USDA Beginning Ranchers?

[StrykerScout]

How can a young man purchase a ranch buy cattle to stock it, pay the bare minimum operating expenses and afford to feed himself for the year in SW Missouri? Is it even possible? I don't believe so. I've done the math several times.. It doesn't work even with a pretty decent off farm income. The off farm income helps but it doesn't cut it with my current liabilities and expenses. With the price of land in the area, you could not make a 5-7 year cattle payment and at the same time make an annual farm payment even amortized over 40 years at a very low interest rate per USDA beginning farmer and farm ownership loans. This isnt even considering a loss/death rate, fertilizer, decent truck, trailer, handling facilities and getting hay baled on shares to maintain a low equipment cost to start. Assuming that purchasing quality brood cows with calves at side and bred back at atleast $1500/pair. Is it possible, what am I missing? The local USDA rep told me that we could potentionally get 1.75 million to purchase land and to make capital improvements as a beginning farmer/rancher and stock it with cattle through a low interest operating loan over 5-7 years. As stated it doesn't matter if you purchase 15 cows and 40 acres or 150 cows and 400 acres. The math doesn't seem to work. How could they give someone all this money knowing it can't be paid back. Or are the USDA beginning farmer loans not intended for beginners but more for people like my good friend Jacob who started out with about 30 momma cows as a teenager and with the help of his grandparents he was able to grow his herd to about 200 owned free and clear by the time he graduated Highschool. Then he was able to purchase a portion of his grandparents farm through the USDA at a fraction of the market value. I unfortunately have to purchase my grandparents farm at full market value from my aunt and my grandparents probably would have given me cattle to get started but didn't have their ducks in a row before they were killed unexpectedly. I have to purchase the farm its not an option for me. I am not quiting my day job but to buy the farm I have to be able to make a cattle payment and farm payment from my calf crop. Impossible? I would love and appreciate some insight from experienced professionals who operate a real and profitable enterprise. Thank you.

 

[Dave]

There is an old saying that still is true today. The land will pay for the cows or the cows will pay for the land, but the cows can't pay for both. People I know who started out from scratch all leased land to start out. Most, if not all, had a full time job to pay living expenses. And did pretty much nothing but work for 10-15 years.

 

[greggy]

I can tell you, small scale over here is not viable even with free land and lot of free feed...unless you can do almost everything yourself....

The view by some here, is you make money with the land, the livestock help to pay the bills and keep the property in order, some use it as a tax reduction thing, so you have to think of ways to come up with funds or stop leaking funds.

Livestock like cattle are not the only thing you can do with a block of dirt....

 

[Lucky]

Until paid for and if managed correctly the cattle will pay for themselves, lease payments, and some odd equipment. They will not make land payments (at today's prices), buy new tractors and trucks, and give you any money to live on. I know this sounds bad but just like any business it takes a pretty big upfront investment to get started and a lot of years struggling to make it. The good thing is once you get the cattle paid for they'll be old and need to be replaced!! If you can ever get over the hump with the cattle deal they'll make money but making land payments is a different story, you can't over pay for a business and expect it to work. My cattle have always paid their way and paid me a lease payment. I look at the land as a separate investment and it has been a good one. Unfortunately the land investment won't be realized until sold which may never happen. I know the USDA deal looks attractive but just like any other loan it's up to you to make it work.

 

[Bcompton53]

I started the process of getting the new farmers loans, but I wanted to start small and grow slowly.....the usda guy was less than thrilled with that plan. I wanted to start with 80 acres And his response was, well I couldn't even call that a farm, so it wouldn't qualify. I'm like " so you'd rather someone jump off the deep end and just accrue tons of debt all at once?!" He said, yeah that's what this loan is for. I gave up...

 

[12251HD]

A few years ago, I sold a farm with a 20 pr cow-calf operation, house, tractor and equipment, hay and crops in the barn to a young neighbor using the USDA new farmer program. He had another job that augmented the farm income. Not for everyone, but it has worked out great for him. A slow bureaucratic process though.

 

[Ky cowboy]

It's a long drawn out loan process. I lease ground and already had cattle on the lease. I sell enough hay to pay for the cattle expenses and the cattle make the farm payment. Keep in mind our newest tractor is a '79 model, we run a lot junk but know how to fix it so it works out

 

[greggy]

I started the process of getting the new farmers loans, but I wanted to start small and grow slowly.....the usda guy was less than thrilled with that plan. I wanted to start with 80 acres And his response was, well I couldn't even call that a farm, so it wouldn't qualify. I'm like " so you'd rather someone jump off the deep end and just accrue tons of debt all at once?!" He said, yeah that's what this loan is for. I gave up...

