You can to profit from farming/homesteading!

I think two different things are being discussed here.

Profit is making more dollars than you spend. One needs to be concrete
Earned on this if one wishes to continue moving forward.

Wealth is being viewed at differently, valuing personal satisfaction as a 'wealth'.

Fair enough, but you will have little of the 2nd if you ignore the first.

The math presented here by the original poster demonstrates personal wealth and satisfaction of life very well, but it falls very short of demonstrating profit, or meeting financial goals to keep you in the game.

Such figuring has gotten a lot of people in trouble, where they end up with neither money wealth nor personal wealth.

Paul

If you are farming for your entire living, it becomes apparent real fast, that if you miss some costs, and not take into account EVERY cost of production, that you won't be farming for long. I love the non-cash benefits, but really, unless you are in some jungle in Brazil, with no need for money, you gotta have more cash at the end of the year than you started with, or you will be done as a farmer in short order...

No, Alice, we got a tiny amount of cash from Kickstarter last spring and our farm has been profitable for many years before that.

Some people are confused about Kickstarter and think we got a grant or something for free. The Kickstarter project was a sale of product. We sold meat that people paid for in advance. That is no different in the end that any of our other sales - people often pay in advance. We provide a product and people pay for it. It was also a fairly modest amount of money. Kickstarter was simply a great way to get the word out about our project which was happening with or without that. We've been working on building our butcher shop for four years - almost done now with the butchering portion. See this thread for an update:

Sugar Mountain Butcher Shop Closed in before Winter!

Cheers,

-Walter

__________________
SugarMtnFarm.com -- Pastured Pigs, Poultry, Sheep, Dogs and Kids

I really do see what you are saying. And I agree with it on one hand. However....I think it matters what your mind set is. Perhaps there's a difference in those farming and those homesteading? I have to equate things I have with cash - that's why I try to produce things - so I'll have more cash to buy the things I can't produce. If I'm not doing all this work for more cash - then what the heck am I doing it for?

My mindset isn't to run a business, though on a really small scale, that's what I do. My emphasis is on self-reliance. That's a different ballgame to me. Sometimes, you do things out of the norm that make no sense to those - especially those that want to make money. To be self-reliant, I can either produce my own hay or produce enough farm income to buy it. We didn't want the worry/work of more animals, so we went for hay equipment. I am sure many would say we were dead wrong - and probably rightly so. I think so too when it's 100 degrees out and DH is out there baling..... Our making hay on so few acres, really doesn't make good business sense. However, we had the cash to purchase some good, used equipment. I didn't have to consider if a bank thought I was making a good decision or what my net worth is/was. I don't say my tractor is worthless, but it's business value is only worth what someone else says it is. I however, think it's priceless.

How does anyone with any accuracy in our position, decide how much of a tractor's usage goes towards hay, snow plowing, mowing, pulling out trees or whatever. Of all of those tasks, only 1/3 of the hay goes to the sheep. That's just too much figuring for me.

It's a good thing I don't have to measure my success in cash...since I've not produced much of that. Doesn't it make sense that at some point, cash has to be produced?

That's too simplistic and it doesn't work. Trees have life cycles. They are not hard assets like gold. I speak as someone who both heats his home with wood and does sustainable forestry, selling lumber, firewood and pulp. Here's the reality of that tree situation:

First, don't cut live trees for your own firewood unless you absolutely must. For heating your home you can simply cut the deadwood. The deadwood has little economic value since lumber buyers and most firewood buyers aren't generally interested either in volume of dead wood. Odd since a good dead tree is perfect burning wood.

Secondly, trees are not like gold, silver or diamonds. They have a life cycle. They grow and die. If you do not harvest them they will eventually die, fall down and rot into the soil. Rotten wood still has value, of course, as your soil needs fertility, but it's not $250 cash. That is the reality of the forests. An ice storm can come along and wipe out your forest, crushing the trees to the ground. They have little salvage value - we lost 150 acres one storm. A forest fire can do worse. The tree is not $250 until you actually sell it. Careful of counting your saplings before they're sold.

Before you cut that three, either way, first start by insulating your home and adding thermal mass so that you don't use much wood. This cuts down on the wood need and reduces your labor and the cost of the chainsaw gas and oil. We have about 1,000 times as much dead wood as we need to heat our home even though we heat solely with wood and we're in a cold northern Vermont mountain climate. The reality is the land keeps producing more dead wood each year than we can use and if we don't use it then it simply rots back into the soil. I don't lose wealth by burning that dead wood.

Cheers,

-Walter Jeffries
Sugar Mountain Farm
Pastured Pigs, Sheep & Kids
in the mountains of Vermont
http://SugarMtnFarm.com/

__________________
SugarMtnFarm.com -- Pastured Pigs, Poultry, Sheep, Dogs and Kids

Highlands, of course it was simplistic. It's an arbitrary tree with an arbitrary value used to make a point and not for the purpose of explaining how to farm trees. Be that as it may, thanks for the explanation.

