Traditional Farmer
Well-known Member
- Location
- Virginia
Article on Drudge about farmers and debt,said the average farmer in the USA was $1,300,000 in debt.Glad I'm not average.Can that figure really be true?
- Thread starter Traditional Farmer
- Start date
That number would be correct as an average. Here in North-East Iowa the number would be a lot higher than that. With land costing $7500-10,000 an acre now. Large tractors and combines costing hundreds of thousands of dollars even used. So a million dollars would not go far.
200-300 acres of tillable ground will cost $2-3 million dollars. Annual rents are $250-350 for this year. So rent for 2500-3000 acres of ground will wipe out a million just for the rent. 500 head of fat cattle will be around $750,000. Heck 500 feeder calves would be in the $450-500K range.
With the average grain farm being 2000-3000 acres makes farming a very capital intense industry.
Local farm family has bought over $10M of ground in the last ten years. They are good farmers and managers but that is a staggering amount of money just in land. They have cattle and equipment debt on top of that.
The numbers are mind numbing. It is hard for me to keep them in perspective. I started out with $10,000 saved in 1978. Got by on family living cost of $10K for years. Now $50K is not living fancy for a family of four.
200-300 acres of tillable ground will cost $2-3 million dollars. Annual rents are $250-350 for this year. So rent for 2500-3000 acres of ground will wipe out a million just for the rent. 500 head of fat cattle will be around $750,000. Heck 500 feeder calves would be in the $450-500K range.
With the average grain farm being 2000-3000 acres makes farming a very capital intense industry.
Local farm family has bought over $10M of ground in the last ten years. They are good farmers and managers but that is a staggering amount of money just in land. They have cattle and equipment debt on top of that.
The numbers are mind numbing. It is hard for me to keep them in perspective. I started out with $10,000 saved in 1978. Got by on family living cost of $10K for years. Now $50K is not living fancy for a family of four.
Geo-TH,In
Well-known Member
JD,
A Purdue grad and fourth generation farmer lives a mile down the road. He has many buildings where he stores his new Green Tractors. Not sure how many acres he farms because his farms are spread out all over the place. The road in front of my place is his last name. When we ride bikes past his place I see nothing but big $$$$$$$. Not to me mention his grain storage, grain drying, irrigation system in fields. Everything he has is John Deere. I never seen a ZTR with a cab and AC. He has a green one.
Before his dad passed he changed the name of the farm to an LLC otherwise his farm would be in the historical record as a family farm that has existed for over 100 years.
A Purdue grad and fourth generation farmer lives a mile down the road. He has many buildings where he stores his new Green Tractors. Not sure how many acres he farms because his farms are spread out all over the place. The road in front of my place is his last name. When we ride bikes past his place I see nothing but big $$$$$$$. Not to me mention his grain storage, grain drying, irrigation system in fields. Everything he has is John Deere. I never seen a ZTR with a cab and AC. He has a green one.
Before his dad passed he changed the name of the farm to an LLC otherwise his farm would be in the historical record as a family farm that has existed for over 100 years.
I see a correction coming that will drastically affect values. Part of that is already starting to take place with stricter child labor laws that will in time affect groups such as the Amish and the Mennonites. Those two groups lean extremely heavy on several kids bringing in sizable pay so the parents can swing deals on paying 10,000 dollars per acre for tracts of land. The dairy industry will weather more correction as the years go by as more people will consume less milk and be more receptive to non-dairy substitutes. If demand were based on fluid milk consumption things would be downright traumatic today for even the best managers and high equity farmers. From what I see in NY even the grain farms rely on exotic financing to be able to grow in size. Trouble is there are fewer and fewer execs that want to play farmer with their money if there is not a hard nuts and bolts type return on having money in farming. Don't know about other parts of the US but those three factors in 15-20 years could make a lot of ground here worth less than a 1,000 dollars per acre then.
fixerupper
Well-known Member
I agree with JD Seller. It doesnt take much to accumulate that much debt today considering the size of our farms in the midwest. In northwest Iowa toward the last of September the farmer has part or all of his seed, fertilizer and chemical costs on loan, both semi annual rent payments, he has just gone through the combine to get it ready for harvest and possibly a new grain bin has just been erected. We dont have hardly any cattle in my neighborhood, but if he is feeding cattle he can have much more debt on top of the crop costs. If he is making payments on $9000 land the debt will be much higher.
Bruce from Can.
