Making a living

[dun]

Farms need to be larger today
Dairy Herd news source (Monday, September 08, 2008)


The 80 to 160 acres that your grandparents lived on isn't enough to make it today, says the South Central Minnesota West Adult Farm Business Management Program.

In 2007, a total of 850 farm families from the South Central Minnesota kept household and personal expense records. Their average household and personal expense for the year was $74,804, with an average family size of 3.4 persons.

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

Family living expenses include: food, medical care, charitable donations, supplies, furnishings, clothing, educational costs, recreation expenses, gifts, utilities, child care, house rent and upkeep of the house. Also included are expenses for the purchase of non-farm vehicles, investments, savings, life insurance premiums, income/social security taxes, and non-farm capital purchases.

For more details, read an article titled "What does it take to earn a living on the farm?"
http://www.cffm.umn.edu/Publications/pu ... vgfarm.pdf

Source: South Central Minnesota West Adult Farm Business Management Program

 

[Limomike]

Amen to that!!

 

[IluvABbeef]

This is the main reason that off-farm income is so popular with those wanting to keep on with their farm.

Not only that, but changes in management are important too to keep the overhead costs, fixed or variable, as low as possible.

Key word: MANAGEMENT. Oh yes, and can't forget the second key word: PLAN.

 

[Workinonit Farm]

Exactly why my husband and I each have off-farm jobs. Yet, some consider what I do a "hobby" farm :roll: . I consider it a business, albeit a small part-time one. Wish we had enough acreage, livestock, crops etc. to not have to work off-farm, but, thats life. And it seems to be the case for many more folks now than it used to be.

Katherine

 

[HerefordSire]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

 

[hillsdown]

Exactly why my husband and I each have off-farm jobs. Yet, some consider what I do a "hobby" farm :roll: . I consider it a business, albeit a small part-time one. Wish we had enough acreage, livestock, crops etc. to not have to work off-farm, but, thats life. And it seems to be the case for many more folks now than it used to be.

Katherine

It is the norm I think rather than the exception.
That is why we have chosen that I be the main care taker here as well ,but then my husband is gone sometimes for two - three weeks at a time.
I am afraid that we are only just seeing the beginning of it. It is funny when I run into old friends and they are amazed at what I do which I do not find amazing at all but rather very common around here. I think there are only two or three operations within 20 miles where both the husband and wife stay home but there was huge money before and both have maids/housekeepers as well.

 

[1982vett]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

If you have that kind of assets you don't need to farm. Sell it all and draw 3% interest (if you can find it) and you will pull in $85320.00. More than the $75 grand the study said the family needed.

 

[mnmtranching]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

If you have that kind of assets you don't need to farm. Sell it all and draw 3% interest (if you can find it) and you will pull in $85320.00. More than the $75 grand the study said the family needed.

NOW :shock: What kind of an adventure would there be in that. :roll:

 

[HerefordSire]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

If you have that kind of assets you don't need to farm. Sell it all and draw 3% interest (if you can find it) and you will pull in $85320.00. More than the $75 grand the study said the family needed.

Another way to look at it:

The $75K net equates to $79.12 net per beef cow. For each $79.12 earned from a cow, we would have to invest $3,000 (just for the land) at a 1 to 1 stocking rate, or 2.63% net return on investment.

 

[Bluestem]

My Grandfather was able to buy a new car every year from his farm income. I replaced my 1969 pickup with a 2004. Figure that will be my last one. There is more to this than meets the eye.

 

[Brandonm22]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

If you have that kind of assets you don't need to farm. Sell it all and draw 3% interest (if you can find it) and you will pull in $85320.00. More than the $75 grand the study said the family needed.

But if you did that you would lose ~20% of your accumulated net worth in taxes (more if Obama is your prez)then since you were living off interest (which itself is not covering inflation) you get poorer every year that you are alive. If you have Herefordsire's $2,844,000 (with cows and calves we are approaching $4m), you would be a heck of a lot better off in the long run letting your real estate appreciate faster than the rate of inflation while you are paying no income taxes on that appreciation. Even just making the pathetically low (for that many cows) $75000 you would be getting richer (most years) versus burning your investment in a money market account somewhere. Now putting the $3 mill in the stock market is a whole different animal and you can draw almost any hypothetical scenario you like there.......though I would tend to accept the pedestrian 6% number.

