Growing from 135acres to 400acres

I have an opportunity to increase my farm size from 135 acres to about 400 (and maybe 200 more in a couple years). The land is coming available and I think I'd be foolish to let it go to another farmer since it's connected to my land. But... I've never farmed 400+ acres.

I only got into farming three years ago so I have little background or much experience yet. Nobody in my family/friends knows anything about farming. I bought a tractor and hay equipment and learned how it worked in the field.

My plan would be to convert the 135 into pasture for the horses/cattle (wife finally gave permission), 150 for hay, and the rest in oats/etc. Maybe in the first year or two just lease the lands out for cash crop.

We do sport horse breeding and boarding, raise some sheep, but I want to get into cattle just small-time though.

What would you do? How do you guys handle growth with a limited budget? I've got the tractor and hay equipment, but nothing for tillage or harvesting. Trying to figure out how to go about this without incurring too much debt or getting over my head trying to keep the land in use.

Where are you located, what kind of crops work there?

100-200 acres a person can run year to year on money in the bank.

400-600 acres it takes a pretty good lump of money to buy seed, supplies, fuel & fert. You are looking at a big investment every 6 months for supplies.

'Here' corn & soybeans would be the only thing that works. You must be in a drier location, for grass & grazing to work out.

If you can pencil out buying it & renting it out to the neighbors for a few years, would be a way to get into it slowly.

Takes a lot of figuring & what you have in reserve, etc.

No wet blankets here, just a few thoughts.

--->Paul

I'm in Ottawa, Ontario. Where I'm at farm land is highly sought after (one of my reasons for wanting to grab as much as I can while I'm still young -- 26).

Usual crops around here are soybean/corn and some oats on occasion. Don't see much else.

The size of land doesn't intimidate me, it's all the equip needed to work it then harvest it, and rinse-repeat. Plus I'm not too familiar with what people do with excess grains, etc... store, sell?

If you have a reliable custom operator / contractor nearby, get some rates for the field work you don't have equiptment for.... see how it pencils out. Easier to cash flow if you're not familiar with the equipment and operating costs, maintenance, depriciation etc and gives you a few years to pick up machinery when you can. You may find you can trade your labor for custom work if you find a custom guy that could use some help.
Chris

Buy all you can afford, their not going to make anymore!

Definitely buy the land. Land is the only item that is yielding a good interest rate (appreciation) now.
Then, increase your hay/alfalfa acres to at least 160.
Rent the remainder for 5 years. Not many will agree to a short term lease.
Reevaluate in 5 year swhere you want to go.
2009 alfalfa was the third largest cash producing crop in SD. Pencil out a 7 year stand of alfalfa at about 2.5 tons. You can get that can't you?

Gordo

What was the land used for previously? If it is low on lime or high in N it might make a difference when you pencil it out. I would think that whomever was farming it would be able to give you a good idea what works on the land with the least amount of input.

Well those are basically your two options. If prices are low, you can store it, and pray that they go higher, and then sell it.

May God Bless You and Yours , And give You WISDOM and STRENGTH always ....

I had a chance to buy about 244 ac. next to me years back, ya know what? I still kick myself daily, don,t make the same mistake, buy it and don,t look back, you,ll have what is needed most , the land, you can always pick up the rest as you go.

Anyone considering a large purchase these days should consider if it"d be manageable if there"s a further slowing of the economy...
Would you have to put your present operation up for security for a purchase loan???
I don"t know anything about Ontario legal/financial laws/procedures, but if at all possible I"d suggest trying to keep it a free-standing obligation, so that if it goes sour and you have to give it up, it won"t pull down with it what you have now...Good luck.

The issue is it can take $500 an acre to get a corn crop.

When you have 100 acres, that's $50,000 invested over summer. A chuck of money, but it works.

If you have 500 acres, that is $250,000 you have stuck in seed, fert, fuel, etc. etc. That gets to be a chunk of money tied up.

I'm all for it mind you, in my head I'm screamimg at you BUY BUY BUY.....

Just - think it through.

--->Paul

Got a good job in town or inherit a pile? Never cash flow a additional 270 acres from a 135 acre horse farm even if it's paid for. If you want to go belly up listen to the others they will gladly spend your money for you. 270 acres x 3000 an acre= 810,000 x 5% interest is 40,500 dollars for interest before any principle is paid. Now how many of you want to sign on that loan? Mark

I always say if ever offered land, buy if you can. Thay don't make any more of it so you know its gonna go up in price. Secondly, thats alot of oats, I get all the itchy scratchys from just a couple acres. Either way, i try and buy it. Just My opininion,
Toby.

