Does old money exist in farming?

[Sheepwheat]

I don’t think visiting 250 farms out of probably 75000 in the province at the time would give you as much of a picture as you may think LEP? Not trying to be argumentative, but these guys I’m talking about would never have used a bank at least to borrow from, or an Agrologist in the first place. Maybe I am misreading your job description? They had their money in mutual funds returning 17 or 22 percent. They built their cash more doing that than farming ever did, but remember, the costs to farm were also magnitudes less than today. My dads income taxes from that era show that his costs per acre were under 30 bucks an acre. He was growing 40 bushel canola back then. Money was pretty easy to make in some areas those years.

I only say what I know, and stand by what I have come across all around me.

You had the spenders/borrowers and expanders, killing themselves with payments, having droughts and poor crops, barely making ends meet. In many many cases going broke. I get that. But at the same time you had the FRUGAL old coots raking in piles of cash from their basic cash investments and compounding interest, on top of some some wild and wicked years for farm income. Western grain stabilization was a godsend to keep some guys afloat. For others, it was just more free cash for the kitty. And then there was the original, good ole 3% of sales NISA. There were quite a few years there when guys were shoving money in there, getting govt matching funds, plus the interest was well over ten or twelve percent, and so cash wealth kept growing.

So combine this cash with not having to buy their land in many cases, or paying for land with cash, or within a couple years, and wealth grew almost overnight for some of these guys. One guy I know inherited millions, and never had to pat a cent for land! His words, not mine. His farm shows it too. I have little reason to doubt him.

I dunno. Again not trying to be a d**k here, just saying what I know..

Just the way it is.

[Guest]

Started with a 1070 and couple plywood bins
Bought every acre
Spent many months away in the patch to pay bills
WTF is a million or two now in the bank now , doesn’t amount to much
Hard to spend money now after havin none for so long

[Rareearth]

I think everyone is correct in their assessment of how some farmers were able to get ahead.

High interest rates and Govt programming were both good and bad, those types of opportunities always exist.

In the last year or two anyone that sold land, retired etc., and put the cash into the stock markets are making out like bandits. We all have that opportunity as well.

[jd3007]

I have always found that many of the “cash rich” farms were guys who were established farms with little to no debt and they hit the high grain prices from 1974 - 1982. When the droughts, low prices and high interest rates of the 1980s hit these guys had no debt and money in safe investments such as Term Deposits and Canada Savings Bonds and were getting fairly good interest rates . Many of these guys were born in the 20s and 30s and seen the depression so they were savers and not big spenders all their lives and when the 70s hit they banked the cash. The next generation did one of three things:

1. Took dads cash expanded and lost everything due to low prices, high interest, poor crops, and overspending.
2. Took over farm and remained careful but at the same time never took risks and expanded much. Basically farmed paid for land and made it through the tough times.
3. Took a paid for farm from the early 80s and made careful expansions right up to today. Quite often had wives working as teachers or nurses in small towns bringing in excellent salaries. Quite often had an off farm business or job themselves. Encouraged the next generation to get an ag education , work off farm, but also join the farm and expand “carefully. Were early adopters of life insurance/ savings plans which in many cases was able to compensate non farming children and leave land and cash in the farming operation. These operations are not debt free, but carry a manageable debt load and have good balances sheets and would be considered profitable “cash rich operations.

Now there is all kinds of other stories ranging from the bachelor uncle who was frugal and left family piles of cash, operations who sold land for big $ in Europe and then came here and started with cash, and others who maybe were growing a little “hemp” in the back 40 and were selling for good cash before it became legal! They will always be a few of them around but overall much of this new wealth is tied up in land and equipment and isn’t fully accessible until the operation comes to an end.

[sumdumguy]

Around here, some real cash was held by old bachelors who never spent their money.

[GDR]

I know a fellow that farmed with his dad. Dad always ran the show, cheap as that generation had to be. They farmed 3 quarters with a 4440 and a pull type combine. About 15yrs ago his Dad died, son went out and bought a full line of brand new JD equipment, new pickup and enough hopper storage to fill 3 times, a large modern shop and a very nice new house. He told me was all inherited cash that he had no idea his Dad had, wished they had upgraded the farm years ago. Don't know the amounts but would have been significant. Incase you think the point of my story is the son would lose daddys money, not at all in this case. Guy just enjoys farming his small acres in style without worry.

Lots of old money in my area, not just ag money, overall just a prosperous area... guess I just dont fit in!

