Is bigger better?

Discussion in 'Homesteading Questions' started by SkizzlePig, May 15, 2006.

  1. SkizzlePig

    SkizzlePig Well-Known Member

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    Hopefully soon, I'll be selling my little company and coming into a bit of money. With that, my wife and I have all but decided to grab some acreage and try our hand at farming & ranching.

    Here's the question: If all things were the same (except price, of course) and we had the ability to purchase 800 acres or 50 acres, which should we purchase? I'm asking this simply because there's a LOT I don't know and it seems like the size of the property is a good place to start educating myself.

    For more background: We want to create a leisurely profit off the farm. It should sustain itself financially and feed our family, but doesn't have to generate a massive income. We'd like crops, solar power, cows, chickens and plenty of quiet space to relax.

    Thoughts? Advice? Criticisms?
     
  2. rambler

    rambler Well-Known Member Supporter

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    As always with these questions, location will make a big difference, & you haven't filled in yours. :)

    Profit is an odd concept for a farm. If you make any, you need to plow it back into the business. If you try to keep it, the govt will take most of it. It also takes a long time to start making a profit of any kind in farming. Need to pay for land, equipment, buildings, livestock, seed, fert, labor, and so forth, and can be 2 years before it is the proper time to sell whatever you might have raised the first year. Like any business, there is a level of experience & knowledge that one needs to make the right choices to make good harvests - the learning curve, and starting in with little ag experience, you are bound to make mistakes that will cost you 20-50 bucks an acre. That is more than your profit in regular row crop farming........ You really can't expect to bank any money for 5 years, & then you need to be making good ag decisions & have the weather like you.......

    As a business owner, you understand all these things. Just mentioning it.

    Now, what kind of land are you looking at, what location (markets available?), and what type of farming are you looking at?

    Three acres of pickles (in the right area, with a market available) will take more labor than the 2 of you can handle, but will net you more money than 800 acres of corn/soybean ground in the midwest. Plus most couples with less than 2000 acres of corn/soybeans - and many who have more - have a town job to supply insurance & a steady paycheck.

    Then 800 acres in Wyoming or Dakota will support only about 25 head of cattle, which will gross you $25,000 a year. You do the math on vet bills, suppliment, water & fence improvements, taxes, etc.

    You will need to define what type of agriculture you wish to do. Ain't no one can give you a useful answer so far. :) Garden crops on 5 acres; hay crop on 25-50 acres; row crops on 250-1000 acres; ranching on 2000+ is kinda some starting numbers. All dependent upon location, of course. Mostly for markets, and for type of land you have to work with.

    --->Paul
     

  3. Freeholder

    Freeholder Well-Known Member

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    Whatever you do, stay out of debt, even if you can only get three good acres for cash!

    Kathleen
     
  4. SkizzlePig

    SkizzlePig Well-Known Member

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    Thanks, Rambler. Very good questions.

    I understand the profit curve (or lack) in any endeavor ... especially one in which I have little to no hands-on experience. The financially self-sustaining is more of a goal than an immediate requirement.

    In response to you questions: We plan to raise cattle ... and breed them to keep costs down. As for crops, we want to grow family foods; corn, beans, broccoli, potatoes, herbs, etc. Then we want to allow for some acreage to grow high profit corps; blueberries, for example ... and pickles as you've indicated.

    We're considering Southern Oregon, it's close to family, we're familiar with the area, etc.

    Does help give you enough information to provide the neophyte some advice? :)
     
  5. rambler

    rambler Well-Known Member Supporter

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    That'll do great. :)

    As a corn, soybean, oats, alfalfa, & few cattle farmer in the midwest, I'm likely not a good one to offer advise for that situation. But you should get some good help here.

    Problems with farming is land. More is better, but it will cost you in taxes as you 'wait' to use it for those enterprises. If you buy small, learn, & then expand, much smarter. _But_ in 5 years, if houses move out your way & developers buy, you won't be able to afford any more land for 'just' farming.......

    A real catch-22.

