Obviously your numbers don't work. Farms that gross $100K aren't buying much, if any new equipment without substantial off farm income supplements. I operated a small operation with a partner in the early 1990's and he and I grossed far more than that from low value crops and custom farming for others.
Hey I have no idea how much crop farmers are making….hence the entire premise of the question. Just seems as this “technology” drives up the cost of equipment considerably….there has to be enough incentive to keep it going.
Hoping you could explain a bit in more detail. I understand that a publicly-traded company keeps debt to offset cash on hand to keep others from buying out the shares and then taking the money and killing off the company. How does debt help a private company or small farm?
Because (especially as a business) having debt and cash is better than having no debt. Let's say I need to make an equipment purchase and I could either spend cash or get a 2% loan (simplifying). However, using that cash in other places (marketing, supply purchases, investments) would make 5-6% then I am making more money than I would save by not having the loan.
If your net worth is several million dollars and you're making payments on a $50k truck, for example, you're technically in debt, because you owe somebody something.
Yes I understand the finances. I am asking where lots of large scale farmers sit.
Have you ever financed a car, truck, home or vacation property? If so you used someone else's money to buy an item that you wanted or needed but either did not have the cash to purchase or did not want to allocate resources you did have to make the purchase. Same deal here except we are discussing business assets that enhance productivity in some form or fashion.
The vast majority carry debt as a vital part of their business plan.