/ Producer Information
by Grassroots Livestock
Why arent farmers their own bankers?
From News Group Post alt.agriculture
A Question and replies from newsgroup post on alt.agriculture.
through 8-16-99 1
I worked as a farm hand for a while, but IN NO WAY am I a farmer.
Current price problems aside, I do not understand why the family farmers of this country are not extraordinarily rich, with enough money to bankroll themselves, instead of always borrowing against next years crops.
The weight of time, endless hard work, cheap family labor, savings, price supports in the past, soil banking programs, etc - would seemingly give the family farmer a huge advantage economically. One where he would easily be able to cover his own crop production for at least a year or two.
This does not sem to be the case. I get the impression that every farmer runs to the bank, hat in hand and begs for loans, at whatever interest rate offered, and has for 100 years.
WHY - or HOW is this possible? I am not trying to start flames here, but I just have never understood!
they say ignorance is bliss
the national average corn yield is approximately 150 bu./ac current corn price at my local elevator is around $1.70 that is $255/acre in total income cash rent is approximately $60/ac fertilizer for 150 bu. corn is $50/ac seed is approx $45/ac for good seed insecticide seed treatment approx $3/ac herbicide approx $20-35/ac 1 tillage pass prior to planting $3/ac planting $10/ac harvesting $15/ac chop stalks $4/ac 1 tillage pass after harvest $5/ac for a grand total of $230/ac expenses $255-230=$25 return on investment
$10/ac crop insurance (ballpark number) $5/ac liability/farm insurace $25-15=$10 before taxes -40% for misc taxes (wheel tax, income tax, social security, self employment tax, gas taxes) $10-4=$6/ac profit
now from that subtract living expenses, health insurance, house payment, car payment
damn! I didn't realise I was sooo rich
farmers can't deduct principle payments on machinery so we are punished if we want to own it
a new combine $150,000-250,000 a new 4 wheel drive tractor $100,000-175,000 a new truck $60,000-100,000 a new pickup $20,000-35,000 a new livestock trailer $6,000-11,000 a new corn planter $3,000/row a new field cultivator $500/ft a new sickle mower $3,500 a new round baler $17,000
yup, us farmers are rolling in dough lets see whos makin the money in the last 4 years all agricultural comodities have seen some of the lowest prices in the history of this nation tell me wise guy, how much did the price of hamburger go down when beef was $.25/lb how much did the price of an easter ham go down when you could buy whole hogs ready to butcher at the livestock auction for $8
it takes 1 - $2.30 bu. of wheat to make 60 - $1.50 loaves of bread it takes 1 - $2.30 bu. of wheat to make 60 - $5.00 boxes of breakfast cereal it aint the farmer making the money its archer daniel midland supermarket to the world or cargill or purina or continental grain I'll leave it at that before I loose my patience
When I read NatiLynn's posting I really couldn't be bothered
to give it an answer. Now that I have read yours, I'm glad that
you made the time. Your figures and analysis of agricutural
finance would probably stand up in every developed country in the
world at the moment. They certainly would in the UK except that
we have the added problem of Politicians and Corporate Greed
playing around with our exchange rate that has force our bottom
lines into the negative in recent years. Jonathan Hoskyns
When all you read is the headlines, no wonder the grass always
looks greener on the otherside of the fence.
I can tell you that there are just as many farmers this side of the pond that look to American agriculture with envy and I expect that they would be just as wrong as you are. I can't defend the European Common Agricultural Policy because I don't really understand it. It has evolved from a mish-mash of different solutions to the problem of over-production following recent advances in farming since the shortages after the last war.
I can't justify them because I farm in a sector that is unsupported in this way and we have to fend for ourselves in the big wide world. However there are two points I would like to make;
Firstly, the "in your face" area payments that are currently being paid to European farmers has replaced a multitude of hidden production based subsidies that exisited before. The rational behind this was to stop paying yield based subsidies for crops that were not wanted and then having to pay
to have those crops stored. It also made it plain to see exactly what the EEC was paying to farmers in terms of subsidies. Now it exists, this system of one payment has allowed the EEC to put in place a plan of structured removal of farming subsidies over a period of time that will allow farming business's and the world market to adjust slowly. The idea being that as European subsidies are removed so will compeditors and the World commodity prices will rise to a happy medium (this is where the argument falls down :-(((( ). This has started to happen. Secondly, by the tone of your messages readers would be led to believe that where American farmers are recieving $6 /acre as a net margin for their years work European net margins must be $206 /acre. This is clearly not the case. Using your back-of-an-envelope calculations that would mean a $25,000 income from less that 125 acre farm. In my dreams. The harsh realitiy is that European agriculture is in exactly the same dilemmor as the USA, it's totally on the floor at the moment. Over the last four years certain commodities have their moments but I can't name one that is making a return to farmers at this moment. At the end of the day, the subsidies, tarrifs and trade restrictions, combined with yield and "economy of scale" differences, not to mention the differential in land values, rents and labour costs all somehow even themselves out in the long run. It is possitivly ignorant to hold up a single headline fact and declare that your compeditors in Europe have got it easy. It's all give and take and the sooner that all trade restrictions are removed the better but I think that is in my dreams too.
