Young farmers face financing issues...an interesting article

[Oliver88]

We need the young people to farm...and try new things ...maybe it is time the financial institutions start looking at better programs...

The root cause of the farmers challenges appears to be not owning any land or having assets to use for a line of credit. The farmer in the article was seeding 5600 acres and owned 0 acres due to the price being to high around the Edmonton region.

If there is less of a barrier to entry for grain farming and banks give out large line of credits to every young farmer who rents land, how would this effect land prices?

[blackpowder]

So glad I don't give a damn for any of this anymore.
Everyone that wanted a piece of what I stuck for 40 years on can kiss my ass.
There is a young non relative in my will. At half market. What good is it to me when I'm dead.
I've been to a lot of funerals where they were flipping checks in the casket. Not mine.
Hopefully I can have a blast before they pat me in the face with a spade.

[ajl]

Looked up and read the original article. Impressive feat ,no doubt. going to 5600 acres of rented land, however, banks are always asset based lenders because of collateral so that is nothing new. Would not rent that much here without owning land that is for sure. Artificially low interest rates have distorted the land market and made it a toxic asset I get but Evansburg is a fringe area west of Edmonton so could have bought land out there. They sure had a crappy year there this year as I was out there in mid July and everything was drowning as it was at my location. I hear the claim and it is repeated in the article that young people are not interest but reality is that there are too many young people pursuing farming and that is why land is high. See lots of young second and third gen farmers here. There is no opportunity in the sector at the moment as evidenced by high land prices but the young are not considering off farm jobs as there is no opportunity there either. Saw a job wanted in the north peace area ad on the farm machinery page of Kijiji yesterday. The business he was working at recently closed. Been a long time since you saw that in AB.

[Marusko]

https://www.producer.com/2020/01/young-farmers-face-financing-issues/ https://www.producer.com/2020/01/young-farmers-face-financing-issues/

There's the article for any interested.

ajl yes there has been plenty of land come up publicly for sale in that area in the last few years. He's definitely had some opportunities to buy, but couldn't or didn't for whatever reason.

I'm 30 with an off farm job, that's the only reason I could afford to buy land last year. Annual land payments are now greater than my take home income. I'm a far cry from 5680 acres though.

[Rareearth]

Nothing ventured nothing gained

If it was easy anyone could do it

Penny wise pound foolish

Luck

Timing is everything

Entitlements


All important, general, thoughts that come to mind

[AlbertaFarmer5]

In most other industries, they seem to function without requiring asset appreciation and borrowing based on inflated assets. I would guess that most businesses do not own the real estate their businesses sit on, and the profit pays the lease. So no reason why farmers should expect to be any different.

Personally, I congratulate this young farmer for doing what most say can't be done. Growing a farm from its own profit. And doing it without outside financing.

That said, I don't like the business model of farmers going back to being serfs on rented land. Our ancestors came here to get away from that oppressive system.
And no one can reasonably claim that a farmer( or anyone else) will treat rented land as well as they will treat long term owned land. And considering that soil and our environment are the ultimate non-renewable( on human timescales) resources, I'd rather have farmers invested in the land where they make their living.

I too have been growing a farm without financing, except financing for buying land. It is certainly much slower growth than what he has achieved by instead renting land.

A comment in the article really shocked me:

A farm that I know has a revolving operating line of credit equal to the total gross income that the farm produced in a year.

Is that really a common occurrence? Essentially being an entire year behind on all income and expenses?

[SASKFARMER]

Some farms do go for the big oppLoan but they have to give that amount of security to get up to 70 to 80% of the value.
It’s a whole Loan and they sign everything over to the banks. They are a corporation so when they are done it’s a real easy exit. 1800 RB.

If you want to play that game the banks play and they don’t lose.

[AlbertaFarmer5]

Some farms do go for the big oppLoan but they have to give that amount of security to get up to 70 to 80% of the value.
It’s a whole Loan and they sign everything over to the banks. They are a corporation so when they are done it’s a real easy exit. 1800 RB.

If you want to play that game the banks play and they don’t lose.

So, is that how some operations fund exponential growth? A huge operating loan, use that to pay for all the rent, inputs, equipment lease payments, and their own income? Then hope nothing goes wrong?