 

[HerefordSire]

But if you did that you would lose ~20% of your accumulated net worth in taxes (more if Obama is your prez)then since you were living off interest (which itself is not covering inflation) you get poorer every year that you are alive. If you have Herefordsire's $2,844,000 (with cows and calves we are approaching $4m), you would be a heck of a lot better off in the long run letting your real estate appreciate faster than the rate of inflation while you are paying no income taxes on that appreciation. Even just making the pathetically low (for that many cows) $75000 you would be getting richer (most years) versus burning your investment in a money market account somewhere. Now putting the $3 mill in the stock market is a whole different animal and you can draw almost any hypothetical scenario you like there.......though I would tend to accept the pedestrian 6% number.


In my view there are two types of inflation, one advertised and one hidden. The first type of inflation consists of a market basket of goods in each region on the country and then averaged together. These basket items are carefully selected, so as not to have to increase entitlement payments such as social security. So, for example, if a computer was one item, then the price of the same computer drops every couple of years for the same amount of power and this purposely helps offsets outrageous escalating items, like food. This number is then advertised politically.

The other type of inflation, which by the way is not published any more as it is kept secret by the Feds, is regulating money supply. For example, say I have $10K buried in the back yard because I don't want to take on investment risk. When the government issues more currency as in printing new greenbacks, guess what happens? The buying power of the $10K is reduced because the all dollars become a little bit more diluted and each esiting dollar is worth just a little bit less than prior to the new currency issue. But here is the kicker....plus, older debt beomes less expensive to payoff, such as in government deficits. Pretty neat tricks.

 

[1982vett]

To earn this income a family needs approximately 928 acres of corn and soybeans, 127 dairy cows, 10,717 head of hogs from weaning to finish or 948 head of beef cows in a beef cow-calf operation.

If land was selling for $3K per acre, then the cost of the land for 948 beef cows at a stocking rate of 1 acre to 1 pair (superb rich land), would be about $2.844M. If one were to finance the land after putting 15% down, or $426.6K, with a 6% interest rate on 20 years, amortized payments would run $17.319K per month.

If you have that kind of assets you don't need to farm. Sell it all and draw 3% interest (if you can find it) and you will pull in $85320.00. More than the $75 grand the study said the family needed.

NOW :shock: What kind of an adventure would there be in that. :roll:

For an ole fart that is getting lazier every day, it is starting to look pretty good. Hell, govment going to get it by taxes or inflation. If they don't get it I'm going to lose it in the stock market. Not much of anything is working for me right now. The earth is about to open up and swallow up the house cause it can't rain. Even oil ain't worth much anymore. :lol:

Naw, I always kind of kept my eye on what would be called "critical mass". The amount of money needed to be able to pay your living expenses and not have to touch the principle. HS threw that number out their and (without checking) I think you can get a 30 year note that pays around 3%. Granted if you had to pay 20% in taxes that still would leave you with $68256, wife would only have to make about $8100 a year to get back to 75grand. ;-) :lol2:

Remember back when $100,000.00 would earn you $15,000. Didn't need but about $10,000 to live on at the time. :shock:

 

[hillrancher]

Remember back when $100,000.00 would earn you $15,000. Didn't need but about $10,000 to live on at the time.

Vett. This is more or less what I was working for to take care of our household. Wont work now. The only hope is the fixit prez to get elected or should I keep working?

 

[1982vett]

Hillrancher, the problem with "fixing it" and "change" no matter which party uses the term. the "Prez" can't fix or change a dam thing without the other branches pulling their weight. The worst of both worlds is what they fix and changed was most likely not broken until they fixed it. They are appauled the most after some "crisis" they caused in the first place, either thru actions they took or non-action. It all depends on what it takes to get elected. Manipulation is no way to govern. I figured out a long time ago not to count on anyone but yourself. You are the only one that can make it or break it for yourself. You just have to figure out what is most apt to break it and avoid it. And yes, if I don't do it or see to it, it won't get done.

Sounds a bit like a definition of :shock: independence.

By the way, it's been great since I quit my paycheck job. :banana: Doesn't mean I am setting on a seat cushion doing nothing.