Well-known Member
- Location
- Woodville, Ontario, Canada
I have never been a average farmer. Didn?t take over a ongoing family farm, and I believe most average farmers do. Don?t have that kinda debt either, but..... if I build a new dairy barn, I won?t be far behind. Debt is a peculiar thing. Say now if I blow a million or even 1.5 million, so long as the income continues to cover the interest and repay the capital cost, why not ? If I have enough income to repay a 1 million dollar debt over 20 years, that would come to around 5 grand each month. If I don?t spend that 5 G that comes in each month, it is just more taxable earnings, and I will get to give half or more to the government, and still have to work just the same as I do now to earn the money. If I build the new barn, and ease my work load, maybe even increase my income by buying more quota and shipping more milk. Then being 1million in debt isn?t such a terrible thing. 40 years ago being $100,000.00 in debt was alarming, can?t even go buy a 100hp tractor new for that money now. It?s called inflation.
Yea, I believe that's as an average. That is you total all farm debt and divide it by the number of farms.
Heck that big farm in MI that failed a year or so ago. They were 145 MILLION in debt when they tanked. As of 2007 there were 2.2 million farms in the US. And that was just one farm. Don't think about the size of your operation. Look around. Here? There are some small farms and some BTO's. Most of the BTO's have a pretty heavy debt load. Even the small guys have debt. I know a couple of guys who buy late model used equipment. Stuff that cost 200,000 used. Plus how many of those farms take out operating loans each year?
Rick
Rick
Moonlite37
Well-known Member
Is it easier to pay rent on farmland than to pay interest on a loan? Would a farmer be ahead to borrow money to farm and invest his own money in tax free municipal bonds? I think a calculator is one of the farmer's most useful tool and it may be as important to make common calculations in arithmetic as it is to know seed varieties and chemicals.
Should have added in. They say the average middle class family spends 110% of their annual income each year. Now if you think about that it's scary. But the actual numbers they are looking at include debt like car and home loans. So that 110% figure is a bit misleading.
Numbers are funny that way. They say last year that 40,000 Americans were killed on the roads last year. Most people see that number and say "that's terrible". Now say last year about .0128 % of the US population were killed on the highways. That's well under 1 full %.
So anytime someone is playing with numbers they can be misleading. The average farm debt? How much a family spends? Yea, all numbers that may or may not tell the entire story.
Rick
Numbers are funny that way. They say last year that 40,000 Americans were killed on the roads last year. Most people see that number and say "that's terrible". Now say last year about .0128 % of the US population were killed on the highways. That's well under 1 full %.
So anytime someone is playing with numbers they can be misleading. The average farm debt? How much a family spends? Yea, all numbers that may or may not tell the entire story.
Rick
Forty years ago there were guys carrying that much debt on a Harvestore product. Neighbor back then on his blue high moisture silo said it cost 1,000 dollars per vertical foot to put up and his was 85 feet tall. Don't know how it worked in Canada back then but the credit institutions here were pretty abundant with loans back in the 1970's so plenty of guys got into debt up to their eyeballs. After the grain embargo in 1980 combined with subpar milk and meat prices these lenders turned the tap right off when guys needed a rework of their finances.
mudcreek183
Member
We had one a county over when he went under he owed over 3 million.
We all see different things based on what part of the world or even the US we live in. Here the Amish and Mennonites are huge drivers in land values. Land quality is too inconsistent in most parts of NY for somebody to setup a 10,000 acre grain operation or 5,000 cow dairy. Corn could run 180 bushels per acre or 35 tons of corn silage one year and produce 140 bushels of corn or 27 tons of corn silage the next year. The science community has become more and more disconnected from farming on a personal level. Fewer people know or are related to somebody in farming to drive their decision making. A lot of them only care about feeding a person if they are into food production and don't make it a priority that conventional agriculture benefits. A lot of research has been done towards replicating animal protein in food.
john in la
Well-known Member
A debt of $100.00 or $100 million means nothing unless you know the net worth and income figures.
Plenty of business out there (and farming is a business) that have a weekly payroll over a million dollars.
Plenty of business out there (and farming is a business) that have a weekly payroll over a million dollars.
Traditional Farmer
Well-known Member
- Location
- Virginia
The feed the World thing is pretty much been proven wrong,starving people in many places right now, food surpluses in the USA.Perfect match right? One little problem people are starving in the first place not because of a lack of food available but because the starving folks have no means to pay for the food.That has always been the issue and will
be worse in the future.So unless US farmers are going to give the food they produce away its a non starter and terrible business model.People with some wealth have all the food they can eat now and will into the future.
be worse in the future.So unless US farmers are going to give the food they produce away its a non starter and terrible business model.People with some wealth have all the food they can eat now and will into the future.
