Does old money exist in farming?

[AlbertaFarmer5]

A thread a few days ago brought up the concept of old money in farming.
I'm probably not the foremost expert on the subject, since I have not been fortunate enough to have been a recipient of old money, or new, or anything in between.
But, I have trouble believing that there is such a thing. With the inflation we have experienced, especially in land, coupled with low interest rates for decades now, I just don't see how any farmer could have amassed such a fortune that his or her kids or grandkids could still be spending it on 2021 priced land or machinery in any signifigant way. Especially after a couple of decades of consistently poor commodity prices in the 80's and 90's into the 2000's.

Am I just niave and unworldly to think that I am not competing against "old money"?

Any real world examples, or just assumptions about someone else who might have worked smarter, harder, or taken the right risks at the right time?

Old land would be a completely different story. If each successive generation doesn't have to buy the land all over again, or buy it from scratch, it would be a massive advantage.

[Sheepwheat]

Yes. BG TIME.

[jazz]

I think you mean old land combined with new leverage AF. Nobody can back any body in this business on a operational level because the costs are too high, but they can cosign assets to leverage new members up to par. Hence the reason Canadas ag sector has more debt than some entire nations do.

[Sheepwheat]

Yes. There is. I know this for a fact. At least around here. Some inherited millions in cash, let alone the land.

But the ppl who have had that situation will never admit it easily. I know several who claim that “ I did it on my own”. Blinded by the reality. They usually don’t see it as outsiders do.

Remember that lots from the older generations made more money in interest than they made farming by a long shot, once they had a kitty started. If one had cash in the eighties and nineties, it was a cakewalk. Far more did than many let on. Usually the two and three quarter sections guys who weren’t expanding at that time.

Another thing that has happened is the young guys come up and gets his first crops paid for by parents. Happens all the time. Lots of times mom had a job and every cent went into the kitty for 30 years, so long as the farm got by. Even if the job is paying for the living costs, it allows the farm to take care of itself, even in rougher years.

The only farms around here left, are the ones with either inherited land, cash, or have a darn good off farm income. I can think of zero started from scratch, or that built without historic genetic lotteries on their side.

Yes, it makes it tough to compete when one is less blessed.

But that’s ok. I have come to terms with it. Being wealthy isn’t all life is about...

[bucket]

if this drought holds on, it will be interesting to see how deep the pockets are.

[AlbertaFarmer5]

I think you mean old land combined with new leverage AF. Nobody can back any body in this business on a operational level because the costs are too high, but they can cosign assets to leverage new members up to par. Hence the reason Canadas ag sector has more debt than some entire nations do.

That I can accept.
Lately I have learned more about some of the first generation European farmers in the general area, who we were always told had sold out their 3 acres in Holland for millions and came here to spend it. At least in a couple of cases, these now succesful farmers started from zero and worked really hard, and used the same financing available to the rest of us, but took full advantage of it. If anything, they have nothing to lose, not risking the family farm as collateral, they can go for broke unencumbered by family baggage.

[helmsdale]

Yes.

If they expanded at the right time, and resisted the idea of a land based empire and instead paid the tax and stuffed it away, it would blow your mind what some elder farmers have in the bank...

[AlbertaFarmer5]

Yes.

If they expanded at the right time, and resisted the idea of a land based empire and instead paid the tax and stuffed it away, it would blow your mind what some elder farmers have in the bank...

And that is the piece of the puzzle that makes the concept even harder to believe. To accumulate any significant savings after tax in this country is just about impossible, then add inflation.

[Rareearth]

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.

[LEP]

Yes. There is. I know this for a fact. At least around here. Some inherited millions in cash, let alone the land.

But the ppl who have had that situation will never admit it easily. I know several who claim that “ I did it on my own”. Blinded by the reality. They usually don’t see it as outsiders do.

Remember that lots from the older generations made more money in interest than they made farming by a long shot, once they had a kitty started. If one had cash in the eighties and nineties, it was a cakewalk. Far more did than many let on. Usually the two and three quarter sections guys who weren’t expanding at that time.

Another thing that has happened is the young guys come up and gets his first crops paid for by parents. Happens all the time. Lots of times mom had a job and every cent went into the kitty for 30 years, so long as the farm got by. Even if the job is paying for the living costs, it allows the farm to take care of itself, even in rougher years.

The only farms around here left, are the ones with either inherited land, cash, or have a darn good off farm income. I can think of zero started from scratch, or that built without historic genetic lotteries on their side.

Yes, it makes it tough to compete when one is less blessed.

But that’s ok. I have come to terms with it. Being wealthy isn’t all life is about...

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.

[SASKFARMER]

You are correct LEP every town has one guy with money.

Watch telemiricle this weekend it can happen.

Yes some have 250000 real cash nit rrsps.

But some have millions and don’t borrow.

If land holds some of this generation will quit with millions. Others with no debt or min will leave with lots.

[Oliver88]

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.

To be a 4th or 5th generation farmer on the prairies your family and ancestors had to earn it and put up with a lot of lean years and decades. The lean times would deplete most cash reserves.

It looks like LEP is an expert on this topic. It would be good to hear what characteristics the most successful farms have in common?

[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.