Comments on Agricultural Policy

[parsley]

wmoebis

Very interesting observation, that producing more and more solves the problem. VOLUME solves income/farming

It hasn't.

You have interestingly left some questions for familyfarms to quander:

1. Is 'big' the best for family farms?
2. Is 'big" best for small towns/rural?

My farmdebt contacts tell me that the folks who are really in trouble in Saskatchewan are the guys who have
massive acres. HUGE Operating loans, advance loans, poor markets, while the smaller guy is hanging on. Is that what you hear?

Parsley

[sawfly]

the biggest are suffering the most.with negative margins the last few years. more acres more losses
smaller producers are more likely to have off farm employment to help cover losses
we are just lucky that, in these times there are decent jobs availible in most areas.
if this continued (loseing big farms) im not sure what will happen,
will we have pasture and cows ranchland. the smaller grain guys with jobs wont expand to meet the same fate.

[wmoebis]

Parsley
My farm debt contacts (my banker) tells me if it is working for you don't change because things aren't always as they seem ?
My coffee shop buds tell me I can't make it the way I am going ?
I am a small farmer my biggest challange seems to be my marketplace and political policies.
As examples: last year I sold all my barley crop to a local hog barn that went broke. The gov't through the court system saw that their Ceo's and accountants got paid but not us suppliers. I was told by ag economists that Saskatchewan farmers were poor buissness men and that we should expect this.
I did my enviro farm plan and asked if I could up grade my machinery to airseeder and was told that I could put new openers or GPS on existing but not buy machiney. I use discers. I wonder how GPS would help on my discers in my hills?
On the other hand there is getting to be a lot of good used big machinery out there that I can farm my place faster possably cheaper and more efficiantly.
Last year I went from a 410 mf combine to a 1480 IHC for very little money. WOW I took off my crop and went and helped two different neighbors finish theirs.
Is big best for small towns? Look at our landscape. I guess if you are the Govn't getting rid of the small towns is best. If you want to live and raise your family in this life style no.

[sawfly]

the whole thing is about national intrests. the usa and EEC . decided on production, which feeds secondary manufactureing and market dominance.

and in the end pay the farmers out of the national proceeds.
is that what we want, if it is then most of the other issues , like wheat board or not, or prices are meaningless.

encourage all out production, and secondary processing (ethanol biodiesel,feedlots,organics)
any attempt to cut back production only hurts us as a nation and benifits other countries.

[AdamSmith]

I think the biggest challenge facing farmers today is the lack of capitalization on too many farms. A well capitalized farm is in much better shape to weather this financial storm than a farm that is under capitalized. Size isn’t so much a determining factor. A well capitalized large farm is in much better position today than an undercapitalized small farm, and visa versa. Probably the biggest reason a farm is undercapitalized is because that farm expanded too much too fast. It doesn’t matter whether it was a 300 acre farm expanding to 900 acres within 1 or 2 years or a 3000 acre farm expanding to 9000 acres in 1 or 2 years. It’s all in the debt/equity ratios.

The guys who I see in trouble are guys who doubled or tripled their land base over a very short period of time. The guys who expanded more slowly and at a more moderate pace seem to be in better shape.

It’s a bit of a tightrope to walk. You know, it’s the risk-reward thing.

Machinery costs are killers right now. I’ve had this little running debate with my father about what is the biggest negative influence, facing grain farms today. He insists its input costs. I think its capital costs in Machinery. Yes, seed, fert, and chem. cost are high but really not that much higher than say fifteen years ago. Yet the price of new SP Combine or a new airdrill is out of this world. I’ve bought both recently and there are some days I think I would be better off pulling the old discars around. But I wanted to go one pass and that required a huge capital outlay. When I started farming my dad had 28 feet of IHC 100 DD press drills and they were used for 20 years. My Bourgault 5710 airdrill is built ten times better than the old 100’s so I think it should last as long.

I really don’t care about new paint, but when you want to change and update technology that requires massive outlays of capital and massive debt.

I don’t know whether my sons will farm (they are only 15 and 11) but I can guarantee you when the time comes for them to make that decision, if this farm isn’t well capitalized, I’ll insist they do something else with their life. But if all I have is old beat up equipment for them to use they’ll take a pass on the farm anyway.

It’s a real Catch 22.

[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....