I think as a starting point you should ask yourself if you can make the payments based on what local cash rent is paying based on current interest. THEN ask yourself if you can make the payments on HALF the cash rent with DOUBLE the interest rate. I've got a feeling that we're going to be heading there; mabey in the not so distant future. If you can't handle that you'd be best to leave it for someone else. If you can handle that, mabey then you go ahead.
After you've gotten settled in then you can start looking at growing more hay, etc or whatever you're interested in.
I would tend to think that throwing another 200 acres worth of hay onto the local market might not be such a wise idea all at once. It takes time to build up a list of good reliable customers. Something that's more easily done over a period of time. Also gives you time to grow into the problems you ~will~ encounter. Laying down 50 grand or 250 grand on crop inputs without a whole lot of experience will break you VERY quickly if there's some small screwup.

Rod

I don't know what the stats are anymore,but 30 years ago they claimed you needed 4 times as much capital to double the size of your operation.
In 40 years of farming,I've found it's been tougher to FIGHT the temptation to go larger than it was to just grow out of control. The opportunity was always there,but bigger doesn't always mean better or more profitable. In fact,I did cut WAY back in about 1984 or so. Been having to really work at it to keep from taking offers of more land since.
Remember,you're not just increasing your land base,you're increasing your risk.

With crop insurance there is not so much to worry about anymore, but that is still a big leap, I like to pick up 40 or 80 acres every few years. Maybe in hay country the land is cheaper, but here is corn/soybean

Only you can decide if you can afford to buy the land. Have you got lots of money to risk? Do you have a good, secure, well-paying outside job, or do you plan to be a full time farmer?

I grew up with the son of fairly wealthy area farmers. My friend always had the nicest clothes and the nicest car in the class when we went to school. His family had a bunch of land, with, I think, about 3000 or 4000 dryland tillable acres.

My friend was a smart farmer--he didn't get caught up in the trap of thinking he needed brand new equipment that bankrupted some other farmers around here. But 35 years of farming later, and after a couple of bad crop years, the bank refused to lend him the money he needed to plant a crop that year.

My friend ended up having to have a farm auction to pay the bank off, and lots of his equipment sold for cents on the dollar. I think he did manage to hold onto most of the land he had inherited though.

Since then my friend has worked as a farm worker for the largest farmer group in the area and also has leased his farmland to that same group. A lot of time, he is farming his own ground, using their equipment and the large farm's investment. My friend says that things are better for him now than when he worked for himself, since now he has health insurance, a regular salary plus lease payments and he can actually take a vacation now and then. He also enjoys operating the large farm's new or newer equipment, which he says he only dreamed about when he was farming for himself.

My friend has steered his children away from farming as a career. In his opinion, even as large as his landholdings are, for him, farming has not paid off very well.

I have never been to Ontario, and sure don't know if 135 acres or 400 acres, or even 600 acres is large enough to make a living on, using conventional crops. It sure wouldn't be in my area. And at the land prices around here, there is no way that I could ever make the payments on 265 acres, even at the incredibly low interest rates we now have. The ground would have to produce fantastic income to do it. And in farming, you have to PLAN on being able to withstand a couple of bad years, because in fact, they happen.

Unless you can buy the ground super cheap, and/or the value of the ground is very likely to go up a whole bunch because of development, I think I would pass. But that is MY SITUATION now. Your situation could be a lot different. Only you can decide.

Years ago I was told that there were really only 3 ways to get started in farming: 1). inherit the farm from family; 2). marry someone who would inherit the farm from family; 3) make a whole lot of money doing something else (maybe the Lottery?) and buy the farm and everything else needed to farm.

And then there was the joke about the old farmer who won $1 million in the state lottery. The news reporter asked him what he thought he would do with all that money? The old farmer thought about it a little while and then said, "Well, I guess I'll just keep on farming until it's all gone."

Good luck, hope you are able to make the right decision for YOU and your family!

Assume for a moment equipment is a non issue. Look at the purchase from pure economics. The reason I say its a non issue is you can crop share, cash rent out, rent equipment in, etc. Look at the whole package.

