How do you see yourself?

[cowman]

Do you percieve yourself as a farmer/rancher or a businessman? Personally I struggle with this one a lot...because I do consider myself a businessman, first and foremost! And yet I have this little "thing" about land and cows, that really is a very poor business!
I still see a lot of people who struggle to survive in agriculture because they "love the way of life"? They will go to great lengths to preserve what they consider their true calling? I never considered farming my true calling...I like to do too many different things!
And yet people deviate from that farming life with an off farm job or business, just to continue in a losing business? Or they spend a good portion of their time becoming "mini packers or direct marketers" so they can earn a decent return on their product. I wonder when the day comes that they realize " Hey, I'm actually making more money in the butchering/retailing business...than I am raising the crops and cattle!" When that happens, does a light come on? And they realize they can make more money processing product, than raising the animals?
I wonder how anyone can justify a multi-million dollar investment, with the low returns recieved? Now if you consider it a long term investment in land, or as a tax writeoff, then you can probably justify it, but the fact is agriculture is a real dog compared to a lot of other businesses?
I see some really good farm manager/entrepreneurs out there. I wonder if they ever think they have wasted their talents in this business and I wonder how far they might have gone if they chose to do something else?

[cakadu]

cowman, I think that most folks in the farming/ranching industry would like to make a good living doing one job well, but economics have forced many of them to take off farm jobs to keep the farming operation going. As you know we all live in NEXT YEAR country and most hope that the next year will see things improve.
The thing that bothers me the most is seeing the worn out looks on the faces of people that put in 18 hour days trying to keep everything together. At some point, one has to wonder if its all worth it.

[kato]

There's a saying, "If you find a career that you love, you will never work a day in your life". I always told my sons that if there was something they loved to do so much that they would do it for free, then all they would have to do was find a way to make a living at it, and they would always be happy in their jobs.

I think most here have found something they love to do so much they would do it for free. The cold hard fact though, is you can't just do it for free .... you must make a living. That's the catch. That's the problem we need to address.

We need to be good businessmen/women in order to keep the way of life we love. It's just part of the deal. You can't have one without the other.

[grassfarmer]

Cowman I consider myself a businessman and cattleman and I don't think the two are mutually exclusive.
We've been in agriculture for a long, long time and have always made money (well not always - you get the odd year..)Longterm it has been a profitable enough occupation to raise generation after generation of kids and I don't see that will change in the future if you are good enough at the job.
On top of that is the land for investment side of it - this has grown spectacularily post WW2 or really post 1975 in the case of the UK. This provides a security blanket but also starts to raise doubts in the heads of producers who are less capable or less dedicated. "Oh, we are worth $1 million today lets sell up and take life easy" - well that's fine if you want to run a one generation operation but personally I don't think it is my right to sell out my heritage for personal gain. I may control the land today but in the grand scheme of things I don't really "own" the land, none of us do we are merely custodians for future generations. Borrowing to buy land based on future land appreciation is a fools game in my opinion - I was brought up with the rule that if you can't pay off land in 10 years at current production prices you can't afford to buy it.
The big think that has changed in society post WW2 is increasing wealth of the masses - in developed countries at least. Ag producers now look enviously at the computer whiz kids that earn $80,000 a year sitting behind a screen with no financial investment.
Whereas these high paying jobs look great that is a short term view - twenty years ago where was the IT industry?
Bottom line is food growers are the only members of society that are actually creating something from renewable resources - sunlight, water and soil and as such are the source of all real wealth created on earth. All the "service industry" jobs that keep most of the workforce going nowadays are not sustainable jobs and ultimately that puts us in a position of power. We are involved in the most important work on earth - never forget that.

[cswilson]

I think from the beginning of ranching the best ranchers have been busibessmen too-whether selling beef to the mounties in Canada-the army in the U'S' or whatever. I know in my area some of the original ranchers had their own general stores or meat markets. It's hard for a ranch-business or whatever to stay the same from generation to generation and survive-maybe we are just seeing history repeat itself. I had a good visit with Dylan Biggs the other day about just such a thing.

[whiteface]

Cowman, I just love the way your brain operates and the "real" questions you must ask yourself on a day-to-day basis, and those same questions you frequently challenge me to ask myself and improve my own "business sense." I have a farm for likely many of the same reasons you do and don't keep all my eggs in one basket when it comes to retirement planning. The land and cattle are good on some counts and the sh**s on others, but with all the things I have money invested in ( you all think I'm going to say cattle are the best!...don't you...no! )there is a business way to run it, and a fools way to run it and I know all of you have heard a story about every business venture ever invented that was a monster sucess and the same one under different management that fell on it's face. All enterprises, sucessful or not are largely based on management, not luck, not inheritance, not the weather, not even BSE. This is just my opinion, of course, but a very good thought-provoking question, thanks cowman.

[cowman]

Good answers all.
Whiteface: That is definitely true. Good management is the trick. I like to call it common sense.
Grassfarmer: You said it very elegantly and straightforward! Probably exactly how I feel about the intergenerational thing. I wonder if that is something a Scotchman has bred into him or something, because I sure got a lot of lectures about that when I was a kid! That and the lectures about how you need to hold land if you intend to remain a free man!
Without a doubt I could sell out and live the life of Riley but I do believe I have a duty to all those who will come behind me, and a duty to all those who came before me! Of course I wouldn't want to live the life of Riley anyway! Just not my cup of tea sort of thing.