[TOM4CWB]

Maybe another way to ask the question is :
“ are there any farmers that aren’t 3, 4, and next generation #5? “

If there is any old money it was earned, blood sweat and tears, good luck and likely bad luck as well. The most enduring features might be persistence, perseverance, community, church, and most importantly Family.

Rareearth very well said...

My Dad worked very hard for the one quarter he got... from the original 1881 homestead our family started.

We still have that quarter in the family today... yet almost everyone says our farm exists because of intergenerational wealth.

To the extent we have a spirit/heritage of co-operation and generosity... being frugal and humble... conservative and our family all fear God...

We believe in practicing 'the golden rule'... the 'Prosperity' and Blessings we enjoy are a multigenerational heritage that is being taught;
With good hard work habits that are taught... giving us the wisdom to decline 'get rich quick schemes' and too good to be true deceptions...

Blessings to all who seek honest answers and search for wisdom!

Read Proverbs for a start!

Cheers!

[AlbertaFarmer5]

Sorry. I have to disagree BIG time. When I was in the banking system was from 1988 to 1998. One job I held was the agrologist in head office. It was during the time of Farm debt and rightsizing the portfolio. One part of my job was to tour the province and meet branches' best customers. So I would have seen the "old wealth". In 1989, I literally did probably 250+ farm calls. Those best customers had net worths a magnitude less than operations do now. Sure there was some with plenty of cash but that was maybe $250k not millions. There was paid for land but remember this was a time of 40 to 70K per quarter land values. A two or three quarter section farmer would not generate millions. Just not enough excess cashflow.

I believe those with paid for land eventually allowed for leveraging. Remember debt was hard to come by, even with paid for land for collateral until the Mid 2000's. I put together a 3.2 million dollar deal in 1998 and received national recognition for it. There was a personal guarantee from a guy with $18 million in retained earnings in his small manufacturing business in Alberta. It was tough as hell to get passed, because it was tight even though it had scale for the time. I finally had to argue, look, this wealthy businessman wants to farm. He put $1 million down and fully backed the loan with mortgage security and a guarantee. Who are we to say it is or isn't the right thing to do... It went bad 2 years later but the bank never lost any money.

Anyway, I saw alot of net worths all over the province. Including your area Sheep. There were wealthy people, just not with millions of cash or off farm investments. What I did find is coffee talk always made situations way better or way worse than reality.

However I would say if there isn't a big crash in land values 10 or 15 years from now there will farms turning over 10's of millions in land and millions in cash.

That is exactly the info I was looking for. And the answer I expected ( although, of course, I'd ,much rather believe the opposite to be true so I can claim victim status) Thanks for posting.

Interest rates only spent about 3 years total in the teens, and that was 40 years ago. That only goes so far, averaged out with the almost zero rates of recent times, especially when land has been increasing at those same high rates in recent times quickly eroding the purchasing power of those savings.

Here, not only is there no old money, I don't think there is any young money, and not much outside money lately either. Cattle will do that. If there was old money, safe to say the BSE years solved that.

Not saying there can't be exceptions, but it would take a massive amount of after tax 1970's dollars, and some very good investing through some very low return periods, to have enough in 2021 to buy even a quarter of land at these prices.

[SASKFARMER]

Like I said earlier If the Bank was coming out to meet with potential borrowers most guys with cash don't give a rats ass. So you would have gone to people who borrow money.

I have a friend that farms close to us and he could buy out most neighbors today with Cash. Lock stock and barrel. Yes, he has never been married or gone anywhere.

Here is how it happened, get to know your history.

Back in the 70s land was cheap and guys who bought could double the farm or triple a farm in a few years. Equipment became better and away a farm went. These guys were in the 40s to 60s. They also were of the generation that saved. Then along came the 80s much like we have today. Land went Boom through the roof. We had some that were bought for 15000 total for three quarters and sold for 483,000 a few years later. Yes boys and girls the 80s were interesting. But if land went stupid smart farmers sat back and had lots of land so why buy or rent. Rent also was insane.

In came the stupid interest rate hikes. You could get for your money 15% on Savings. Oh, borrowing was 18% but hey it works, yea the borrowers didn't fair very well.

Take the $483,000. it was a year later $72,450 more. So now you took that and invested again $555,450.00 and so on and so on. Oh, but the taxman had to get some. Yes, he did but you were a farmer where do they make any money. Fertilizer and chem and droughts helped out min tax was paid over the 80s. Also, these guys never were big spenders. Had a good home, maybe a cottage, and a few minor toys.

That original investment could be worth in the end. Well over a million in tax paid CASH.

The 90s on the farm were not a time to spend money and most didn't.

