stuff would you attend to?

Again, thanks to all here for their useful advice. [img]/forums/images/icons/wink.gif[/img]