grassfarmer?

[ALLFARMER]

Cowman is bang on with his comments on new farmers. Plain and simple! Anyone who thinks its just roses has been temp testing cattle to long. A good friend of mine had the balls and thought he knew better than everyone else, that was 2 years ago...when he still had 2 big air seeders lots of owned & rented land 100 plus cows a house with a wife & young doughter. Today he rents an old trailer on a acreage & lives in the oilpatch. How he keeps goin I don't know. Another friend has given up 3 of his 5 quarters before he loses it all, and he was not long ago set up by his dad.

I could continue with these story's for a while because I know another 5!!!!! farmers who are looking at similar pictures. And yet I don't know 1 young farm couple who doesn't have significant off farm income keeping them afloat. FARMING IF YOUR LUCKY (VERY LUCKY) PAYS ITS OWN WAY - END OF STORY.

[Cattleman]

Well I never said this was an easy business, and the success rate is probably lower other self-owned businesses, but not all. You can look at the failing businesses around you....but not much you can learn from them....I have three neighbours (in Saskatchewan) who either started with very little or have expanded a lot in the last 10 years (one does significant off farm income) but one neighbour is a sharp sharp feedlot, and he said last year was his best year ever. Many know him to know his numbers as good as any in the industry, so he is always upbeat about what he is doing next. The other is a cow-calf operator, who had 20 cows 10 years ago, and who will ahve about 220 this spring. These guys are not doing anything even that special really, just managing costs. So it is your choice to dwell on the negative versus the positive.
I am not saying your are going to get rich raising calves and wheat, but if you want to get the higher return on investment, invest up the value chain versus those same things that are pretty much guaranteed a low rate of return. I am concerned as well about my rate of return, but I am not asking for the $60,000 pay for something I love to do. My after tax take home pay is satisfying enough for me. I have lived in a city as well and disposable income can sure dissappear fast there too.

[greybeard]

Again, I have to vote with farmers-son. Agriculture is still an honorable profession to participate in. We aren’t eating out of garbage cans.
If I lived on the Highway 2 corridor, I may see things differently. A very buoyant oilfield influences Land prices there. It is also seen as a very attractive place to live because of the proximity to urban services. The best of both worlds, so to speak.
When comparing agriculture to oilfield, you have to remember one is in the midst of the greatest boom ever, and the other may be in one of the greatest busts ever. But they are both commodities, and both will cycle.
I know guys that have started with nothing but good management skills and a sensible
Lifestyle. I also know some who lost everything their fathers handed over to them. They had the assets but not the management skills.
This thread started about Grassfarmer. Maybe Cowman was just trying to bait him out?
Didn’t you come here because you saw Canadian agriculture as a better opportunity than Scotland, even if Scotland offered higher prices for your product?
I have a friend who is in Alberta making $75 hr welding oilfield tanks, but I know he would rather be at home making hay.
Cowman and me are about the same age and think a lot alike. We need some more of Grass farmers “holistic” training. Then we won’t need that $75 hr to enjoy life.

[greybeard]

we don't need $75.00 an hour to enjoy life but even a holistic farmer needs to have a roof over their head and some means of transportation both of which are getting more costlier to own by the day.
I think by and large farmers are a more frugal sort,which helps get them through the rough spots like the one we're in now. With the oilpatch job comes added expenses, living in resource based communities usually means higher cost of living so its not all gravy.

[blackjack]

...but there is one big difference between farming now than 25 years ago...when the cycle of better returns happened the farmer was able to put more away in the old nest egg account...now because of higher taxes you had better be sharp to keep it cause our govt(at all levels) just love to think they can spend it more wisely than you...

... one of the reasons the industry needs you young guys is the experience...not only to do the work but to how to manage...back a few years the farmer could do a few poor decisions and get away with it...I agree with you guys that want to move up the value chain but remember partnerships (even with family ) can run in to it's difficulties...

[blackjack]

goood advice, blackjack. If land ownership is involved and the family partnerships end up in the middle of a divorce it can really causes havoc.

