How do farmers make any money?

[LHF2019]

I'm not a farmer, never have been, and never will be.

Couple examples from many many years ago.

 

[CasualObserver]

Farm subsidies need to be directed at a reasonable size family farms, not major corporations or mega farms. There needs to be a cap to how much one entity can receive in subsidies. Grew up on the family farm in the Midwest watching several families buying up other local family farms to combine into mega farms. We knew one of them personally from church. Their answer to how they did it? He told us that they'd take the government subsidies and every two to three years and use use them to buy another farm outright and expand the operations. Government would then pay them more subsidies since they were now larger, rinse and repeat.

 

[fishheadbob]

Sold the 20 beef cows and related equipment 25 years ago; tired of maybe breaking even in a good year. I was out for a year when a friend asked if I wanted to partner in an established Christmas Tree farm. After 2 years I sold my half to my partner (good partners are hard to find) then grew trees on my home acreage; still at it. I'm never going to get rich doing this but the venture is profitable most years.
Before you jump into Christmas Trees realize that it takes about 8 years before you have your first tree ready, then all you have to do is develop a customer base for your product. That takes time. For the first 8 years you are bleeding money on equipment, seedlings, chemicals, property taxes and on and on. I work on the trees part time 10 months of the year, and have very good employees that return every Christmas season, probably because I pay them exorbitantly. I lost one employee (died), another has been with me for 25 years, others are newer as business grows and more help is needed.
Trees are a lot easier and less time consuming than livestock

 

[Mcdust]

I'm not a farmer, never have been, and never will be. But I'm fascinated by youtube videos of farm operations, in particular larger operation, and I can't help but wonder how they are able to survive. Maybe the answer is they aren't surviving? On the surface it looks to me like the people making money are John Deere (and others), Monsanto, and ADM. I see massive investments in equipment, and very expensive equipment at that. Multiple row crop tractors, all sorts of planters and other implements that I expect are very expensive, combines and all the different heads, specialized carts for mixing or hauling product, huge bins with auger systems to load and unload them, several tractor trailer trucks with specialized trailers, etc. Oh, and huge storage and workshop buildings, Denali trucks for everyone, few side by sides, and one or two tele-handlers. Probably a couple of skid steers too.

Can anyone help me understand how this works? What does it cost in equipment payments and operating costs plus seed, fertilizing, weed control, and proprietary seeds? How many acres typically get planted? Then what are the harvest costs, gathering, storage, and ultimate transport to a buyer? How does this break down per acre, and what is the final crop value per acre?

If our fearless leaders stop subsidizing worthless ethanol that ruins every thing it touches maybe there will be cheaper food (and gas) and more farmer profit

 

[part-time-Farmer-NC]

I looked into "crop ins" they charge per crop, meaning, peach, pears, blackberries, grapes etc. I designed our u-pick for the eventual crop loss of some varieties but not a total loss for all. Crop insurance wouldn't have benefitted me unless I had only planted one or two types of fruit.

As for making 3-5 years peach farming, you are about on par or above average to others. Ours is about 2/5 years. I did quit trying to use burns to prevent frost when peaches are blooming. If it goes down as low as mid 20's the set fruit freezes and drops anyway.

Once these peach trees die out, I'm probably not going to replace them. Got about 30-40 pears so don't need more of them, apples don't do so hot here.

I'm getting older so won't ever full appreciate the value of newly planted trees. Although peaches usually make a decent amount in their 3rd year in the ground, if its not one of the 2/5 years...

It takes my wife and I about 2-3 months to prune everything and get it shaped up at a leisurely pace. So it is a lot of man/woman hours.

I see it as an exercise program as my day job is a desk/recliner job. Gonna get some tee shirts printed one day... Farmer Jim's Gym, will workout for food....

 

[JLinOK]

I'm not a farmer, never have been, and never will be. But I'm fascinated by youtube videos of farm operations, in particular larger operation, and I can't help but wonder how they are able to survive. Maybe the answer is they aren't surviving? On the surface it looks to me like the people making money are John Deere (and others), Monsanto, and ADM. I see massive investments in equipment, and very expensive equipment at that. Multiple row crop tractors, all sorts of planters and other implements that I expect are very expensive, combines and all the different heads, specialized carts for mixing or hauling product, huge bins with auger systems to load and unload them, several tractor trailer trucks with specialized trailers, etc. Oh, and huge storage and workshop buildings, Denali trucks for everyone, few side by sides, and one or two tele-handlers. Probably a couple of skid steers too.

