Comments on Agricultural Policy

[charliep]

A comment I hear is the larger machine steps to increase size. You might have a perfect machinery to handle a 3,000 acre farm. Moving to 4,000 acres means working a lot harder/exposing yourself to more harvest risk. Moving to 5,000 acres means you are either over machined when you add new equipment, relying on custom work or expanding/having custom work as a part of your business plan.

I also note that in previous, most farmers owned most of their land. Today, a farmer owns a 1,000 acres and rents the rest. A lot more risk with maintaining working capital to finance a large farm a challenge. Add in expensive equipment and you have the challenges that every farmer faces.

[AdamSmith]

In my mind owning land is much more desirable than renting. Sure the cash cost to buy are usually larger per acre than rent but when it comes to years like this year when every grain farm is losing money the ones who have decent equity can outlast the guys who have less equity. Too heavily weighted on rented land means more equity in non depeciating assets and too little in land equity and when it comes time to restructure debt there is very little a farmer can do without the land based equity.

A little rent is fine but if the bulk of your land base is rent. You might not survive this PERFECT STORM.

Think long term and you'll likely be in business - long term.

Think short term and you'll likely be in business - short term.

[magpie]

I agree with your statement that it is all about debt/ equity ratio's. I have a friend that is a senior loans manager and he talks ratio's allot and I tend to agree with him . I'm sure glad I heeded his advice on some equipment purchases a few years back . My thoughts exactly Adam Smith sometimes new paint doesn't fit . The price we have to pay for equipment now warrants year round use not a few weeks spring and fall.

[northfarmer]

Your equipment configuration has to be matched to your land base to get to lowest cost per acre of fixed overhead. Your agronomic choices need to be be made to optimize your potential return factoring in risk and eventually diminshing returns on higher levels of input costs.

I have grown my crop production from from under 1000 acres to over 6000 acres with direct seeding, a strategy adopted almost twenty years ago. With one tractor and drill we seed the entire acreage.

My dad figured I was doomed for failure when I bought out what was left of the farm. Before he passed I proved him wrong. The farm will survive at least another generation and hopefully more.

Our declining cost per unit of production, both variable and fixed is what keeps us in the game. We are on the leading edge/proven edge of many technologies, yet our main tractor is twenty years old - we only put 200 to 300 hrs a year on it.

Our industry needs the support of goverment policy and we need to focus on maintaining a focus on the specific needs of primary producersc. But,your business still has to be built on sound business/economic strategy in porder to survive the tigh margin/loss years.

I agree on the undercapitalization issue, it is ahuge challange to gowing farms.

They are looking at flow through share investment opportunities for the ag industry developments. This could help and has been helpful in providing capital. Undoubtedly one of the greatest advantages of farming are the tax deferral and tax managemnt planning tools we have available to us.

I certainly could have raised more capital and shared my tax strategy to lower my risk if such tools would have been available

[furrowtickler]

northfarmer, are you running 2 combines?(class 6 or 7)

[northfarmer]

was running with two and sometimes a third classs 6 combine. now have one class 8

[charliep]

Just to help an ag economist who isn't allowed to escape into the real world very much, what is the difference between a class 6, 7 and 8 combine?

[furrowtickler]

charlie: about $50,000 per class(new) and 20-25% capacity per class.
northfarmer: One class 8 on 6000ac? We looked at going this rout but on average years we would never keep one full enough. Did you get all the crop off in decent shape this year with the one machine? 36ft. or 42ft. header?

[northfarmer]

we only operated the one, and did get some help with other combines at times when they were available, and we could keep the grain away....we used 36 foot, and would not be scared of 42 foot d****r....i did not beleive the capacity claims until i tried one a couple of years back....you have to have skilled operators to keep these machines moving at capacity...6 miles an hour cutting and picking swaths, but have done up to 1800 bu/hr in wheat, oats and peas and 1400 bu hr in canola

[northfarmer]

the crop came off in as good a shape as we could have given the environmental factors....there are guys i know that even went to the class nine machines and were happy... but, you also need a decent crop even at those speeds, and of course in this business that does not always happen, specially if we run short of water....