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How can farmers justify to purchase new tractors ?

C

Crackerjack

Member
Just wondering, considering the absolutely staggering prices of the big players today, how many years or hours on a new tractor would it take to break even on investment using today's market prices for foods as an indicator?
Those of you that got new what were your reasons why ?
 
I dont think you can "justify".The big guys already have so much debt that it just blends in.They never really pay for it. They just keep trading dollars with a banker.The more money you owe to that banker,the more money he makes,not 'you'.
 
Obviously I'm far from knowing....

With govt regulations and electronics and all I think any new planter, tractor, combine needs to be run 20 hours a day in season, rack up as many hours as you can in three years during a lease, and roll it into another new lease then.

You can't afford down time, you can't afford to repair one of those complicated things on your own dime....

Get big, lease it, and wring hours out of it on many many acres. Then get rid of it.

The trouble is, who buys it used then, it isn't worth anything; too big for the small fella, and no longer dependable enough for the big fella.

Machinery companies are finding this out now?

Paul
 
I wonder that too ?
Same thing with pick up trucks ! but the trucks are selling really good. Ford always sells more than any one else and the truck sells more then the cars.
 
OK the big guys have been leasing for decades. They have never had a problem selling that used stuff before to guys on their way up, those who are big but not that big and those on the way down.

Here what you see is a lot of 2-3 year old lease returns then a gap, then next thing you see is 10-15 years old on dealer lots. Anything older starts really loosing value quickly.

As far as justification? Good operators are hard to find. So find one good one and put them on something bigger. They cover more acres per day and reduce the number of hired operators. Got a guy here who had a new clutch put in a tractor. A new, very short term operator ran that tractor 2 days to burn out the new clutch. He went to bigger tractors because of that.

Rick
 
Crackerjack, I've wondered that for years, yet somehow I keep seeing newer and bigger equipment on the fewer remaining big farms. I believe this is what is primarially keeping the few remaining ag dealerships in business, and the BTO's get treated really well - special deals on implements to go with, great lease rates, service plans, etc. As Paul said, a lot of them are just rolling loans, and as long as the money keeps flowing, it doesn't matter if the farm is making money or just breaking even.

Sort of reminds me of the I Love Lucy episode, where she goes in a store to buy an appliance (maybe it was a toaster), and the salesman ends up selling her an entire household worth, on sale no less, so she saves so much, she gets the toaster for 'free'. Ricky was not impressed.
 
I would imagine that they always trade up just before that staggering, back-breaking payment comes due. :>)

Allan
 
I don't judge the BTO's tractor purchases because I don't know their tax situations and the ramifications of those purchases.

I'm sure that scenario figures into what they are doing, BIG time.
 
Talked to a guy yesterday who told me his boss just spent $118K on a USED tractor because the tax man told him spend it or give it to uncle sam.

Allan
 
I won't pretend to have the answer or fully understand the answer to this but I do know not to try to apply common understanding. For example I needed to do a quick job for a friend but told him I needed a big tractor to do it, so he sent me to get his new tractor. So as we were looking it over I asked what spured the purchase, he stated that his tax man called and told him he need to spend some $$$ on a tractor very soon. Something like, go spend 50k on a new tractor or pay the tax man 30k. Neither is attractive but if you buy the tractor you will have something to show for it.

In my world it would be like, go buy a $2,000 Farmall M or pay the man $1,400 in taxes, I'll take the M. I think the gov does this to stir economic activity.
 
When was that not the case? The same could be said when switching from mules to a an IH Regular. Then guys stood in shock and awe as the Regular got traded for the massive and expensive IH 450. Then the 450 (biggest row crop tractor IH built in 1957 with 45 HP got traded 10 years later 125 hp 1256 with a freaking cab!!! Then 10 years later that old broken down 1256 was traded on 1586 with 179 hp, digital dash and AC!!!!! Who needed all that stuff and who could afford one? Then 10 years later that slow, akward underpowered 1586 was traded for 7240 with 216HP. And that MX270 with 11,000 that replaced the old 7240 needs to be traded at some point.....
 