He is right, 80 acre is a hobby block, my family in the city has 100 acre and leased 250 next door, it is a hobby farm still, now back to 100 acre and about 20 breeders....and drought means lots spent on hay for years....

80 you would have to feedlot or be prepared to hand feed a lot, if you can get free feed, that would work, either way, at that size, your going to have to think of other ways to put land to use...

 

[greggy]

Your lucky to have a system that helps, everything is much more expensive here, and to buy rural farming land, lenders will only give 60% if they think it is a reasonable deal, you have to prove to them...anything under about 250ac is considered a house block or hobby block, but banks wont lend on blocks that size as resi either...so your stuck unless you have cash.

It shows though, that lenders feel it is high risk lending, if you want a loan for a plumbing business they would be all ears

 

[Brute 23]

... you cant.

 

[StrykerScout]

I appreciate the insight. Our local USDA agent pretty much told us the same thing as far as they only finance fulltime operations, and not playing with dimes and nickels. Was also informed that to qualify, the total off farm income can only equal 30 percent of our total income which pretty much tells me that I would have to quit my day job and be a fulltime rancher to even qualify for a loan. Not an issue I would live nothing more if we could even break even on land, cattle, and normal operating expenses. We have 120 acres, "wifes grandmas" rent free, 30 commercial angus cows on 80 acres, and have 40 acres baled on halves.. By no means large operators or that experienced. Totally not experts but thought I had enough experience to know that I could not quit my day job to become a fulltime farmer, make a $40,000 dollar farm payment, a $30,000 dollar cattle payment, feed and house myself plus, all other operating expenses.. It just didn't work, did the math on several farms of different scale, no way does it work.. The local USDA rep doesn't seem to see the issue and just acts like everything will be ok they do this every day she said, and its done all the time. I thought maybe I was missing something huge.. Continue commenting I appreciate the conversation with knowledgeable people especially those that have experience in this matter.

 

[Bcompton53]

I started the process of getting the new farmers loans, but I wanted to start small and grow slowly.....the usda guy was less than thrilled with that plan. I wanted to start with 80 acres And his response was, well I couldn't even call that a farm, so it wouldn't qualify. I'm like " so you'd rather someone jump off the deep end and just accrue tons of debt all at once?!" He said, yeah that's what this loan is for. I gave up...

He is right, 80 acre is a hobby block, my family in the city has 100 acre and leased 250 next door, it is a hobby farm still, now back to 100 acre and about 20 breeders....and drought means lots spent on hay for years....

80 you would have to feedlot or be prepared to hand feed a lot, if you can get free feed, that would work, either way, at that size, your going to have to think of other ways to put land to use...

Cool story. I wasn't trying to run a farm on 80 acres...I was trying to buy an initial 80, get a few cows, some pens and facilities put up, then start looking for more land. That's what "start small and grow" meant.

 

[greggy]

Yes, but finaciers are not looking at what your looking at. That should be pretty clear.

Farming is a business, lenders may be different there, but here, they want a business plan. Seems your offering a proposal to fund building infastructure and then an aquisition plan, I am not a lender, but that is not a business proposal with forecasts etc.

So you may need to look at things from a residential angle, I do not pretend to know what lender requirements are there, but there is no easy path to get money from land and cattle however you go about it. Need to think outside that box imo....and it would be same there, any cheap country is prob rubbish, so, they are looking at people who will do more than run a few or herds of cows.

I wish we had some such program here, I can think of many ways to add value, and there will be lot of things I have not thought of.

I am not profitable enterprise, so will bow out for now and read, hoping for ideas to be posted

 

[farmerjan]