[farmers_son]

Blackjack, I agree with your comments. Still the challenge for producers is to develop the skills and means to form alliances with other producers if they wish to improve their competitiveness. Whether we are talking family partnerships or co-op type ventures a proper structure can help ensure success.

[cakadu]

Agriculture - the way we've known it to be the last 40 to 50 years or so - is slowly changing in the directions that have already been mentioned. It might help to know that 95% of new businesses fail within the first 5 years, so having a business outside of agriculture is no guarantee of a good life or of success.

You are 1000% correct cowman when you say that agriculture cannot continue the way it has. By far and away the biggest challenge that producers face is not knowing their costs, which you happen to know but for every producer that knows and understands there costs there are likely 6 to 10 that don't. If you don't know where you are or where you've been, you won't know where to go for the future.

These days everyone is faced with shrinking income while costs soar. Tough decisions have to be made everyday. Greybeard makes a good point when he says that things go in cycles - even the oil patch. This time around the bust, when it does come, is going to be harder on a lot of folks than it was the last time.

The younger generation of farmers needs to be free to make their own choices and decisions, just as all the older producers have been. Some may not make sense to us looking in, but it makes sense for them and their operation.

Albert Einstein said it best when he said that "Imagination is more important than knowledge." We need to be able to look at growing more value-added crops than wheat, barley and canola. How do you know it can't be done unless you try? We need to each find that niche or value-added opportunity that makes sense for our own operation and not worry about whether or not more can grow it. Producers have been stuck in a commodity mentality for a long time and we have a penchant for turning things into commodities, which in turn bring lower prices by their very nature.

Emrald points out that the next generation of producers are getting things like their ag mechanics etc. so that they can still stay home and run their farming business, but make extra money.

Innovation and out of the box thinking are critical and the next generation should be free to make their own decisions and mistakes.

I liken it somewhat to what our grandparents must have thought when their kids bought houses - how will they manage? My own parents wondered how we would make it with house prices and mortgage rates the way they were. Now I wonder how today's generation can make it with high house prices and reasonable mortgage rates - for now at least. We all adjust to the circumstances, some seen -- others unforeseen and we find ways to continue.

Maybe if we listened more to the young producers' and how they see their decisions and farms going and gave them encouragement they just might make it a success story.

[cakadu]

I think that it is a lot easier for younger farmers to make their own decisions if they aren't involved in a family operation. Younger people that have always been involved and treated as a partner by their parents likely have things a bit easier than those who leave home to get an education, or for employment, then return to the farm after not being involved for many years. For one thing their lifestyle will likely have to change significantly if they go from having a regular paycheck with benefits to relying on farm income .

I don't see too many young people even considering farming even if their parents are willing to give them the farm.

[farmers_son]

I noted the comment that 95% of businesses fail within 5 years.

Businesses start up, it should then follow that businesses also cease operating. In Alberta the number of businesses operating increased by 31% during the 1990s. According to Statistics Canada over 33% of new business are still operating 5 or more years after startup. That is not to say all the others failed. They just ceased to pay income tax in their original name. They may have sold or changed their name for any number of reasons or simply ceased operating because the business goals were reached.

The reality is about one million businesses operate in Canada . In 2004, 8100 businesses declared bankruptcy or 0.81% of the total. That is the number of businesses that fail.

See: http://www40.statcan.ca/l01/cst01/econ11a.htm
See: http://www.statcan.ca/Daily/English/050215/d050215a.htm

smcgrath76: You say you are a young farmer who generates most of your income off farm as a means to cash flow expansion. Now I want to make it clear that I am not familiar with your situation. However I have seen quite a few young farmers for who their off farm income is a trap that will keep them grasping at that paycheque for the rest of their lives. That off farm job kills the entrepreneurial spirit. Unless that job is extremely high paying how can it ever see a young person set up on a farm. When does the young person quit the job and go farm full time? When they are 30 or 40 or 50? Farming is a young persons job, it takes a lot of hard work.