Respectfully disagree. AGAIN dollars are not the only measure of wealth, dollars are only good if they can be used to purchase GOODS that one needs to satisfy his wants and needs.

Nobody cares about dollars for their own sake, people only want dollars because of the goods that they can buy with them.

If you can produce those goods DIRECTLY then you have profited. $250 dollars is not 'more valuable' than a cord of wood, particularly if you have a need for the wood.

I ALMOST agree with this!

One summer, instead of spending $20 a week for produce, I spent about 0 for produce for my family of 4. The way I see it, $20 saved is the same as $20 earned.

So, I would want to amend the statement to say "Profit is making OR SAVING more dollars than you spend. Especially since there are no taxed paid on money that you save.

Then there is depreciation: since the tiller is reduced in value for $X per year, you can call the depreciation an expense and subtract it from the $20 per week saved.

Actually, $20 saved is $27 earned after taxes, depending on the income tax bracket, of course. As I like to update Ben Franklin's saying, "A penny saved is 1.36 cents earned."

__________________
SugarMtnFarm.com -- Pastured Pigs, Poultry, Sheep, Dogs and Kids

Yes it is very difficult to to calculate the value produced by a piece of equipment that is used for multiple uses..like a tractor, or a barn. That is why I used the baler in myoriginal example because it basically has the one function for most people ( and I happened to have recently read the study regarding the depreciation of balers ). I think the only way for me to figure it would be to do a gross calculation of total outputs vs. production for my whole farm.

And, yes it does make sense to consider cash..of course most people need SOME cash for operating expenses and etc.. But how much is needed is greatly reduced in proportion to the amount of goods you can produce for yourself.

What good is making 50,000 a year if you have to buy everything you need from someone else and at the end of it you are left with 5,000? That is less profitable than the person who makes 12,000 but fills his/own needs and ends up with 6,000. You can amass tremendous wealth and profit but still make very little cash money...until its time to liquidate your assets, at which time you should have a plan to reinvest that cash immediately once again into real goods.

It's not a right or wrong, but looking at the same thing differently I guess.

One needs heat in the house, how does one accomplish that?

Spend the time with $20 worth of tools _plus_ your time to chop and saw your own, or spend $250 to buy some firewood _plus_ some time feeding the fire and removing ash, or spend some dollars to fuel a different type of furnace and no time needed by you.

I understand your argument, but I feel it is too simplistic. Time has a value, and much of your examples use drastically different amounts of time.

Put that into the equasion also, and then we will be close to on the same page.

It doesn't matter if a person loves chopping wood or not; it takes time to do so, and so that time has a value that needs to be charged to the task.

For personal uses, it does not matter, a person can feel wealthy by supplying heat for their home themselves, and that is great.

But if you talk about profit and wish to _compare_ different sorts of profit, then all activities need to be converted to dollars to get a fairly level comparison. If one person profits more than another, we need to compare that profit on an equal basis - dollar bills. Profit is a measure of monitary values, to me.

Depreciation, resale value, and _time_ all count in the measure of profit, in my book?

I could spend months with an axe and a hand saw and make wood to heat my home, or I could work at McDonalds and use the money to buy wood or I could work in a proffesional job making $20-50 an hour and buy wood to heat my house. In some cases I will use less time, or I will have more cash, plus have my wood.

All of those give a person a different sense of personal wealth, and all will show a different profit.

I see profit as crediting everything with a dollar value, and comparing them on that level.

If you want to talk about being a satisfied person, and talk about wealth on that level, it is something totally different and a person doesn't need to consider time or dollar values to measure how you feel.

But the world 'profit' brings an equal base line to my mind, and you need to get a lot more detailed for me.

Just my view of things.


--->Paul

EXACTLY...

Well I'm not really talking about being a 'satisfied person' or feeling some spiritual value of doing things one way vs the other. I'm talking about actual hard profit. But, of course, in reality we are human and we cannot escape the fact that its not all about profit or we would just live in a homeless shelter or a shack and work full time doing whatever would pay us the most no matter how repellent we found the work to be. Thats another conversation...definitely it is PART of the answer.

What I am doing is measuring profit...true profit, not just calculating cash flow. Goods are wealth, paper dollars only represent goods. But if we are looking for a baseline to measure value than dollars work fine..so long as we don't get fooled into mistaking those dollars for the real thing or thinking that the dollar is more valuable than the good it can buy.

You mentioned time and say that your time needs to have a price attached to it. Well, like every other good that price is a function of supply and demand. If you are a doctor and can command 200 dollars an hour, then the price of your time is going to be very high...higher than cutting any amount of wood /farming is likely to gain you. If you are an unskilled person in a dead end town and are lucky to get minimum wage, then your time is much more profitably spent farming or cutting wood.

Which is more profitable at any given time depends upon what you might otherwise be doing. Your time is worth $10 per hour ONLY if you could have used that exact time to engage in another task that would have netted you $10 per hour.