I don't know,...i just bought a nice 40' double disc air seeder with cart for $4500.I need it only to stitch some oats into my hay fields and sod seed new grass in my pastures,..maybe an half section/year
So what shall i do?
1)Take the wings off so i can pull the center 15' section with my old 1855 Cockshutt.
2)leave the thing as is and buy a used 200 hp+ versatile for +/- $20 grand.
3) lease a brand new JD or Case?
 
(quoted from post at 09:10:52 07/08/15) I won't pretend to have the answer or fully understand the answer to this but I do know not to try to apply common understanding. For example I needed to do a quick job for a friend but told him I needed a big tractor to do it, so he sent me to get his new tractor. So as we were looking it over I asked what spured the purchase, he stated that his tax man called and told him he need to spend some $$$ on a tractor very soon. Something like, go spend 50k on a new tractor or pay the tax man 30k. Neither is attractive but if you buy the tractor you will have something to show for it.

In my world it would be like, go buy a $2,000 Farmall M or pay the man $1,400 in taxes, I'll take the M. I think the gov does this to stir economic activity.
Click to expand...

A 2K M? Heck here an M with power steering, Cornhusker 3 point, live hydraulics, near new rubber, a loader and decent paint has trouble selling for 2K and will more than likely bring close to 1800.

Rick
 
I don't really care if I don't run a new tractor in my life, but some of my equipment is going to be new. That said I bought my round baler new and I just changed the first bearing on it yesterday, the belts are seeing some pretty good wear, and I have 45 acres down, I can not afford to run a machine that I am going to wonder if it will do it! Just bought a new mower this spring, double rotary rake and a hydro push spreader with vertical beaters is on the list, along with a new baler!
 
Just my thoughts 1. tax issues/depreciation 2. downtime or non productive issues with old stuff 3. Not able to do extencive repairs on the old stuff 4. cost of repairs. 5. Old stuff bnot able to handle modern implements.
 
well I can say that I wont ever have enough money to buy new. All I know is that wear I live its gas country and that if you have enough money to buy new it can help you process a lot as far as time/fuel/and labor cost.
 
In order for there to be used tractors in the future someone has to buy a new tractor today.....Lots of the younger guys lease but the old timers with lots of paid for land and no debt can pay cash....I know several farmers with 1500-2500 acres all paid for and no debt that could walk in to any dealer and write a check for 300K and never blink..Some cleared $200-400 acre profit when corn was $5-7.00 and beans $10-15.00....Purchases are often done for tax purposes,not because the trade in was worn out..
 
I see these new tractors (equipment in general) and all of these taxs advantages that they get, or tax write offs...
In the end when they sell/trade that equipment, they will have to pay the taxes on it or if thier estate ends up with it they have to pay the taxes on it...
I see alot of farmers spending all of there money becuase they dont want to pay taxes, they would rather have buy some equipment and have a tax write off. When the time comes for them to retire they have no money saved up becuase they spent all there money tring to avoid taxes; and since they had all these tax write offs and never paid into Uncle Sam they can not draw Social Security or any of the other benefits.

If I make a $100,000.00 a year and a farmer makes a $100,000.00 a year we both pay the same taxes. The only difference is what either of us are able to write off on our individual returns. I pay my taxes every 2 weeks when I get paid. The farmer only pays there taxes a couple fo times a year and I would feel no different if I had to write that big of a check to Uncle Sam.

Thier Accountant needs to do a better job explaining the long term advantages / disavantages of tax write offs, not just showing them how to spend there money.


I know there are alot of other reasons to buy these big tractors and equipment as it s necessary to keep up with the times and being efficiant in the field. You can only keep a 4020 or a 1066 running for so long and what they are capable of doing is growing limited these days. 40 or 50 years ago these were "big" tractors, these are babies now days!
 
I'm far from an expert but I figure they justify a new tractor just as some people justify a new car. I also thinl they look at it as a cost per acre expense. I don't buy much new equipment but I justify my upgrades by the expected reduction in downtime and repairs. Since I'm into cattle, I break the expense down by a cost per cow basis. When a piece of equipment gets to costing too much per cow I evaluate whether or not an upgrade might be less expense.
As far as the crop farmers go, another thing to consider is if they go bigger can they cover more ground and maybe less hired help. There are a lot of pieces to the puzzle and each operation is a little different. And, of course, there is the keeping up with the Jones justification.
 
