Equity Needed by a New Farmer

[charliep]

Lots of conversation about the impact of outside investors by established farmers with equity to cover land payments and provide cushion for risk.

How much money/hard core equity does a new farm family need to establish a farm business?

Assumptions.

A young family and the expectation that the business will cover their income needs with limited to no off farm income. Family is important.

No help from outside sources/family help such as machinery use agreements, etc.

The family team has the business, agronomic and marketing skills to run a farm business.

How much equity does this farm family need to bring into this business and have a reasonable chance of success? What would the value of the business likely be? Equity versus assets? That is, could a farm family with $500,000 of equity and a business worth $1 million (i.e. $500,000 debt - you tell me how financed) make it?

[pgluca]

This is probably something I will regret but, to have a reasonable chance of comming up with a number you would have to know a lot of things about the young farmer.
-What level of life style would he expect(would he raise his own food, live in a dump and drive an old beater and have his wife sew his clothes, or does he NEED $65K a year to live??
-Is he mechanically inclined and can fix anything, and doesn't mind using obsolete equipment and spending long hours, or does he need the equipment dealer to change oil??
-Does he know how to handle money and it's time value, or is he going to need the banker to hold his hand.
-Does he have a basic knowledge of agronomy and marketing, does he realize the last few bushels and dollars are what makes the difference??

The best route for a talented person with no equity is to find a turnkey operation with a sick or aging owner who is a business man and make a deal!

[cottonpicken]

Tough call,people who run farm numbers would know
better but 500,000 doesn't go very far anymore.

Lots of "different" farming models out there to
explore,fruit,goats,sheep,fish,vegetable,organic.

LOTS of days i would prefer to be in something less
capital intense the stress of coming up with 5 or 6
figures a month sucks.

[ajl]

Simply can't be done today. Asset
inflation means that the price of
necessary assets goes up faster than
savings. Thanks Ben and ECB. Any land
that will cash flow is located far from
family and friends so they can't be
important.

[zeefarmer]

I am a young guy (28) that has always wanted to farm.
I have been driving tractor since I was 5. Farming is
all I have ever wanted to do.

Currently, I rent 2 quarters. My dad, brother and I
farm just under 3000 ac together. I custom haul grain
full-time. I have no equity other than my home,
vehicles and semi unit.

I have not gotten any financial help from my dad. He
refuses to help by co-signing, and I don't want any
either. Any time I use his equipment, I pay him full
rate for custom work. Any labour I provide helping
him I am compensated fully as well.

To start on my own is a daunting task. A million
dollars won't go far. 3 quarters of land and a line of
10-15 year old equipment is all you get. And why
would you buy machinery and rent land? I have had
one instance already (and a second coming by the
sound of it) of an older farmer promising to help me
get started and then selling out for big money. Not
worth it to me. Money always wins, doesn't matter
what they promise.

I am to the point where I don't even want to farm
anymore. I can make a good living trucking, or doing
anything else (oilfield), and if I want to "scratch my
itch", I can get a combine or other equipment and do
custom work. No risk. I am not willing to put my
family under the stress that would come by paying off
7 figures worth of debt, no matter how low the
interest rate is.

So, to answer your question, $500,000 to start is low
for equity.

[cottonpicken]

Holly Zee,don't get to discouraged,your bro and dad
and you need to work together as a unit and move
forward,if that doesn't work "cut line and fish".

Farm managers are in high demand,a few dozen
months from now they will be extinct/bought up.

How many men really "know" what the fk is going on
in the field?

[pgluca]

Zeefarmer, one of thoses old guys that you talk about will probably make you a deal you can live with. It may not be the first or second one, but if you are capable and a businessman, you will find they don't have any more options than you do if they don't want to sell. Be a manager with a base wage and a percentage of the profit. After you prove yourself, work into a share purchase agreement or if they don't want that maybe they will let you use their leverage to buy some adjacent land for your self.

[pgluca]

Continued..............Zeefarmer, you can get in and out of custom work or trucking any time. If you are motivated and qualified for the job your risk in trying is not that high!

[tstep]

500,000 equity? Can't do it!! Risk is to high and the money that these big guys?? and investors are paying, the young farmer cannot compete. That Broad Acres Farms that is buying and/or rent/lease is ONLY paying workers 16-18 per hour. What a joke. Anybody with farm background of running or fixing is worth 25/hr. So Zee stay trucking and maybe bro and dad will decide to turn things over and you get a start that way.

[Hopperbin]

Zee to top it off I just dropped some land I rented for over 20 years. The owner wanted 55 per acre said he could get 60 or more but was interested in the 55 guy. Rent was at 36, I paid the full rent the year before when no crop was planted. I would go up to 40. He said he would split it and give it to me for 52.5 guess we were not on good communication. Since we were out so far on price I said to go take the higher price I am not close. The land as far as I know is rented now at 47.5. Why was it not offered to me for 47,5? I was taking care of the land like it was my own. Told the guy if he can get that price he should go for it and we shook hands when he left. I may or may not have took the 47.5.

[SASKFARMER3]

problem with renting always some one
looking over the fence. The guy should
have offered it to you for the 47.5.

[SASKFARMER3]

We were offered a section on Saturday
touching some of ours. So will have 9 in
block with possibility of another 5. If
that happens 15 in Block. No my maths not
wrong it would touch another one of ours.
Were looking at this but problem he lost
lots of acres last two years due to
flooding. I asked how much to purchase he
turned me down. Saying he believes land
will go up.