[grassfarmer]

I don't know about elegantly or straight forward Cowman, part of it is just that Scottish protestant work ethic - S### won't happen if I work hard enough!

[smcgrath76]

We are asking ourselves this question a lot lately.
Personal belief - a lifestyle based on having no spending money, the stress of a massive debt load, etc. and no idea of how to change it is a pretty crappy lifestyle.
That said, I think that a lot of producers are in the land business and basically run their cows or other commodity to cash flow their mortgages. This explains a lot of the production ineffiencies that occur. A lot of people know they are crazy to calve in January and wean 900 pound calves and that their cattle enterprise would be more profitable if they were to run 1000 pound cows and spring calve, etc. but they need to cash flow their December 1st land payment.
Two questions...
Do you need to own land to farm?
If you are truly running a farming/ranching business, is it logical/intelligent to locate your business where the rental or ownership cost is beyond the gross return?

I think I know the answer to both questions, but being a 6th generation farm I also appreciate some of the other issues that arise. We are just getting to the point where we are realizing that anyone can run cows (it doesn't have to be us). Very few people can manage the business of running cows.

[kpb]

smcgrath, your post really gets to the heart of the matter, I think. The fact is that the price of farmland, particularly in the Calgary-Red Deer corridor, has gone way past the point of making sense financially. So those of us who have been around here a while are, now, really in the land business whether we want to be or not.

A quarter of ordinary farmland goes for $330,000 or so. If the price of that goes up $500 an acre and you've got a section, that is $320,000 in increased net worth. That's a lot of money in anyone's book and makes all our talk about saving a few bucks on cattle managment look a little ridiculous.

I don't think it started out that way for any of us--we just wanted to run a ranch. But the reality is, if we really look at our financial situation, that we have most of our net worth tied up in land prices and that land is yielding very little cash flow based on its market value.

kpb

[cowman]

kpb: What you say is exactly true! The value of our land, in reality, is where we make our money. Now having said that...how do I ever leave this place? My great grandfather died here and so did my Dad. My children were raised here, just like I was, just like my father was, just like my grandfather was.
My Dad told me when he was in the ugliest battles in Italy that all he could think of was coming home to this farm.
I love this piece of dirt more than life itself, but I also realize the day will come when the suburbanite will make an offer that can't be refused!
I tell my son "Don't be an idiot. When the price is right sell it...just don't do it while I'm still alive".

[kpb]

cowman, you are so right about the land--it does get in your blood and it's hard to feature selling it. Same with the cows. It's just too hard to imagine getting rid of either.

But the reality is that the land prices are unreal. Sooner or later my land is going to be subdivided and taken over by the acreage crowd. Now this can be for my benefit or the benefit of those coming after me. But this is not a matter of if but rather when--the plain fact is that land in my area is not ever going to be viable again for ranching--it's just too expensive.

There are many farmers in my area now who have just a quarter section, 30 cows and a great life. They have sold their land, have no debt, lots of cash in the bank, take long holidays, drive nice cars and trucks and spend lots of money on their families.

Then there are a few guys in our area like me left, not many but a few, with a decent land base, some or lots of debt, lots of depreciating machinery or depreciating cows and who can't afford a holiday, have no time for anything other than farming and think hard about spending money on a used truck or big purchases for the family because most of their net worth is in the land and their cash flow from farming is terrible.

Which lifestyle makes more sense to you? I honestly don't know but I think we should all think about our choices and not just keep plugging away.


kpb

[kpb]

When I look at people paying $250,000 for dinky boxes of houses in my home town,and $400,00 for the same house on a few acres of land, it makes a lot of sense to me to stay where I am. I have a farm, 1800 sq.ft. home, all the support buildings that I need and peace and quiet to boot....so until they pack me off, I intend to stay, cows or no cows !!!

[cowman]

kpb: If I was to answer you on this question from a purely "business" perspective, I would say sell!
However as Sean says, there is a lot more than meets the eye here!
Yep, your darned land is worth too much. But in the "really big picture" does it really matter? What is the purpose of your life? Is it really to make X number of dollars?
You know, I believe, if at the end of your days, you can say " I did the right thing, I did what I was meant to do, I did it in an honest manner, and I never screwed anyone doing it....then you had a good life?"
Believe me, many times I have wondered why in the hell do I keep this place and continue to do this little "thing" instead of doing something else? I still don't have the bloody answer!
However I do believe to be free, you need to have a place you can call your own? Not a place you bought or even inherited but a place where you "invested" your life? That is home.

[grassfarmer]

One option for you guys sitting on land near cities or towns where the urban sprawl is encroaching is to relocate. I did it - from somewhere I couldn't expand to somewhere land was half the price. Surprisingly having done it the attachment to the actual land wasn't hard to break. I made the best job I could of managing my previous property and then sold it well. Now I'm trying my best to manage this place - the bond to the land is transferable! Selling up and getting a top price for a well managed property gives you the same buzz as selling a top pen of calves it's not the tough, heart wrenching business I expected it to be.
There are plenty of good cattle places for sale on the prairies at half the price of the highway 2 corridor. I'm always vaguely interested in the Peace country - if I didn't mind living further away from things I would move there in a shot ( wife wouldn't though as it's too far from Edmonton)
Saw a place advertised there recently - 1600 acres deeded a large grazing lease, would carry 3-400 cows listed at $950,000. The price of 3 quarters where you are kbp?