Traditional Farmer
Well-known Member
- Location
- Virginia
The USA is 22 Trillion$ in debt and going in deeper every year.So how long can the gov't money that is fueling agriculture and other parts of the economy be around? Probably not that much longer without gov't money agricultural land values/prices will drop like a rock.
Traditional Farmer
Well-known Member
- Location
- Virginia
Ask the people with big loans on houses how that line of thinking worked out for them back in 07-09 their Million$ on paper houses were suddenly only worth a fraction of
that,same thing can happen to farmland and other ag assets.Values are reset by buyers willingness and ability to pay all the time.If I had loans and only farm income to repay them
I'd be one worried fellow these days.
that,same thing can happen to farmland and other ag assets.Values are reset by buyers willingness and ability to pay all the time.If I had loans and only farm income to repay them
I'd be one worried fellow these days.
Philip d
Well-known Member
I know a local potato farm the government lent them 2.5 million last year to put their crop in because the lenders cut them off and another 3.5 million this spring because one lender called in their loans. They could still afford a new top of the line pickup this spring and 2 months vacation in Florida. I?m guessing in 3-5 years all will be forgiven and off they go again,sure wouldn?t be their first time.
Case Nutty 1660
Well-known Member
I have no farm debt, I do not borrow operating money I am in no way well off but I am happy with what i have, this season and last I have lost 50K worth of income,, and NO I do not carry insurance as they never would have pid a dime either year any way, tried that junk for over 10 years they always find a way not to pay
Absent Minded Farmer
Well-known Member
- Location
- Gehl Country, Wis.
Avar.... what?
Mike
Mike
olgentdc
Well-known Member
not wanting to steer of topic of debt, but hiway death
deserves mention ...There were 50,000 killed annually in 1970 on
the roads of the USA ,,.TODAY pat yourself on the back , our cars
are safer,yet faster ,roads are better and safer and the traffic
level load is triple of 1970 . and most of us are better drivers ar
being aware of those around us ..Back in 1970 , Most cars only had
a driver side rear view mirror.
deserves mention ...There were 50,000 killed annually in 1970 on
the roads of the USA ,,.TODAY pat yourself on the back , our cars
are safer,yet faster ,roads are better and safer and the traffic
level load is triple of 1970 . and most of us are better drivers ar
being aware of those around us ..Back in 1970 , Most cars only had
a driver side rear view mirror.
George I saw a figure a while back on the amount of debt free land in Iowa. It is 82% debt free. WOW Now the other numbers. 65% of the landowners are over 65 in 2017. 35% of the landowners are over 75. That number has just about doubled in 30 years. In 1982 the owners over 65 was only 35%.
P.S. 60% of the land is not farmed by the owner. The land being in older hands and with fewer actually owning what they farm is not a good thing for the long term future in my Option.
P.S. 60% of the land is not farmed by the owner. The land being in older hands and with fewer actually owning what they farm is not a good thing for the long term future in my Option.
Lot of Havestores went up around here in the 70's. And they were some of the first to fail with the 80's farm crisis. So much so that some of the older guys here still call them "blue tombstones". In fact a lot of silos of all types went up around here in 70's. Most of them sit unused anymore. Those feeding livestock are bagging or feeding out of a bunker. Lot less labor intensive.
Rick
I?m certainly not average.
Buying $8000 an acre land or paying $200-250 and acre rent, putting in a crop with $400 an acre seed, fertilizer, weed control. Add in fuel and machinery.
It?s not really very hard to see 2-10 million dollars invested on the small to medium sized farms. Having 1-3 million of that on loan isn?t really that unusual from a business perspective.
I am a much more conservative curmudgeon and adverse to having much loaned, but then I miss a lot of opportunity along the way as well. So my way isn?t for everyone, and doesn?t grow agriculture either.
Paul
Buying $8000 an acre land or paying $200-250 and acre rent, putting in a crop with $400 an acre seed, fertilizer, weed control. Add in fuel and machinery.
It?s not really very hard to see 2-10 million dollars invested on the small to medium sized farms. Having 1-3 million of that on loan isn?t really that unusual from a business perspective.
I am a much more conservative curmudgeon and adverse to having much loaned, but then I miss a lot of opportunity along the way as well. So my way isn?t for everyone, and doesn?t grow agriculture either.
Paul
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