the consumers don't have the faintest clue what things cost or where they come from alot of city people still think milk comes from the store shall we start a long flame on product labling like the a/c fan motor i bought for my combine from agco allis $150 from agco $60 from napa basically the same motor down to the lable on the box that said manufactured with pride in the USA while stamped on the side of the motor is a lable - a product of canada
Easy. Go get yourself a job and offer to work at 1954 salary.
Something like $3. a day and then go out and pay 1999 prices for
everything you buy. Maybe then you can understand.
Interesting notes that I have run onto recently. After WW1 a bushel of wheat was sold for the equivelant of a day's wages or $1. Today that same bushel sells for less then $2. ($1.87 when I took the last load in three weeks ago.) Corn and soybeans are selling at 1954 prices. In the '40's and early 50's the average American spent approximately 50% of his take home pay for food and clothing. Today the average American spends less then 10% on food and clothing and of that portion the farmer gets approximately 1 cent for every dollar spent on food or clothing. In 1951 my father sold the wheat off of 6 acres to buy a tractor cash. 50 bushels x 6 acres x $2.00 = $600.00 for a new 24 hp tractor. This year we averaged 55 bu. per acre. 55 x 1.87 x 6acres = $617.10. A tractor the same size today costs approx. $15,000.00. Know why small farms are disappearing??
Can these figures be correct? Are you serious that you only
get 5 bu./acre more than your Dad did 48 years ago? What kind of
fertalizer/pesticides did he use? You certainly must be spending
more on them than he did, and you should be reaping the benefits
of the increase in technology over the last 48 years of
Yes, the figures are correct. Normally we get 60 to 65 bu. per
acre but this year because of the drought we were down a little.
But even if we would have gotten a yeild of 65 bu. per acre it
still comes out to $729. A long way from the $15,000 price for a
tractor. Ag research? I live 10 miles from the famed Ohio
Agriculture Research and Developement Center and have several
friends who work there. Ask the farmers around here what they
think of OARDC and it is not much. They tell us one thing one
year and several years later tell us something exactly opposite.
The farmers take the beating for listening while the researchers
shrug their shoulders and take there fat paychecks home. One
researcher told me personally, "I wish I could deny I ever
wrote and advocated this but my name and picture are on the
articles." A good friend of mine and I joke that he will
keep me posted on their latest recommendations so I can do the
exact opposite so I can make some money. I personally had a herd
of Jersey cows that averaged over 45 lbs of milk a day. Had OARDC
come in and test the feed and changed the feed ration to their
recommendations. Within one month the herd average dropped to 15
lbs. I got out of dairying fast and several years later OARDC
shut down the lab because too many farmers had the same
experience. What a sorry joke....Ag Research!!
Thanks for taking my question seriously, I'm considering
getting 'back' into farming after a 25 year absense and I'm just
about to start researching what/where to grow. I really don't
need that much income for the first few years...but I do need to
get some!!! Maybe I should stay away from grains/legumes and try
my hand at xmas trees or landscaping trees, etc... Are there any
crops making a fair profit this year? Just for kicks, I checked
out the prices of tractors like you suggested. Holy Cow!!!
They're more than my first new car! And, that's without the AC,
Stereo and Fuzzy Dice! ;-)
It is my understanding that after the civil war in the US the
freed slaves were granted 40 acres and a mule by the government.
This was deemed sufficient to provide a good living for a family.
Today you would need 40 acres and a full time job. My brother has over 1000 acres of irrigated crop land and his wife has been teaching school for over twenty years so they can afford his hobby.
The difference between 1000 acres and 40 acres is that you have the opportunity to lose a lot more money on 1000 acres.