Now I know the trend is for young people to have off farm jobs. Just an off the wall suggestion, but the best way to start farming is to farm. The younger the better. As with any long term investment, the sooner you start investing the more you end up with. If a young person 20 years old can find a way to make $10,000 farming each year and have his/her farm grow at 5% a year by the time they are 70 they will have built up a 2 million dollar farm. If they work off farm for 10 years and saved $50,000 cash, which would be quite good, then go farming at age 30 they will have ½ million less when they retire at 70.

[cowman]

Maybe I should have clarified my statement about agriculture being a dog? I meant agriculture as we knew it!
You know cow/calf, maybe background them through, raising the traditional crops...wheat, barley, canola. In my area those seem to be about the only crops that can really cut it. People have tried lentils and beans...usually with disasterous results and more money down the drain!
Now I realize, perhaps there is more money if you move up the value chain? But then are you still a farmer or are you a packer, wholesaler, trader, retailer? And at what point do you realize "hey I'm making my real money after the product leaves the farm gate?" When that day comes do you say to hell with raising the product, I'll just buy it from the peasant?
Now personally I believe the best businessman has to take care of the business and work at it pretty well full time? If we look at a lot of these co-op ventures what do we see? A bunch of "directors" who really don't have a clue and a "professional" management team that are usually the castoffs from the real industry players? A clear example of how this thing won't work is the old Fletchers hog plant in Red Deer? Farmer owned, brought in some high priced management, and basically couldn't cut it! Sold out to a real player(Olymel) who turned it around and made it profitable! And by the way really started to screw the hog farmers!
It would be very interesting to have a crystal ball and see what happens ten years down the road with these new co-op type packing ventures? Do you think any of them will still be functioning as a co-op? It is a sad reality that to succeed in just about any business you need to be involved and get your hands dirty? Nowadays part timers find it difficult to survive.
I always find it amazing that people think they can go into any business and out compete the people who know what they are doing? It can be a real steep learning curve and a very costly lesson in how the real world works!

[farmers_son]

I agree with your statement that agriculture as we know it is underperforming.

Re moving up the value chain; are you still a farmer. My grandfather, father and I were members of the Alberta Wheat Pool which in effect moved us up one rung on the value chain. We never stopped being farmers. For most of three generations the AWP did what it was designed to do, bring fairness into the marketplace. Unfortunately after years of success people forgot what the Wheat Pool was all about and the dream was lost.

I am not familiar at all with the Fletchers plant. But from a farmer standpoint is the situation better or worse now that a “real player” like Olymel is killing hogs and as you say really screwing the farmers. I think part of the challenge for producers is how measure the success of efforts to improve their lot by moving up the value chain. It is my impression from your comments that producer net returns did not improve after Olymel started killing their hogs. Perhaps in hindsight Fletchers was better than it appeared.

I would point out that Tyson and Cargill went up against established competitors before they went into the beef business. In another thread I provided a link to Porters Five Forces Model of Competition. Michael Porter points out that established players like Cargill and Tyson are vulnerable to suppliers moving up the value chain.

From a producer standpoint any value added venture must be measured in terms of increasing producer net returns. I suggest for producer beef packing plants we would measure success in terms of a narrower basis between local prices and the U.S. market.

Look at it this way. This last week a American producer received $181 more than his Canadian counterpart, slightly more than in previous weeks when an American producer received about $165 more than us for the same animal. Now I would point out that there should be no basis between Canada and the U.S in a properly functioning market but for sake of argument lets assume a $81 basis was fair. That leaves a $100 dollar per fat steer and heifer that we are basically getting ripped off. How is that for a costly lesson in how the world really works!

Alberta slaughters about 2 million steers and heifers each year. Yes that is correct, Alberta producers are being ripped off to the tune of $200 million each and every year. That is enough money to buy and completely pay for 2 brand new ultra modern large scale packing plants this year, next year, and every year into the foreseeable future in Alberta alone, forgetting the rest of Canada.

The simple fact of the matter is we do not have to be as good as Cargill and Tyson. We just have to capture some of the $100 per head they are stealing out of our pocket.