    Cattle need room, cheap pasture land is what you want for them. Suppose you might want at least 2 acres or so per head? Wild guess for that area, I don't know. Other grazing critters need less space, if you don't want so much fence & land tied up. Cattle have 3 'stages', taking care of mommy & the kid from conception through weaning; growing them from 300+ lbs up to 900 lbs or so on mostly pasture; and then finishing them off on grain & a little hay to market weight. This is the 'comon' way, the 1st 2 portions take a lot of space & grass to be efficient, the last part takes a lot of grain & not much space to be efficient. Which part do you wish to do, each is really a seperate buisness but of course you can do all 3. Cattle markets go through a cycle, each section has real good times & times you are selling every animal at a loss.

    There are organic setups, and there are all-grass deals as well. These take more mangement, longer until you get a crop to sell, and more risk as it is such a specialized market. Can offer more income as well, once you are set up. All depends.

    Garden crops take good fertile land, good water. Only need a few acres unless you want to be manager & hire the labor out. _Really_ need to locate your markets before planting a crop.....

    Just random thoughts from a crop farmer up too late who is frustrated with the weather - waiting for it to dry out & warm up, you'll get better from others. :)

    --->Paul
     
  6. Niki

    Niki mini-steader

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    I'd also be looking down the road. Do you have someone you plan on leaving the land to? You can get land pretty cheap in some places, like E. MT, for example, and can get a lot of it, but it is mostly prairie from what I understand and the soil isn't the best for growing some crops. As land becomes more and more scarce, it is tempting to purchase it just so I know that generations that follow me will have something of value. With that said, however, it could take many generations before the land becomes much more valuable than it is today.

    The other side to this is we want land where we can farm, but also have some of it wooded with natural water sources running through where we could hunt and fish. In order to have this, so far we are finding we need to compromise the amount of land we will ultimately buy because the price/acre for land with these features is considerably higher.

    Personally, if you are just looking for something for you and the wife, and not looking at it so much as an investment for future generations, I would look at something smaller that is going to be more easily managed.
     
  7. Michee

    Michee Well-Known Member

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    "and plenty of quiet space to relax"..... Buy more than 50 acres if you can then. If you always have great neighbors, 50 is plenty for nice and quiet, if you have neighbors that drive you nuts or are just simply inconsiderate then 200 won't be enough. Neighbors move sometimes so the ones that are there now may not be in 10 years.
     
  8. Terre d'Esprit

    Terre d'Esprit Boer-ing Mom

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    We are new at this, too, and have more land than we can work with. We farm it on shares with the neighbor. He uses it as his own, and we receive 1/2 the profit for it. It helps with the expenses as we begin our goat operation. We wish we could afford more land, for the reasons stated above.

    Good luck!

    T
     
  9. Quint

    Quint Well-Known Member

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    All things being equal I guess I would have to say I prefer the larger piece of property. It is just hard to beat having a big chunk of land all to yourself. It eliminates all the difficulties with neighbors. It also allows you to do something that is very very important when you build your home. As someone here on the board (cabin fever perhaps?) is fond of pointing out it allows you to "own your views" or something to that effect. This means that no one can ever build something or cut something down or otherwise meddle with the views from your house or otherwise disturb your tranquil homestead so to speak. If your place is 5 acres that isn't really possible. If it is 155 it is much more possible. If it is 1555 it is no problem.

    As for making a leisurely profit at farming I'm not sure how that can be accomplished. I suppose by renting the ground out. That way all the risk is someone else's for the most part. Then you can just raise cattle and other stock for your own amusement or whatever. As for sustaining itself financially that is a tougher nut to crack. That takes WORK. Nothing leisurely about it. Nowadays it is harder than ever. I know my place is decades past the point of making it pay for itself. I'm going to expand a couple of operations to bring in a little extra income but even if I expanded into cattle and went to a small dairy op there is no way I could live off of it in modern sense. It just isn't big enough. I'd have to be 10x the size and have several hundred thousand in machinery to even get started.
     
  10. SkizzlePig

    SkizzlePig Well-Known Member

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    Thank you for all the advice and considerations.

    I'm very new and VERY ignorant of homesteading and farming and you all have been very patient and imparted great wisdom. You've all been very open-handed with your experienced and advice. I really appreciate it.

    I may have also given you the wrong impression when I said "leisurely profit". I should've said "work smarter, not harder to make a profit". In retrospect, I can see which one more accurately represents our intentions. We're certainly not afraid of hard work. Now, maybe a "profit" is not going to be the expectation, but a far distance dream. :) And I'm okay with that ... after a career in software, it will be refreshing to work on something you can actually touch and see.
     