It's real simple and six words will explain it. Farmers buy
retail and sell wholesale !!!! Dennis
Simple - supply/demand curves on most commodities don't favor
producers at the moment. Take a look at the NY and Chicago
markets - today (and for all of this year and the foreseeable
mid-term future) our major commodities are priced below the cost
of production. Even using the best technology, most efficient
techniques, and highest yielding varieties, there is a limit to
how cheap we can produce corn, soybeans, and cotton. Also, this
technology and technique comes at a price. When I was a kid in
the 60s, we used to farm 600 acres with 3 full time farm hands
and we were large farmers. Today, we still have 3 fulltime farm
hands, but cover almost 10 times that acreage. And we're not
especially large farmers. The equipment that helps us achieve
this efficiency runs high - tractors in the $80-180,000 range,
cotton pickers in the quarter million dollar range, combines in
the $100-200,000 range, etc. And the chemicals that keep us from
having to have an army of cotton choppers run high, too - mid 5
figures a month, with at least one or two bills
each year that reach 6 figures. And mind you, we're cutting input costs to the bone, doing most of the work ourselves (i.e. we don't use as much custom application or custom harvesting as we used to, we use much higher thresholds for insect and weed infestations before spraying, we use specially bred varieties that reduce the need for spraying, etc.). But farming is, and has been for the past 30 or 40 years, a capital-intensive business. Hard work and determination alone won't make a crop. So when you see the family farmer going to the banker for a loan, remember that he's a businessman first.
You fellas haven't even touched on livestock!
How about $4000 it takes to buy 100 goats at auction, $54000 it takes to feed them per year (That's supplemental feed they need every day), $600 to fertilize the pasture, and God help you if they get sick - Worming medicine - that works is over $100/bottle and they get it every 6 weeks. Disease prevention? Try $168 /year for medicine you've got to drench with once a month, Vet bills? Forget it!--- we had one tell us she "didn't like goats"!! So, I've had to do quite a bit of learning! And to process a goat, the closest slaughter house charges $0.68/lb! Hired hands? None - just my dad, my son and myself. Farmers are a dying breed - hope those city people figure that out when their "manufactured peas" don't make it to the grocery shelf! Yep, I'm just rolling in the dough - 'Tis better to be thought a fool than open one's mouth and remove all doubt!
The reason the family farmers of this country don't have much
money is the price we get for what we produce (milk) is far lower
than what it costs to produce. The milk prices are not much
higher that they were 20 years ago. Unfortunately the price of
feed, electricity, vets,machinery,labor and
everything else is up. My wife and I work 7 days a week and have not had a vacation in ten years, my parents have been farming for 45 years and have had only one vacation and that was 20 years ago. I have three kids and have to live on $10,000 a year. Yes, we are really rich and have all kinds of money to throw around. I think with less and less people becoming farmers the rest of the population of this country should take better care of their farmers. alot of people take for granted that the stores will always be full, without farmers they would be empty. As far as all the programs for farmers alot of them have many strings attached and or you have to have matching funds. For example In Vermont we have the land trust which buys the development rights to your farm so you get a large sum of money and lower property taxes. It sounds good but once you sigh the papers you no longer have control of your land. I guess we are back to the dark ages with lords and serfs.
Outside the fact that as the cost of farm inputs have
quadrupled at the least or in some cases increased ten times ten
over and over again...disregard for a moment that here in grape
country we used to spray for the whole year three times for a
total cost of $5.00 per acre and now each of those three sprays
costs $20.00 per acre... hold the thought that in 1965 a 40hp
tractor sold for $3,500 and now costs $20,000, ,, yes we have
increased our production per acre by a modest 10-15%...but the
cash price received per ton is still the same as 30 years
ago...FORGET ALL THAT!!! The NUMBER 1 reason that farmers are not
as wealthy, or even as well off, as that gas pump jockey raking
in $7.50/hr plus benefits...well, reason #2, we can't even deduct
the whole cost of our self-purchased health insurance...still #1
is the fact that a 3rd generation farm will have been bought and
attempted to paid for 3 times over. The suggested
elimination of capital gains tax and inheritance tax is NOT FOR
THE RICHHHH. it is for the poor farmer whose parents died
anf left him a legacy that he must either sell part of or
mortgage once again in order to satisfy the tax bill.
And how do we pass on our legacy without giving half of it to the
lawyers or accountants, and, who really has time for the extra
paperwork of S corporation and even then the shares of
stock are not entirely exempt. A double-blind trust appears
to be the only answer, but , if we truly want to preserve the
fundamental family farm in America then we need the ability to
transfer totally tax-free to our children. We paid taxes
all along building our equity, one drop of sweat at a time. And
if we happen to have an occasional decent year and try to invest
a little for our retirement, then
even that capital increase is taken away, while at the corporate level it had already been taxed. Wake up! We live in a country where dual and triple taxation is the norm. We could do without any decrease in individual tax rates and actually could withstand an increase in exchange for elimination of capital gains and inheritance taxes. While we're at it, we should bring back investment tax credits for capital expenditures.
