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Can the family farm survive?

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Jason

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Econ and Randy have both bemoaned the loss of small agriculture.

Small ag has long been considered the family farm. A mom and pop operation, enjoying life and raising kids with good old fashioned values.

My question is how many think the "family farm" in that context can survive, or does it even still exist?

How much money does it take to live a comfortable life? And how big does an operation need to be to earn that much?

Can the family farm change but still have the old fashioned values?
 

Andy

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Jason"My question is how many think the "family farm" in that context can survive, or does it even still exist? "
Yes it can survive.
Jason"How much money does it take to live a comfortable life? And how big does an operation need to be to earn that much?"
If the fram provides all the land and pays the utillities and insurance I think you can live on $25,000+3-5000 for each kid after the first. The operation size is less important than how efficient it is. You need to get the kids involved if you are going to make it.
Jason"Can the family farm change but still have the old fashioned values?"
It already has changed, but i don't know how much more it can change.
 

Jason

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I think you can survive on the $25-35,000 but what about retirement?

Is that kind of wage enough to entice kids to stay on?
 

Andy

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"That wouldn't pay the property taxes in a lot of states!" I think that the farm has to pay the property tax, the houshold income is over and above that.
 

Jason

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If you have a household income of $25-35,000 I think the size of operation needed to do that is important to this discussion.

To achieve that kind of income after all farm/ranch expenses and after taxes(?), would take a lot more than just showing a profit.
 

cowzilla

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Jason If you require 25000-35000 Dollars per household and given the ave. net / profit per cow at $100 then all you need is 250 - 350 Cows. Some cattlemen make a good living on less but usually the land or cattle are paid for allready :lol: but unfortunatey not mine :roll:
 

Jason

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Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?
 

Econ101

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Jason said:
Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?

Heck, we get paid to winter them on pasture in Texas. What part of Texas are you in?
 

frenchie

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Jason said:
Ok then there is another important piece to the puzzle. The land base.

In some areas it would take nearly 4000 acres to run 350 head.

In this area grass is selling for $7-900 per acre. 4000 acres at $800 is 3.2 million dollars.

A $32,000 annual income is 1% of the land investment.

Payments on 3.2 m over 20 years (no interest) $160,000 per year.

Income from 350 calves at $600 is $210,000 (100% weaned calf crop)

That leaves $50,000 to take a $35,000 living wage from, that leaves $15,000 to pay for 350 cows or just over $42.85 per cow for bull power, deworming, winter feed etc.

Can anyone winter a cow for $42.85?

So either buy cheaper land or lease it longterm.
 

YoungFarmer

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With those figures Jason that would mean you would have over $9000 per cow invested in land. Who in their right mind would ever go out and pay that much to raise cattle. I have a hard time even justifying paying $1000 per cow for land invested in Manitoba even with decent bred cows still selling for under $500 a piece here. In agschool they harped on us to know what our return on capital investment is on the farm. Fourtantely the best thing i learned was you will make more money with your capital in the bank than invested in farming. (though I was not quite willing to follow this advice and find the only people willing to inquire on my cattle for sale are already in their fiftys and looking for a deal)

Im thinking its easier to just continue working my $40,000 a year job and forget trying to farm.
 

Econ101

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Unfortunately that is the result of a cheap food policy. You almost have to have the operation handed to you at a real discount to its value for you to be able to make any real money owning and running a farm as a lifestyle. Why do you think so many "rich" people own farms instead of family farmers doing it for a living?
 

Jason

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The comments are staring to say "why farm?", and that's what the numbers say in many places.

Econ blames the "cheap food" policy but that just means the gov't would subsidize ag by inflating the cost of food. That also doesn't adress the poor people that live below the poverty line and can barely feed their family now. Shifting problems from one group to another isn't an answer.

I guess this explains why the US can't supply enough beef for it's own use.

Someone has to own this land, one post mentioned long term leases. That is an economically viable option if you can get one. And the land doesn't sell out from under you. And someone else doesn't outbid you on the next cycle. It isn't very acceptable while building an operation because of the lack of stability. (long term lease on land is considered 3-5 yrs.)

What has been the result? Ranches/farms all of ag is getting bigger to make a living on small margins.

The 'lifestyle' of working 60-70 hrs a week to maybe make that $35,000 isn't as nice as the 'lifestyle' of working 40 hrs a week and making $40k.

Some who make a good living at their real work have 20-50 cows as a hobby. You see the split. Those hobby cows are disposable, dump them if they get in the way. The big ranches might run 500-1500 cows.

There are some smaller ranches around that will continue if they get passed on to the next generation at a discount. But most of these are running close to 200 cows now, if not more. Yet no one is attacking ranches from making changes to survive, but other sectors use the same ideas and get treated like the plague.
 

Econ101

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Jason:
Econ blames the "cheap food" policy but that just means the gov't would subsidize ag by inflating the cost of food. That also doesn't adress the poor people that live below the poverty line and can barely feed their family now. Shifting problems from one group to another isn't an answer.