The best way to figure it out would be to figure how long it takes you to cut, say, a cord of wood...then figure the market value for that cord, then you can calculate, roughly, the hourly gain. Compare that with the other options that are available to you and decide which is preferable.

The price of labor is different for every person...at different times.

PS.

It is also worth noting that when we begin to calculate the 'value of your time' what we are really doing is comparing the profit of time spent farming to time spent in another endeavor. What the gist of this thread is really about is whether or not farming is profitable...not how it compares hour to hour, with another activity.

If I start the year with $100 in the bank. Over the course of the year, I feed my family, pay all my bills, and at year's end I have $100 in the bank.

That works for me

__________________
http://www.mofga.org/

http://www.mofga.org/Programs/FarmAp...2/Default.aspx

Is that how it works?

I do not earn enough to pay income taxes. haven't for many years.

__________________
http://www.mofga.org/

http://www.mofga.org/Programs/FarmAp...2/Default.aspx

it takes a lot of money to be poor

me either, since I retired

Originally Posted by rambler
It's not a right or wrong, but looking at the same thing differently I guess.

One needs heat in the house, how does one accomplish that?

Spend the time with $20 worth of tools _plus_ your time to chop and saw your own, or spend $250 to buy some firewood _plus_ some time feeding the fire and removing ash, or spend some dollars to fuel a different type of furnace and no time needed by you.

I understand your argument, but I feel it is too simplistic. Time has a value, and much of your examples use drastically different amounts of time.

Put that into the equasion also, and then we will be close to on the same page.

It doesn't matter if a person loves chopping wood or not; it takes time to do so, and so that time has a value that needs to be charged to the task.

For personal uses, it does not matter, a person can feel wealthy by supplying heat for their home themselves, and that is great.

But if you talk about profit and wish to _compare_ different sorts of profit, then all activities need to be converted to dollars to get a fairly level comparison. If one person profits more than another, we need to compare that profit on an equal basis - dollar bills. Profit is a measure of monitary values, to me.

Depreciation, resale value, and _time_ all count in the measure of profit, in my book?

I could spend months with an axe and a hand saw and make wood to heat my home, or I could work at McDonalds and use the money to buy wood or I could work in a proffesional job making $20-50 an hour and buy wood to heat my house. In some cases I will use less time, or I will have more cash, plus have my wood.

All of those give a person a different sense of personal wealth, and all will show a different profit.

I see profit as crediting everything with a dollar value, and comparing them on that level.

If you want to talk about being a satisfied person, and talk about wealth on that level, it is something totally different and a person doesn't need to consider time or dollar values to measure how you feel.

But the world 'profit' brings an equal base line to my mind, and you need to get a lot more detailed for me.

Just my view of things.



This is the second time today I have agreed with Rambler. As a former bean counter in the large industrial corporation(that went bankfupt), but the one who worked in the great Activity Based Costing concept(unfortunately too late to stave off the bankruptcy), it became fundamental that the measurement system used had to be in terms of a dollar standard first--not a shifting value system where intangibles come into the picture and skewed things up. In fact, the corporation got itself into big troubles, because it didn't have a permanent dollar standard among all the divisions and the varied 'profit centers'(of which, there should have been only one) so the profit or loss could be precisely measured.

During the rollout of this computerized, across the board system of costing, I insulted a lot of corporate people by telling them this stuff is old hat. "Whaddaya mean--this is brand new computer stuff" My reply was that farmers have been doing this for decades--only with a pencil and paper. Woe be to the farmer who can't figure out what a bushel of corn, or a pig, or a bale of hay costs, because he is inviting disaster. Farming, by its nature is done on a repeating, year by year basis, so the accounting of such, can't use any smoke and mirrors. And the IRS requires a dollar accounting, as well.

The University of Nebraska has a similar system for farmers to use, which is computerized--just plug in the figures to see exactly what it will cost each year to make those go-no go decisions at planting time. I can agree that a farm can be profitable, but that possibility goes down as the size of the farm scales downward to the homesteading level. I believe it is a disservice to imply or assert anything differently to the beginning or aspiring newbie homesteader--and especially so if my opinion would lead him/her to give up a day job, thinking that philosophical, romantic values will be any substitute for food on the table or money to pay a mortgage or medical bill.......There's just too much at stake there, and the old saying goes; don't bet the farm on a scheme.....

And another really old saying: A gentleman farmer is one who has more hay in the bank than he has in the barn.

My opinion.....

geo

I know what you mean, but do your expenses include upkeep, surprise breakdowns, higher costs of production from one year to the next? Machinery replacement? If you are including these all, that is great.

BUT YOU DID SPEAK FOR MY AREA! You made a general statement and now you are backpedaling and qualifying. Thats simply luck. And thats nice for you but in other places thats simply not true.



LOL I can tell you EXACTLY what you would have if you had put $100 in a jar back in 1960...you see that happened here. I dig those jars up from time to time . Guess what? The money has rotted its not worth a thing!
But If they had put GOLD in that jar it would buy MORE land now than then and if they had wisely invested it it would have bought even MORE LAND!