 

[Brandonm22]

In my view there are two types of inflation, one advertised and one hidden........The other type of inflation, which by the way is not published any more as it is kept secret by the Feds, is regulating money supply. For example, say I have $10K buried in the back yard because I don't want to take on investment risk. When the government issues more currency as in printing new greenbacks, guess what happens? The buying power of the $10K is reduced because the all dollars become a little bit more diluted and each esiting dollar is worth just a little bit less than prior to the new currency issue. But here is the kicker....plus, older debt beomes less expensive to payoff, such as in government deficits. Pretty neat tricks.

Exactly, most years the fed publishes that ridiculous number they call the inflation rate. Folks need to look at the canned beans that cost 25 cents ten years ago that is passing the $1 mark, the $3.59 a gallon gas, or the home that cost $125,000 ten years ago that appraises at $214,000 now (even after the much needed market correction of the past year). THAT is the REAL inflation rate.

 

[Limomike]

This thread reminds me of when I was at the sale the other day, and an "older" man told me how he used to sell a few calves and get $100 out of them, and go to town and he could buy anything he wanted, including a good used car. Now, you can sell a calf, get about $500 for it, and cant buy much of anything but a few bags of groceries and gas.

 

[HerefordSire]

In my view there are two types of inflation, one advertised and one hidden........The other type of inflation, which by the way is not published any more as it is kept secret by the Feds, is regulating money supply. For example, say I have $10K buried in the back yard because I don't want to take on investment risk. When the government issues more currency as in printing new greenbacks, guess what happens? The buying power of the $10K is reduced because the all dollars become a little bit more diluted and each esiting dollar is worth just a little bit less than prior to the new currency issue. But here is the kicker....plus, older debt beomes less expensive to payoff, such as in government deficits. Pretty neat tricks.

Exactly, most years the fed publishes that ridiculous number they call the inflation rate. Folks need to look at the canned beans that cost 25 cents ten years ago that is passing the $1 mark, the $3.59 a gallon gas, or the home that cost $125,000 ten years ago that appraises at $214,000 now (even after the much needed market correction of the past year). THAT is the REAL inflation rate.

Another characteristic of inflation and fiat currency is (not back by gold)...it is very very very very very hard to reverse increasing the money supply (as in taking the money supply out of circulation) if there is any oustanding debt, such as in a government deficit (trillions?). Like already mentioned, older debt is being diluted. In other words, it takes less of "today's" dollars to pay older debt relative to when the credit instrument became in existence. This assures that raw land will move higher and faster than historic averages (among other demand commodities). To cap it off, the population of the world is surging. Land is expected to jump.

 

[HerefordSire]

So if I make more than 75 000 at my off farm job I am doing good and making a profit. So then it really dont matter if I am a cattle barron with 40 million acres.

I would think you could do allot better because you should be able to get a refund for 100% of the taxes you paid as the result of your off-the-farm employment provided you are not profitable, usually as the result of being a first generation farmer with a land payment. If you are a second or higher generation farmer, this could be an entire different ball game. The trick would be to be ethical, pay a little taxes, and increase assets much faster than liabilities. This value will show up in net worth, which is what working is all about for many.

 

[HerefordSire]

So if I make more than 75 000 at my off farm job I am doing good and making a profit. So then it really dont matter if I am a cattle barron with 40 million acres.

I would think you could do allot better because you should be able to get a refund for 100% of the taxes you paid as the result of your off-the-farm employment provided you are not profitable, usually as the result of being a first generation farmer with a land payment. If you are a second or higher generation farmer, this could be an entire different ball game. The trick would be to be ethical, pay a little taxes, and increase assets much faster than liabilities. This value will show up in net worth, which is what working is all about for many.

I forgot to mention another important aspect. There is a difference between book value (net worth) and current market value. For example, the market value of your land (equity portion), in itself, can be larger than your net worth on your books. If you were looking for a value investment, consider older companies, such as a railroad company. Most of the rail lines reside on real estate purchased many many years ago when land prices were much lower. If you were to look at the real estate portion of their book value, the difference in the current market value of the real estate portion of a rail line is likely to be much higher, than the real estate portion of their net worth because of years and years of appreciation through inflation.