Contrare, Jason. I propose the govt. stop subsidizing food and decreasing its price. I think I even posted a Western Resource + group arguing for this. If I didn't, I will do it again for you. Food is inelastic in its consumption. You don't eat a lot more day to day because the price is down. When governments increase the food supply via a cheap food policy, it reduces the prices that producers get. Their profit margins decrease, and there is more concentration in the industry. I happen to believe that diversification in food production is an important Homeland Security issue, not just an economic consideration. Again, go look at Katrina for lessons there.

The thing that has kept food prices low over history has been overproduction. You make that same argument in your cattle cycle example. It is a reality. We can allow all of our food to come from other parts of the world, as we have not fully tapped the productivity of the planet completely. I don't believe this is necessarily the best way to go because of its impact on the planet. Its impact on our food security is also of great concern to me. Russia knows those lessons all too well.
 

Jason

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You still don't adress the problem of raising food prices hurting low income Americans or Canadians.

What is the level of poverty in the States?

In Calgary the hottest economy in Canada it is 17%. People that can't afford food now won't be able to afford it if it rises.

I understand the problem with foreign control of a countries food, but limited to beef, why is Canada considered a threat to the security of the US?
 

Econ101

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Jason said:
You still don't adress the problem of raising food prices hurting low income Americans or Canadians.

What is the level of poverty in the States?

In Calgary the hottest economy in Canada it is 17%. People that can't afford food now won't be able to afford it if it rises.

I understand the problem with foreign control of a countries food, but limited to beef, why is Canada considered a threat to the security of the US?

Prices should always be a factor of supply and demand. If you have seen what happens in these third world countries when imports come in, you would see the problem I express about food security. Cheaper food does not necessarily decrease poverty, sometimes it creates it. It is kind of like dumping. Dumping on world markets just gets rid of supply so prices can remain high domestically.

The problem of poverty is a national and global problem. It should not be born on the backs of producers alone. I you would like to individually help out the poverty situation and not enough beef for the poor, then donate some. Having a "cheap food policy" does not help the situation. A cheap food policy leads to poor farmers.

Why does John Tyson need more money from Canadian taxpayers when there is that kind of poverty in Canada? Why is this a producer problem? Maybe if food cost a little more then people could get decent jobs producing it and get out of the poverty you suggest. All of this has to do with efficient resource allocation. READ ADAM SMITH's book, "The Weath of Nations"!

On your last question, you already know the BSE issues. I personally think that whole issue is being mishandled. Economically speaking, captive supply is a bigger worry to me on its effects on the market notwithstanding the hurt Canadian producers have had over BSE issues. You already know who I pin the blame on BSE on. Packers made the problem with MBM in feed. Whether they knew it at the time or just wanted to play Malborro Man (tobacco) on that one doesn't matter to me.
 

cowzilla

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Jason ; You seem to think food is too exspensive in North America but food costs amount to only 15% of total household costs! People tend to spend more on less important things. Only in Canada do you see people drive Big Cars and Trucks getting only 15M.P.G. complaining about paying more than $2/pound for hamburger :!: Its all about show at somebody elses expense( usuually farmers).
 

Jason

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I don't think the gov't has chosen a 'cheap food' policy on purpose. I think competiton in agriculture has kept the price of commodities down.

The first thing we do if we need to expand is grow more. More pounds of beef, more acres of grain.

The yield per acre or pounds of beef per cow has gone up dramatically. At the same time fewer people are needed to provide the same level of product.

30 years ago no one had heard of 500 cow ranches. Today they are not considered out of place. 30 years ago a farmer cultivating 2-3000 acres was a big deal, now that is small.

Why does the packing industry which has had to change dramatically over the last 30 years take the flak for all the industries woes?

Econ would have us believe BSE was caused by the packers to manipulate the market. That's like shooting your foot off to get a disability pension. He says pushing a swing makes it go higher, but then it comes back and swings higher the opposite direction as well. So much for a positive manipulation if it causes an equally large loss.

Family farms are using the same mechanisims the packers are. Greater numbers of cattle, or more pounds of beef supplying the living of fewer people on the same overhead. This is called efficiency.

A family farm that grows crops and has a feedlot included is a good example of vertical integration. Costs are avoided on the calves and on the transportation of feedstuffs. More dollars per head are realized and the owner stays fully employed. The owner knowing how the calves have been handled knows they are better than average and wants to capture some of the extra value they hold on the rail. They approach a packer and look for a deal on the grid. The packer gets a group of cattle without some of the risk of buying unknown cattle. If they don't grade well the price is adjusted, the owner takes the hit. If they do better, the owner does better, and the packer is glad as they have a better carcass to sell.

Somehow R-calf and Econ hate to see a private deal like this occur. R-calf has a LMA bias, Econ is just anti packer. How did the packer manipulate the family farm into becoming more efficient and asking for a larger share of value put into the cattle?

If the industry continues this direction, the cattle owners will continue to expand, Tyson and Cargill might have to offer more competitive contracts (if possible) to get any cattle. Or they will be relegated to those hobby cattle spoken of earlier. The cattle owners have he most incentive to expand into slaughter and even retail ventures to capture the most dollar from each pound of beef.
 

Sandhusker

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I think the family farms/ranches can make it, but they had better pay close attention to their debt load and cash flow. You need cattle, land, and equipment, and you had better have two of the three paid for.
 

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