When I started on my own I had my cows and had them paid for. I was renting pasture. I sunk everything I had into land, and everything I had for the next five years to try and retire principle. With what I could scrounge I bought equipment. Junk mostly, literally in one case as my first hay rake I bought at of the scrap pile at a consignment auction in buckets. First I paid the land down, tried to fix and paint my equipment, then sell it after a year or two and buy better to fix and paint, etc. That was 23 years ago, and I was younger than you are now. Its all paid for and then some. My equipment is decent, most of the tractors were good used, most of the machinery I bought new. But, I waited until the bills were paid before I did. Yes, there has been some bumps in the road.

My Dad, when asked how long he was going to farm yet would always answer. Until I run out of money.

Don't be afraid to stick your neck out. But by the lack of experiance that it sounds like you have, make sure you include the cost of a farm adviser in your budget.

You would be the first Farmer I ever heard say that , "... there's not much to worry about anymore." That must be some great crop insurance ?

It has been my experience that if you can store your own grain your options are greater. With no storage many have to sell at harvest time which is often when demand and prices are lower. Does the farm have any grain storage facility ?

I'm about an hour southeast of Ottawa and around here when decent land goes up for sale there are a few big farmers who'll grab it for more than a guy like me (150 acres) can afford to pay. Are you around Vernon or North Gower or Richmond or Kinburn where there's a lot of farming? If you are, you may be competing with the big guys who are artificially inflating the price. Go to the Land registry office in Ottawa and look up some of the recent selling prices in your immediate area. Another way to look at it is a form of RRSP. If you can manage the payments. I got my place here cheap and aquired another 25 acres of bush cheap and it's now paid for and if neccessary I can use it for retirement. All the best.

What I am getting at is if you purchase descent insurance, you are protecting yourself from a big disaster, like a drought, or hail storm. You can even protect the prices. I can lock in my cost of production for this year already. As long as you know your inputs when you start you can make it work, yeah you probably won't get rich on the insurance, but after a bad year it wont take 5 good years to make up for it. Not trying to start a pisssing match here, but just to tell you where I am coming from.

Must be some major differences between your crop insurance and 'our' crop insurance. Here it's nothing but a joke. They're worse to deal with than the major insurance companies. When you whittle it down to what they actually insure and figure out what they'll give you you'd no doubt come to the conclusion that you'd be better off setting the premium money aside yourself every year and self insure.
Outside of a major hail storm or flood, the losses you'd incure here on a crop would be such that if you did everythign else right, or at least according to their requirements... your yeild reduction would probably not be sufficient to trigger a claim. If it was, and it happened year after year, you jsut lower your average to the point where you no longer trigger a claim.
It's a scam, plain and simple.

Rod

Sorry guys, I should have clarified before that I am leasing the farm I'm on (25 yr lease), and I intended to lease out the other lands as well for the same length.

I'm in a protected area (Ottawa Greenbelt) that the government owns so they lease the lands to all farmers. I'd be paying $10-20/ac month in rent for the extra lands so it's not the rent cost that is an issue, it's the equipment/manpower/experience needed to work an extra 200+ acres.

I have a job in town... never inherited any money or had any help. I paid cash for all my equipment but I bought a tractor new (was a mistake, should have bought used...). However, I want to expand and eventually farm full-time. Because of my proximity to the city (less than 10 minutes), I'm in a good position to sell beef/lamb locally. In fact I already have buyers lined up, just through word of mouth, for the current livestock I have. This is what I want to aim for - direct sales.

The only way for me to expand into this is to take on more land. If I pass it by, another farmer will take it and I'll miss my opportunity.

I don't have much for grain storage, I'd have to rent space or keep in bins. I'm really not setup for grains at all so I know I would have to invest a lot to harvest and store.

It's certainly tough without a farming background because I had equipment passed down to me... I have to buy everything. Not an easy situation, so I was just curious how others managed growth without going too far into debt. I think renting out the lands and accumulating equipment slowly is my best choice.

I agree that it can't be a loss every year and then it will lower your yield history. Are you buying a revenue insurance like CRC or RA or is it a yield only insurance or county average at a low %. I know all insurance is a scam, but you have to have it, same goes for your health, auto, home insurance, you have to have it. I can cover my input costs with a CRC policy, won't make any money if I have a big loss, but I won't lose the farm.