The real operators I know break down every purchase on how it effects their input costs. About the only thing that doesn't get that treatment is land.

I remember a guy posting on here a while ago that stated that not one acre he ever bought would pay for itself at the time purchase - but all did within 5 years.
 
Not on a tractor but some implements are hard to find used so new is the only option
 

Interesting subject, I was just talking about this with a retired farmer the other day. He told me a little about his scenario, but I don't know any numbers or acreages. He was full on farming in the 80's and 90's. His strategy was buying used equipment that needed a rebuild and was too big for the smaller farmer, but too old for the big farmer. Think 12 row planters and 4wd tractors. He rebuilt it, then often had 2 of everything "just in case", and thought he was farming cheaper than everybody else. A good friend of his that he "ran with" bought new, large equipment. They compared their machinery costs per acre, and it was "closer than you'd expect". Within a few dollars. The guy I know would have had more direct write-offs, while the other had longer-term depreciation. So, for a guy covering some ground, "making a living" farming, I'll bet he can justify it in his mind to own new or like new/ used, and with the bonus depreciation, well, it makes sense to me. I farm too small to fully understand the decisions and economics of the situation, however. The last two years my maintenance bills and repairs to my machinery is over half of my gross income from farming, so in a way it makes some sense to me to buy new if you can swing it. Just my $.02 -Andy
 
Get yourself new equipment, or give it to the government. That was when they were making money.

Most farmers hate to pay taxes, and new tractors are fun to drive.

Gene
 
I'm not a farmer, but I too hate to pay taxes. When I make a purchase for my rental
business, I think of it this way. I spend $3 on business, I don't pay one dollar in
taxes, 28% fed, 3.4% state and 1% local. Some people making big bucks are way north of
28% fed.

So when buy something, I think I'm gettng a tax discount.
 
Don't know how leases are, but at the local JD
dealer dad asked what it would cost to rent a
new JD 200 hp Tractor. He was just asking for
S and giggles. He's old school, he laughed
when they told him it was $225 per hour on the
meter and tenths rounded up, then they asked if
he was interested lol.

Ross
 
About a year and a half ago, we did some remodel work for our local John Deere dealer. I've known the Deere salesman my whole life and during break I talked to him about a new combine that had come in on a semi trailer. He told me that it had been sold to a large BTO who lived about 200 miles away. I asked him why the guy didn't buy local and the salesman said that he didn't want any local Deere salesmen telling the BTO neighbors how bad he was in debt, so he bought it from hundreds of miles away. The salesman also said that he trades his combine off for a new one every two years and each time gets further and further in debt. The salesman didn't know how far Mother Deere would allow this, but JD financing hadn't pulled in any reigns yet.
 
It doesn’t matter what the Jones’ are doing. Not now, or ever. Save where you can, spend where you need, and live a life you want.
 
I bought a new tractor because I wanted to - that simple. But.....

It was the 2nd lowest priced utility tractor JD made, 2 wheel drive, bare bones, non-tier 4 emissions, plenty of power for our needs and starts everytime we turn the switch.

However....

It will be in the family a long time. My boys will likely be using it after I call it quits.

JD 5055d - knock on wood, hope it lasts.

Bill
a195514.jpg
 
(quoted from post at 08:49:42 07/08/15) Just wondering, considering the absolutely staggering prices of the big players today, how many years or hours on a new tractor would it take to break even on investment using today's market prices for foods as an indicator?
Those of you that got new what were your reasons why ?
Click to expand...

I've heard (Machinery Pete) that certain 8-10 year-old low-hour tractors are now selling at auction for up to 16 per cent more than they did 5 years ago. Why? because they are cheaper than new and less-complex to fix if something breaks ........... that's my guess, anyway. But, it's just a guess :roll:
 
(quoted from post at 21:01:53 07/08/15) It doesn’t matter what the Jones’ are doing. Not now, or ever. Save where you can, spend where you need, and live a life you want.
Click to expand...