Thanks for the reply, I'm trying to understand this and get some good hard facts to help in my decision as to which crops to grow. I realize that the system is majorly messed, mostly from the Govt., but I would like to choose a crop that has a sustainable income (for about 20 yrs) without Govt. interference.
I'm more concerned about whether or not to go Organic (not certified) .vs. Conventional. After all, why should I spend $20/acre 3 times a year if it only gives 10-15% better production than our grandfathers got off the same piece of property! That's just Bull$!%, scare tactics by the big pesticide producers that I am not motivated by.
I've read a lot of complaining on here about how much the farmer's expenses have increased and the payout hasn't. That's real bad news! But, I find that most of the arguments people have been making are very emotionally based (And, rightfully so!) but they really don't help people like me (wanting to get into the biz) make a decision as to which direction to go. But, I'm sure it makes a lot of people feel better.
THE ORIGIN OF CHEMICAL
The agri-chemical industry, which utilizes chemicals, not natural methods, in agriculture, was born out of a paper presented in the 1840's to the British Royal Academy of Sciences by a renowned German chemist. Baron Justus von Liebig,.... analyzed human and plant ash and determined that nitrogen, phos-phorus, and potassium (NPK) were all the minerals plants needed. If fed synthetically to plants, he reasoned, farmers could force plants to grow and support healthy humans.
In 1855, Liebig published Agricultural Chemistry. This book be-came the founding testament for the German chemical indus-try (the richest in the world today), through which they began aggressively to market the NPK idea to farmers. The industry suppressed all opposition to their "artificial manure," as it was then called. As a result, it flourished in Germany and was soon exported around the world. Had Liebig known about trace minerals, fungus, and microbial life, he would have undoubtedly realized what a deadly new science he was launching.
Despite his widespread success and fame, Liebig, a tal-ented chemist, began over time to discern his error, though too late. In one of his last works, The Natural Laws of Husbandry, Liebig reversed his advocacy of man-made manipulation of the land and wrote, "Nature herself. . . points out to man the proper course of proceeding for keeping up the pro-ductiveness of the land." At the end of his life, in 1873, Liebig expressed deep remorse for his misguided contribution, wish-ing it had never been offered. His latter revelation is duly re-corded in the 1899 edition of the Encyclopaedia Britannica.
Some twenty years after Liebig's death, famed German nat-uralist Julius Hensel published a short book called Bread From Stones. In it he exposed as "nonsense" the "artificial manure," or NPK theory, and instead encouraged farmers to spread a finely crushed, minerally rich rock dust on their land to remineralize their overworked soil. Those who did were amazed at the quality, strength, and drought resistance of their crops.
But the thriving German chemical industry launched a vicious campaign to discredit Hensel and promote their hero and golden goose, Liebig. The German chemical industry either published or controlled most of the agriculture journals of the day, which, as today, accounted for the vast percentage of their advertising revenues, and used them to advance their artificial products and squelch all arguments for natural alternatives. Soon after it was published, one could not find Hensel's book with a search warrant. Although his rock dust theory never became popular, the soil's need for minerals to sustain microbial life and build strong plants that were full of mineral-dependent enzymes never changed. An unaccepted fact is a fact nonetheless.
In the midst of a mindset of chemical weed eaters and pest killers, nature managed to produce a few odd men and women within whom the natural design could be discerned and taught. One such teacher of nature was Sir Albert Howard, the modern-day founding father of the natural agri-culture renaissance. Sir Howard was an Englishman, mentor to American naturalist J. I. Rodale, who went on to create the Rodale natural farming and foods publishing empire.
In 1940', Oxford University published Howard's greatest work on natural farming, entitled An Agricultural Testament. In this book, Howard supported Hensel's rock dust theories and addressed the misguided origins of chemical farming. "The principle followed, based on the Liebig tradition, is that any deficiencies in the soil can be made up by the addition of suit-able chemicals [made-made]," he wrote. "This is based on a complete misconception of plant nutrition. It is superficial and fundamentally unsound. It takes no account of the life of the soil, including mycorrhizal association-the living fungus bridge which connects the soil and sap.
Artificial manures lead inevitably to artificial nutrition, artificial
food, artificial animals, and finally, to artificial men and women."