Can anyone help me understand how this works? What does it cost in equipment payments and operating costs plus seed, fertilizing, weed control, and proprietary seeds? How many acres typically get planted? Then what are the harvest costs, gathering, storage, and ultimate transport to a buyer? How does this break down per acre, and what is the final crop value per acre?

In Oklahoma where a lot of old time farmers get lease bonuses (oil and gas), farming is just and expensive hobby, lol. Others survive with the help of the farm bill and still others go broke. Sometimes it is a roll of the dice.

 

[ning]

When someone asks me “hows the money in farming”?
My answer is “Like soup through a fork”

I took a “bottom line” approach to it. When I started for real about 20 years ago, I was given the opportunity to mow fields. I had 2 tractors and just dragged mowers behind them and did a lot of light land clearing, too.

Then I got the idea that rather than a couple rotary mowings, which seemed like I was cutting viable hay and leaving it, why not bale it instead? Most of my land owners were happy to get rid of the field mowing costs.

I crunched the numbers. I bought mostly relics and junk and started. Then it just grew larger and I was able to afford a step up from junk.

I just took on an additional 170 acres in the last 2 years. It keeps on growing. One thing I will never do is pay rent for hay. I did one time and it’s just a waste of my money

Maybe someday I’ll own a Fendt

 

[DadofTim]

My Father told me "Farmers don't make any money, they handle a lot of money."

 

[jigs_n_fixtures]

My grandfather was a very good card player and consistently won. He knew the odds of every hand and could read peoples tells well.

It always bothered him that my grandmother considered card playing, as gambling but didn't consider farming/ranching to be gambling. As he saw it, the odds and outcomes were far more predictable playing poker or pinochle then they were ranching/farming. He never had bad weather maim half his cards. He did lose half his cows in the "blue snow" when it snowed 22-inches, followed by freezing rain (which turned the snow blue) and then dropped to 22 below zero, and froze their legs in place. He did have dry years when he couldn't irrigate the hay. Farming was always unpredictable.

So, far as he was concerned farming/ranching was a lot more of a gamble than cards, and there was no way to calculate the odds of winning or losing.

 

[spruce Deere]

“If you want to make a million in farming, start with 2 million”.

More like 3 million anymore to make a million....

 

[ArlyA]

I have family members who do square miles of acreages and do not buy crop insurance and see no government subsidies. I asked him about crop insurance once and his answer was "it cost about the same as the profit we'd see if its an average yield, so why buy it?"

 

[Stuart122]

We just lease the land now, and take our cut as the landowner. But, when we did actively farm it, we didn't get subsidies, and we didn't buy crop insurance. We have a 1000 acres, but the farmer that leases our row crop land farms 5000 acres. The family that handles our 200 acres of Almonds farms a couple thousand acres of Almonds. Similar numbers for the guy doing the Olives. So they own and lease enough land to make enough, and they do pretty well. No mortgages. Buy it for cash, 1031 it, lease it, or inherit it. Don't borrow against the land, ever, that way a couple bad years might leave you broke, but not out of business.

 

[Green Acres Homestead]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

This topic you started was very interesting and had some great responses. I’m just a hobby farm so have nothing valuable to contribute to the conversation other than to say this was interesting and the replies were great and informative.

 

[ultrarunner]

Please tell me how works.?

The plan might require being large enough to spread the costs over enough acres so revenue is enough so that everyone gets paid…

The incremental costs typically diminish with volume.

 

[ultrarunner]

That's why i repair and maintain all my own equipment, all it cost me is for parts and oil and filters. I farm nothing out.
It's for me the only way to keep farming by cutting out the insane repair labour costs.

The big guys may lease everything having enough volume to make leading viable.

In theory, no repair costs and less down time and less sunk cost tied up in equipment.

My grandfather thought the world of the co-op as mechanization came to the family farm… things he could not afford to buy were still attainable to use through the co-op.

 

[LHF2019]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

You mention meat. Think about dairy. Just take what you pay per gallon of milk. The dairy farmers just get cents of that milk you bought. I think class III milk is around $20 per hundred weight currently. When I quit in the early 2000’s it was around $8. But probably cost $13 to make that 100 weight. Imagine the uproar if your food doubled just so the farmer could get a little more. We can’t have that though.