As the more experienced guys here have said..... with today's cattle prices you can't go that far in debt and make it work. I lost one place trying to have some cattle, buy my hay, and worked a full time job. The cattle were paid for but I couldn't run enough to make the land payment and use my town job to live on because I didn't make enough money. They were more than happy to loan me the money to buy the farm though...80 acres but not the best of ground.... and finally lost it. Now, my son has his house on 4 acres he makes a mtg payment on, we make lease payments on several places and have a couple we don't pay any money for. Made cattle payments for years and by the time we paid them off, most all the cows were culled out. Sure we kept some heifers then to replace them, we keep heifers now as replacements, and we buy some breds or cow/calf pairs now when the prices are right. He still works full-time, I am down to part-time but am now collecting my SS...... he bought a 75 acre farm, and the cows make that payment now. 2 years later, bought the house that didn't go with the farm originally, because the water is on the house and we figured that it made more sense to have the house with it, when the guy couldn't make it, and it is rented to pay the house mortgage. We have given up a few lease/rental places because the owners seem to think we are getting rich or something. They get the ag tax breaks which are significant by renting the places out. Yet they want more and more done, and it is not worth the time, or stress, or expense, to us. So we have cut back about 50 head of cattle, and we could not afford it if we were paying for all the places we still rent. Neither of us is afraid of work, but that is all we do anymore. Cattle prices were good for about 3 years and that is when we had expanded, so couldn't cash in on it much, and then the prices fell back off. We are getting very little more than we did back 30 years ago.... with expenses 3-4 times as much.

We also have equipment that is anywhere from 20 yrs old (newest tractor bought used) to over 50 yrs old, the old farmall H.

You are very smart to realize that you just can't make it pencil out on the cattle. The only chance is that if you want to buy the land, and I am assuming that you want to buy your grandparents place, then you could rent it out to help make the mtg payment and you would have to make up the difference with your full time job pay. Then buy some used equipment as you go along as we did, and then see if you could lease just part of the farm out ,and gradually buy a few cows along and pay for them. But you will not make it pay unless you are in an area where the prices are better than they are here in Va. The difference in cattle prices, coupled with the higher land prices just don't make it profitable.
As Greggy said, you would need to have a business plan, and then you are still at a big disadvantage, because you cannot control what you get for your product (the calves) like a business that provides a service, like a plumber or a mechanic. There are value added things you could do, but again, you would have to either quit your job or hire someone you could really trust, to help you implement those plans..... it's a tough reality to face.

 

[greggy]

You see the farmers down here with money, flash cars for all, latest tractors and gear.....

They have many, many thousands of acres, they got it at no cost, and it is fantastic farm land with plenty of water .....and they run multiple operations, none do just cattle, because, to me obviously, they cant....not because they are greedy and piling up cash.

It does also become more feasible when scaled up, 20, 200, 2000 head etc all make more sense as the numbers increase.

The livestock on a real farm are part of a system, not the system, unless a feedlot of course.

I would also err on the plan to aquire on the run, much land here may have been in one family for centuries, they usually will only sell off portions that may be useless, anyway, would be hard to buy out adjacent places, if not next door, then that means lot of work moving all the time, and travel, etc...

 

[littletom]

The usda deal is not a bad one I have bought 3 farms with it, about to time out with that you have 10 years after first purchase. I did time out on the operating and eqt. loans last year. Like the others have said and yourself the cow calf thing does not cash flow. So maybe you could do something else with part of it to cash flow. Any of it crop ground or could be cash rent it. Could money can be made in small square bale hay the profit is there. Here putting up hay in round bales doesnt pencil out. You can buy it cheaper than you can make it you have to charge yourself what you can rent it for. Are there anyother cash crops you can make work? Cows and make a farm payment or pay for operating it not both. What about stockers instead of cows money turns faster? Good luck i Know how important family dirt is. Shoot me a pm if anything i can help with

 

[ChrisB]

There are other programs besides the Beginning Farmers/Ranchers program that might make more sense to you. You maybe could get a guaranteed loan to buy the farm. Then you can keep your day job to help make payments. You may have to get creative to make it work as getting loans for both land and cattle is asking for trouble. As was mentioned, what can you get renting the place out? Then growing your current herd until you can stock the new place? Maybe running your cattle with the renters? Renting on shares of the calf crop? If you can make 1/2 the payment from renting it out, figure out how to come up with a solid plan to close the gap. Is your aunt in a hurry to sell? Maybe rent from her until you own enough cows to buy the land? Maybe she would be willing to do a Contract for Deed that could help you out?

 

[StrykerScout]

Understand that My aunt is not the type of person that would help anyone..lol. Yes I am emotionaly attached to the place but it is also a good purchase I believe as it borders and is adjacent to the 120 acres that my wife will more than likely inherit one day. I know there are other options as far as producing income from agriculture. I think were going to sell some if our other assets "rental homes" our current home and 10 acres that is half a mile from the farm, sell some of our liabilities such as our new truck, boat, etc, and use our equity in the assets to purchase more cattle, get a traditional loan, keep our day jobs and go for it.