Now these guys are gone and that amount is transferred down it would be like winning lotto 6-49. Some will piss it away some will quietly enjoy the time and play farm.

It's always about the money.

I also said earlier look at this weekends Telemiricle in Sask some farmer is going to always give a little to the cause.

Enjoy the day.

[Sheepwheat]

Interesting thread.

My one neighbor who admitted to have inherited his six quarters, mentioned to me once that the first million was much harder to attain then the next millions. With an ‘S’.

The thing that may be different in this area, is that it had been for most of history, literally a farming eden, with scarcely a blip of production difficulties. So that would have helped too.

Most I would say never inherited so much cash, true enough as they did in land and therefore leverage power. Being a third generation farm, and buying the exact same land over again each generation due to circumstances, tends to slow progress down, because the leverage factor never kicks in.

A thing often overlooked unless you didn’t have it: most farms, even if they didn’t outright get a bunch of ‘help’, according to them, did have help. They just don’t see it much. An example is a farm where he swears he built what he has on his own. Well, looking at rm maps from the sixties before he was born, it shows that his grandpa and dad had ten quarters of land in a block. Land he didn’t have to chase after or fight for. And his wife happens to have an 80 g job.

Another neighbor, very well off, fully admits and shows appreciation that he was very well set up. His dad paid for his first years inputs on 500 acres, co-signed his mortgage, etc. So you kind of have these extremes as well, where some will never see it, others do see it. It’s just interesting.

I’ll throw it out there now. I appreciate that my grandparents came to this spot. I appreciate my dads skills and his ability to make us never feel poor growing up. I appreciate that my mom helped me as much as she could. Just because it wasn’t easy for me, and that it still isn’t easy, because of financial constraints due to terrible circumstances, I want to say I am not bitter. I used to be quite self deprecating because I felt frustrated by my personal situation. But lately I have been coming to terms with it.

Just wanted to throw that out there, because I can see in text, how words could be construed. I ain’t jealous, I ain’t bitter. I just see things from a very different perspective due to circumstances. If you ain’t lived it, it’s hard to see, I get that.

[RTK]

SF3 - exactly... I never voluntarily visited a farm in my 12 year lending career without a reason and pebbles in my pocket to check on inventory or to ensure there was no excuse for the wife not to involved in the discussion.

Most guys that wanted to borrow money found away to come into my office.

Serious investors met advisers not me in the office as well. Why would anyone with a portfolio of any size invest with a lender?

My investment professional had a zoom meeting with my wife and I; my brother meets in person with his professional at least monthly. Pretty sure I know whose business is a priority.

[LEP]

Like I said earlier If the Bank was coming out to meet with potential borrowers most guys with cash don't give a rats ass. So you would have gone to people who borrow money.

I have a friend that farms close to us and he could buy out most neighbors today with Cash. Lock stock and barrel. Yes, he has never been married or gone anywhere.

Here is how it happened, get to know your history.

Back in the 70s land was cheap and guys who bought could double the farm or triple a farm in a few years. Equipment became better and away a farm went. These guys were in the 40s to 60s. They also were of the generation that saved. Then along came the 80s much like we have today. Land went Boom through the roof. We had some that were bought for 15000 total for three quarters and sold for 483,000 a few years later. Yes boys and girls the 80s were interesting. But if land went stupid smart farmers sat back and had lots of land so why buy or rent. Rent also was insane.

In came the stupid interest rate hikes. You could get for your money 15% on Savings. Oh, borrowing was 18% but hey it works, yea the borrowers didn't fair very well.

Take the $483,000. it was a year later $72,450 more. So now you took that and invested again $555,450.00 and so on and so on. Oh, but the taxman had to get some. Yes, he did but you were a farmer where do they make any money. Fertilizer and chem and droughts helped out min tax was paid over the 80s. Also, these guys never were big spenders. Had a good home, maybe a cottage, and a few minor toys.

That original investment could be worth in the end. Well over a million in tax paid CASH.

The 90s on the farm were not a time to spend money and most didn't.

Now these guys are gone and that amount is transferred down it would be like winning lotto 6-49. Some will piss it away some will quietly enjoy the time and play farm.

It's always about the money.

I also said earlier look at this weekends Telemiricle in Sask some farmer is going to always give a little to the cause.

Enjoy the day.

Actually the clients that I met were picked by the Branch Manager. Some were top borrowers, many had the largest deposits. Those were the people that actually just about fell over when you came to visit because they didn't know they mattered.

I still think over the years I saw a good cross section of the "real" numbers.