 

[ultrarunner]

M

Sold the 20 beef cows and related equipment 25 years ago; tired of maybe breaking even in a good year. I was out for a year when a friend asked if I wanted to partner in an established Christmas Tree farm. After 2 years I sold my half to my partner (good partners are hard to find) then grew trees on my home acreage; still at it. I'm never going to get rich doing this but the venture is profitable most years.
Before you jump into Christmas Trees realize that it takes about 8 years before you have your first tree ready, then all you have to do is develop a customer base for your product. That takes time. For the first 8 years you are bleeding money on equipment, seedlings, chemicals, property taxes and on and on. I work on the trees part time 10 months of the year, and have very good employees that return every Christmas season, probably because I pay them exorbitantly. I lost one employee (died), another has been with me for 25 years, others are newer as business grows and more help is needed.
Trees are a lot easier and less time consuming than livestock

Brother bought what remained of a 65 acre Christmas Tree Farm with no intentions of going into the business… Land had been in the pioneer family since 1850’s and brother and his family fell in love with it.

Folks would drive by and ask if they would be open this year with many buying for decades…

A quick survey said let’s give it a go… and it did ok with the u-cuts and my brother said maybe it’s viable given it was well known as the place to go.

Now they grow on 95 acres split between California and Oregon selling 3300 trees annually in California.

The alternative is buying a netted tree in the Home Depot parking lot and most folks will make an afternoon with 3 generations coming out for the perfect tree at the farm and there are a lot of hardworking high school and JC kids on the payroll that come back year after year…

 

[Hay Dude]

I question that myself. With the price of the meat at the grocery store the beef farmer should be making more.

The price at the store includes the middleman’s markup. What you see selling for $10/lb retail may have been bought for $5/lb wholesale.
But I get what you’re saying.

I started out selling small bales wholesale to a guy and he would sell them for 2.5X what he paid me. I said hell with that and sold them for retail myself. I learned that doing that extra work was harder than I thought.

This topic you started was very interesting and had some great responses. I’m just a hobby farm so have nothing valuable to contribute to the conversation other than to say this was interesting and the replies were great and informative.

 

[oldbones]

I'm not a farmer, never have been, and never will be. But I'm fascinated by youtube videos of farm operations, in particular larger operation, and I can't help but wonder how they are able to survive. Maybe the answer is they aren't surviving? On the surface it looks to me like the people making money are John Deere (and others), Monsanto, and ADM. I see massive investments in equipment, and very expensive equipment at that. Multiple row crop tractors, all sorts of planters and other implements that I expect are very expensive, combines and all the different heads, specialized carts for mixing or hauling product, huge bins with auger systems to load and unload them, several tractor trailer trucks with specialized trailers, etc. Oh, and huge storage and workshop buildings, Denali trucks for everyone, few side by sides, and one or two tele-handlers. Probably a couple of skid steers too.

Can anyone help me understand how this works? What does it cost in equipment payments and operating costs plus seed, fertilizing, weed control, and proprietary seeds? How many acres typically get planted? Then what are the harvest costs, gathering, storage, and ultimate transport to a buyer? How does this break down per acre, and what is the final crop value per acre?

Pretty sure this will draw some fire, but so be it. I'm a crop farmer, corn and soybeans. Used to raise hogs from feeder to market.
There is good money made farming, and has been for at least the last 10 years. Before that it was still profitable, just not as much as now. That's why land is in demand and the price stays high. Crop insurance will take a lot of the gamble out of it. Sure, if you have new equipment and more than you need, you're going to have trouble staying afloat. If someone is actually having trouble, there is a reason for that, but it won't be made public here.
Don't use YouTube for a barometer of the farm economy. Those guys need views to keep their money coming in their account, and nothing draws views like a doom and gloom story. Like I said, if it was as bad as you're hearing, land would be cheap, but right now every land sale is a bidding war, and it's farmers bidding against each other with stupid-high bids.
It's no different than any other business, and you have to run it like a business, and be smart about it. Period.
But livestock guys earn every penny they make. But, again, if there wasn't money in it, they wouldn't be doing it.

 

[Fixastuff]

We got some real romantics here thinking all these people are farming just to break even or lose money. lol.

I know many farmers and rent land to one I have know my whole life. They specialize in farming and talking about being broke, while buying more land, houses to rent out and send kids to private school each year. (this is just southern va don’t have a clue about other areas)