  11. agmantoo

    agmantoo agmantoo Supporter

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    Buy all the land that your budget will permit without effecting your lifestyle. I have over time tried many methods of generating income. Even my poorest land investments have or will out yield anything else I know. 1031 exchanges are geared for people like us!
     
  12. Jan Doling

    Jan Doling Well-Known Member

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    Smaller is better when it comes to taxes and insurance....but you don't want it so small that you can see your neighbor or vice versa.
     
  13. rambler

    rambler Well-Known Member Supporter

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    I'm real proud of the fact that I made 2 replies to this thread, and _didn't_ comment about this line. :)

    Tho, it has offered me hours of smiles. :) :) :) :)

    As if there were such a thing...........

    --->Paul
     
  14. Mike in Ohio

    Mike in Ohio Well-Known Member

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    Bigger is not always better. We were originally looking at larger properties (200+ acres) in central WV. We ended up buying 55 acres in NE Ohio (Some call it east central Ohio).

    Location location location. With rising energy costs you need to consider access to markets and the cost of shipping in supplies and equipment.

    Quality of the land. Which would you take? A 100 acre parcel with no water resources and poor quality soil or a 50 acre parcel with multiple springs and good quality soil?

    Improvements. Improved land (fencing, wells, drives, barns, etc) is generally worth more, all things being equal.

    Just a few thoughts.

    Mike
     
  15. Country Doc

    Country Doc Well-Known Member

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    1. no debt- I second this advice
    2. Farming tends to be a lousy business, so don't count on alot of income.
    3. Beef cattle need about 1 bull for 25 cows so think in multiples of 25 for cattle if you are doing cow calf. See how many acres in your area to support a cow as stated before.
    4. You're competitors in farming may have done it all their life and are better at it.
    5. If you are doing this as a business consider doing a small intensive farm of something others don't do as much. Organics, aquaculture, hydroponics, etc.
    6. Think about how hard you want to work and if you want a vacation-oops-there goes the dairy!
    7. Ideal would be small acreage with option to buy bigger.
    8. Try an maintain more capital than your think you need, ie don't blow it all on the farm.
    9. If you ignore #8, remember alot of stuff is a good writeoff to offset your taxes from the sale. Tractor, toys can be expensed off- it may still be up to $100,000 before you have to depreciate stuff.
     
  16. SkizzlePig

    SkizzlePig Well-Known Member

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    I have a question based on the advice to not engage debt in order to get our farm. Does this advice apply to a mortgage or consumer debt, like tractors and trucks?

    As we all know, you get tax credits based on mortgage interest. Should we stay away from any debt whatsoever? Or is a mortgage okay, but use cash for tractors, cattle, trucks, etc?

    Sorry for the ignorance ... I really appreciate your wisdom.
     
  17. Mike in Ohio

    Mike in Ohio Well-Known Member

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    Unlikely Farmer,

    You are likely to get about as many different answers as there are posters to this site.

    The reality is that you need to consider your personal circumstances. Although some people will tell you not to have any debt at all, as a business person I'm sure you can appreciate the benefit of leverage through debt.

    We could pay down most or all of our mortgages but we prefer to have a reserve of cash (or equivelents) available rather than borrowing at a later point when we expect interest rates to be higher. Given the tax benefit of deducting mortgage interest, the fact that the interest rates on our mortgages are fixed and at low rates plus the fact that interest income from the cash invested is currently higher than what we pay on the mortgages..... well, it makes sense to us.

    Bottom line, do you think you can invest your money (all things considered) and get a better return than the interest rate you would pay on a mortgage? If yes then a mortgage makes sense....if no then it may not.

    We prefer to pay cash for equipment. While this limits our ability to implement our plans it also reduces financial risk for us. I have considered some of the 36 months at 0% interest on a new tractor.....I think I'll wait <G>.

    Understand that farming is one of the worst types of businesses around....it is both capital intensive and labor intensive. This is one of the reasons that the number of farmers is expected to decline significantly over the next 10 years.

    As usual, just my 2 cents.

    Mike
     
  18. rambler

    rambler Well-Known Member Supporter

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    The debt thing is just a personal preference. You will find many on hereare extremely $$$ conservative, and that will be reflected in their replies.

