Farm of the Future?

[digitS']

Are you ready? Everybody eats!

The premise behind this upsets me:

Investing in Agriculture, the Economist

Steve

 

[bobm]

Well Steve, as you well know that the small farmer's cost of producing a crop is in many cases much more than the costs of the larger farm operator so his income is less per unit than the large farmer. This is the law of price of scale of operation which decreases the unit cost as more units are produced per unit of land and labor. Then on the other side of the coin, there is the "organic " issue as by their definition increases labor and production costs therefore the cost per unit produced rises. Now , there is the push to increase the minimum wage which increases the unit cost of production for the owner of the farm, transporter, processor, restaurant, etc. ... the farm owners , etc. will have to receive more for each unit that they sell or glean a much less return for their efforts therefore decreases their own purchasing power which in turn makes commodity prices rise and lowers the income of every other person on a higher salary scale and their purchasing power lessons . With higher prices any increase in minimum wage evaporates . Good or bad, Enter the investor with an influx of capital to fund larger land unit holdings with the advantages that come in scale of operation, more bigger and more efficient equipment ( such as mechanical harvesters ) , scientific research and development of new technologies and labor saving costs . This lowers the unit production costs therefore lowers the cost of the food for one and all. Hey , everyone has to eat.

 

[seedcorn]

1) I object to fact that it is Ag's job to "feed the world". That is code for "cheap" food.
2) Commercial Ag makes very little $/acre, thus have to farm more acres to make enough to support families.
3) Most $ is made by middle men in food chain. Except for last 4 years, most farmers are lucky to make a living. Most wives have to work off the farm for insurance.
4) Just for giggles, average combine is $500,000. Few years after owning it, worth about half. Huge net worth loss.

 

[Chickie'sMomaInNH]

@seedcorn does that combine include all the attachments you need to harvest too? or just the base package for the main machine?

my problem with that report is they seem to think agricultural land is a common stock to trade. if someone is making $$$ from my land like it's publicly traded why am i not getting paid too? from what i gather from that report is the only one making $$ off Agri is the bigger industries, banks and middle men doing the trading. the poor farmers are the ones that can't afford to keep their property and keep mortgaging it trying to keep it afloat. and i'm sure subsidies aren't always there to pick up the losses.

 

[seedcorn]

@Chickie'sMomaInNH , just box (combine) heads are extra. I don't thinkanyone should feel sorry for farmers as they have made choices as all of us have. I just don't like concept of cheap food. Have to control myself when people complain about food prices while they take vaca's, boats, toys, etc...... Dairy farmers I think are crazy.....to milk 2-3 times each and every day of your life????? No thanks, i will NEVER complain about any dairy prices.

Currently a lot of investors are buying dirt as a hedge against a recession. Even in collapse ground holds value. Cash rents have escalated to make interest plus.

Banks are making money but 1-2%-cheap interests now. Brokers selling/buying contracts make the most money. Most levels in the food chain are low margins, hi volume-which is why size pays off.

 

[bobm]

1) I object to fact that it is Ag's job to "feed the world". That is code for "cheap" food.
2) Commercial Ag makes very little $/acre, thus have to farm more acres to make enough to support families.
3) Most $ is made by middle men in food chain. Except for last 4 years, most farmers are lucky to make a living. Most wives have to work off the farm for insurance.
4) Just for giggles, average combine is $500,000. Few years after owning it, worth about half. Huge net worth loss.

@Chickie'sMomaInNH , just box (combine) heads are extra. I don't thinkanyone should feel sorry for farmers as they have made choices as all of us have. I just don't like concept of cheap food. Have to control myself when people complain about food prices while they take vaca's, boats, toys, etc...... Dairy farmers I think are crazy.....to milk 2-3 times each and every day of your life????? No thanks, i will NEVER complain about any dairy prices.

Currently a lot of investors are buying dirt as a hedge against a recession. Even in collapse ground holds value. Cash rents have escalated to make interest plus.

Banks are making money but 1-2%-cheap interests now. Brokers selling/buying contracts make the most money. Most levels in the food chain are low margins, hi volume-which is why size pays off.

Speaking of $500,000 combines... in Cal. my across the street neighbor's son-in- law owns 9 of those babies, employs 20 drivers and 3 full time mechanics to keep them going as they travel from farm to farm up and down the West side of the "Big Valley" custom harvesting crops. 24 hours per day 7 days a week until all the crops that are under contract to be harvested are in. Cost to the farmers is nearly half of what it would cost them to harvest their crops themselves. He trades in 3 harvesters every 3 years as it is to his economic advantage to do so to keep going around the clock harvesting. My next door neighbor in Cal. has a custom tomato hauling business with 12 diesel trucks each with 2 bin trailers . He starts hauling in S. Cal and ends up in N. Cal. as the tomatoes ripen and are harvested and delivers the loads to canneries. Cost to the tomato grower is much less than hauling the crop themselves while each of these guys as well as their employees make a very comfortable living. My wife's cousin raised hogs on 640 acres in Minn.. One of his sons attended U. of Iowa. to study Ag. Econ / Animal Husbandry and when he graduated he bought the farm and took over the hog operation, leased another 640 acre farm and a 400 acre farm to grow corn, increased the size of housing for feeder hogs, tripled the number of sows and his profit was 4 times of what his father ever made, all the while paying back his father for the farm. His wife is a stay at home mom. In Tulary County, Cal. the average size of a dairy is about 2,500 cows which produces more milk than the State of Wisconsin. One dairy near Bakersfield , Cal milks 38,000 cows 24 hours / day with milking crews working 8 hour shifts and has 2 Veterinarians on site. Each dairy hires a crew of milkers in 8 hour shifts to milk the cows. I don't think that the owners milk their own cows. I haven't taken more than 1 week vacation when I got married 45 years ago and a 2 day vacation in 40 years as our animals had to be fed and taken care of ( horses, sheep, rabbits, chickens, ducks ) . I do not own a boat or other toys and our car is 7 years old. Since I am now retired, I know that I don't have the luxury of paying high food prices. On our city lot , I now grow high value crops such as blueberries and strawberries while low value vegies are best purchased from the store as there just isn't enough room to grow our own and the growing season is too short.

 

[seedcorn]

@bobm know nothing about your neighbor. Most commercial operators lease combines, heads on 2 year agreement. Great part is they know their costs as all repairs under lease. Since they know equipment, insurance, labor, etc costs, they charge whatever it takes to make profit. His largest problem is collections.

Agree that large commercial dairies use a lot of help so owners don't do physical labor. That's why some here increased so they could afford to pay labor so they could have some time off.