Higher cost farms?

[ColevilleH2S]

Parts and labour on old junk is
expenseable. New iron is CCAed At 15%.
My accountant likes old junk.

[Partners]

You have to be "comfortable" with your amount of loan payments..There is more to life that New Iron..but you also only live once!!! The money you save, your kids will just spend it any way..

[bgmb]

Its impossible to generalize farmers by size. There are good small farmers, good medium size farmers and good large farmers.

What makes a farm successful is how well you are able to convert your inputs into outputs its that simple.

Horse,

Debt levels probably have more to do with how long you have been in business and how fast you have expanded than farm size. If you want to preach that bullshit take it to your local coffee shop and you and your buddies can attempt to figure out "how they did it" "they" being the local farmer that has more land than you.

[freewheat]

bgmb, I am with you on generalizations.
Every operator has a different
philosophy, never mind what they learned
from their dads, or inherited from their
dads, or whatever. We all started at a
different point this past generation at
least, and so generalization is pure
folly.

Some may run what looks like a gong
show, yet have a great bottom line. Some
may run what looks like a tight,
streamlined ship, yet hardly have two
cents of their own dang cash! Bottom
line, is we just don't know. Unless we
have seen all our neighbors financial
and bank statements from year to year.

[rhoff]

I agree with the statement of generalizations
however I wonder about the intangibles that we
don't always see. Sometimes older equipment
affects our cropping decisions and spraying
decisions example would be the guy who uses
fungicide because he owns a 4420 patriot and
has the time to do it as opposed to the guy who
decides not to because he doesn't want to hire a
custom sprayer.
Another example would be the guy who couldn't
get his top dressing done on a wet year but had
no choice because his air drill is an older single
shoot.
My belief is that a farm is made a low cost
operator by having the machinery right sized to
the acres and competent operators not
necessarily total acres.

[malleefarmer]

for what its worth my dear old departed
dad used to say always keep 80% equity
or more and never let borrowing costs be
it for land and or machinery combined be
greater than 10% of your gross income

of course the interst rate theory comes
unravelled in times of extreme interest
rates

not sure but thats how he farmed for 45
years and land and steel was cheaper or
is it all relative as time has gone on?

[Hopperbin]

mallee rethink that cause 10percent of gross
income would have downed every grower i
know

[poorboy]

You do have to be careful with numbers.

What if I told you that machinery was an investment like farmland. Before you blast me read on.

An old combine that has been repaired for 30 years has lost productivity and is worthless today. So on paper the old machine keeps costs down as long as repairs are not too high and repairs are fully expensable.

No take a very large operation that gets all the deals on multi units from the Deeres or Cases or ??. The repair costs are minimal every year, the efficiency and capacity numbers keep improving and the resale value of the machines keeps going up every year. I am not a big farmer, but often I get more on resale for my newer machinery than I paid.

On paper it is the dollars tied up in machinery that gets put down as opportunity cost that makes the overall costs of the new machinery look bad. What if that cost got stuck in the column with land owned. Most people would think that land owned is a good thing. When I look back over the years it has returned almost as much on my farm by keeping machinery current as land values (with the exception of the last 2 years of land).

So no two farms are the same, but some have had opportunities to keep upgrading their machinery for not much more than the cost of repairs and efficiency gain and they do have a valuable asset just like farm land.

So numbers can tell many stories, it is just how a person reads them.

[phoenix64]

Problem is when the crop prices are low and
some trainwrecks for yields, those large equip
payments continue debiting ur cashflow, whereas
some preventative maintenance on some older
paid off iron can be put off for a bit, till things get
better, different for everyone, fact the matter, is
the equipment are the tools in toolkit, the land is
the money maker! unless ur a contract operator or
only interested in leasing most of ur landbase,
then at least u can build some retirement equity in
iron if u keep it recent.