    I am as well, so not knocking _anyone_. :)

    If you have cash flow, I see no problem going into debt for real estate. This is assuming you do not plan on using youre leasurely profits to pay off the morage. ;) It will be many years before a hobby farm starts making as much as you spend on it, much less a profit to put back into the morgage. Perhaps you will be renting part of it out, or have 2-3 jobs in your household & can use that bankable income to make the morgage cashflow. Then - works for me, land is a good investment _most_ of the time.

    If you are in a hobby or very small, just for me, type of farm, I would not go into debt for machinery. Not at all. You will quickly get in over your head. Good used small equipment is abundant, and can be had for 30% of new. Do that. Don't go into debt for these mid-term expenses. Anything with new paint will depreciate rapidly, and you will go to the poor house.

    Now, if you are running a real, large, farm as your major income, then one can get fairly new machinery & borrow some for it - if one has a business plan, a history of being able to turn a profit farming, and so on.

    If it were me - and it's not, it's you so do _whatever_ you are comfortable & familiar with......

    If it were me I would consider debt for the land _if_ I had a proven income stream to pay it off.

    I would avoid moderate term debt like the plague.

    I would consider short term debt (cattle, seed, fertilizer, etc.) only as a last option, & only if I _knew_ I was protected with insirance, had a good money making plan where the operating loan would be repaid in that season.

    It becomes _very_ easy to spend large sums of money in farming. I can gross near $400 an acre, but I will spend clse to $350 per acre trying to get it. If things go wrong & my yields are cut in 1/2, suddenly I spend $340 per acre to get $185 back - on _every_ acre. You were saying 800 acres???? Just lost $124K. On a 'small' farm in today's world.

    If things go real well, make $75 an acre, made $60k. Only. Look at the risks & rewards.

    Debt is a bad thing for a smaller, 'leasurely' farm. It can eat you alive in 2 bad years.

    If one figures the land is an investment for your older years; and has a way to pay off the note - can be a good thing. If you know how to set it up.

    All the rest - short & mid term loans, you are digging yourself a hole, and don't have enough experience to know how far to get in, how to get out, what the risks & rewards are....

    Jimho.... Take this for what you paid for it, and good luck with your plans. :)

    --->Paul
     
  19. MorrisonCorner

    MorrisonCorner Mansfield, VT for 200 yrs

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    There are a series of articles on the business of farming starting at:

    http://www.vermontsheep.com/farm_biz.itml

    which you might want to look at. The third piece is on the Break Even point which does a fairly clear job of explaining how to look at business investments (tractors, fencing, trucks, etc) so you know if your farm will support them.
     
  20. Queen Bee

    Queen Bee Well-Known Member Supporter

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    I agree: Purchase as much land as you can "afford".

    We have 80+acres and lease another 60a-- We have maybe 20a open fields, another 10a in good pasture and the rest is woodlands/timberland with mainly hardwoods.
    We spent the first 4 yrs. cleaning out the hollows, valleys and woods of trash. The next 4 we spent tearing down rotten barns/falling down shelters, two yrs we cleaned timber land that was mismanaged for 60yrs.and the next few we are tearing out the fences and replacing them.

    DH was rasied on a farm, knows how to grow, plant, repair, fix, use up and reuse just about EVERYTHING and we do not/have not made a "profit" on the land. He loves the land (It's been in his family for over 85yrs..it was his gf, parents, siblings, and we purchased it back from all his siblings 10yrs ago. and would love to be able to farm and make a good living..Good equipment is expense, repairs (even if you do them yourself or hire them out) are time and money pits, the weather dictates your crops, labor (if you hire workers/helpers) is expensive and unpredictable --such a headache. Lumber for barns/sheds and fences are out of site. Insurance for family and farm?Taxes? For us we use our land/farm as a hobby. We have 'enough'-- to provide food for a very large extended family. And it is a great stressbuster.....but a profit? NO!


    In the last 10yrs. I have added: a small orchard: 8 blueberries, a row or blackberries, raspberries,10 antique southern apples,4 peaches, 2 plums,2 cherry, and a small vineyard of 15 muscadine and 10 beehives. Most are just now 'really' starting to produce a nice crop.

    Our dream is to retire on the farm. Have a few animals such as goats, chickens, sheep, waterfowl and beef cattle for our food sources and pleasure.

    I do know that their are a few that 'make a nice living' but as far as a nice profit I would think not to many....