I never said it mattered but there are a number of farmers, that I personally know, that do just that. Some of them make it and some of them don't. I agree with your last line and follow that philosophy closely.
 
It is interesting to consider the cost of a new tractor in terms of bushels of grain - this helps lessen the impact of inflation. In 1960 wheat was bringing about $2 per bushel and a new 100hp tractor was in the neighborhood of $10,000. So, 5000 bushels of wheat would buy a good-sized field tractor for that era. Today wheat at our local elevator is $5.50 and a new base-model, open-station, 2WD, 100hp tractor with the same work capacity (but hardly considered a good-sized field tractor anymore) is around $70,000 which is nearly 13,000 bushels of wheat.
 
Consider a farmer brought home a new 200,000 dollar tractor. No reason for this number other than it's in the middle of the price range for a new tractor and something an average size farmer would use on say 2500 acres. Yes they make them $400,000 plus. He likely traded in an older tractor worth 100,000. With that he puts down 50,000 cash and finances the remaining 50,000 at zero % interest for three years. His payments are 16,666/yr over 2500 acres which figures out to 6.67/acre. Even if he's paying interest and his payments are 20,000, his cost is still only 8/acre. Considering the cost/acre of rent, seed or fertilizer, the tractor cost is pretty reasonable. Its all about cost/acre, cash flow and tax strategy.

But that's not all. Also consider a big new tractor means this farmer is likely doing more acres with no hired help. Two months of hired help to put in a crop would cost 10,000. No repairs means another savings of 10,000 easy. No down time means crops get planted on time. Only one bushel of lost yield due to late planting on 1250 acres of 9.00 beans figures out to 11,250. Three bushel of lost yield due to late planting on 1250 acres of 3.50 corn figures out to another 13,125. He also receives full warranty so he can sleep at night. Newest in engine and transmission technology will save on fuel efficiency. Newest in computers, gps, auto steer and iso bus compatibility with the newer planters and implements allows for additional savings in seed and fertilizer by using variable rate technology. Auto-steer allows some farmers to forego markers on planters and drills, saving an additional 10,000 and up to 20,000 on 50-60 foot equipment. The auto-steer also saves time from constant over-lap when doing tillage meaning more savings on fuel. It also allows for planting after dark and covering more acres/day since you don't have to see your mark. Timely trading for newer tractor also allows one to keeps up with trade in values.

Last but not least, he gets the latest in creature comforts. A farmer who goes home hot, dirty, tired and grumpy soon has a wife who is also grumpy. Cost savings of a happy wife and no divorce....priceless! If wifey likes to drive the new tractor....even better. More time for farmer John to go to the sale barn or coffee shop. Maybe he gets more work done in the shop while she's on the tractor. Maybe, just maybe, he spends more time on YT.
 
I can only conclude that farmers must be incredibly rich. Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book.
Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.
 
(quoted from post at 18:36:42 07/09/15) I can only conclude that farmers must be incredibly rich.[b:ef780a82fb] Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book. [/b:ef780a82fb]



[b:ef780a82fb]Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.[[/b:ef780a82fb]/quote]

Living within its means versus living beyond its means.

The farmer is most likely up to his eyeballs in debt as well.
Click to expand...
 
(quoted from post at 21:59:51 07/09/15)
(quoted from post at 18:36:42 07/09/15) I can only conclude that farmers must be incredibly rich.[b:2ae25bc5ef] Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book. [/b:2ae25bc5ef]



[b:2ae25bc5ef]Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.[[/b:2ae25bc5ef]/quote]

Living within its means versus living beyond its means.

The farmer is most likely up to his eyeballs in debt as well.
Click to expand...

Many are deep in debt but the difference is that the blue collar worker for the most part isn't using debt to make a living. Debt used in the right way is a necessary tool now days. Not just in farming but in nearly any business. An old farmer once told me that after the 1st seven years your debt should be less than 50% of gross worth. After 15 years it should never exceed 25%. I thought that was a good philosophy.
Click to expand...
 
(quoted from post at 18:59:51 07/09/15)
(quoted from post at 18:36:42 07/09/15) I can only conclude that farmers must be incredibly rich.[b:9fec35991e] Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book. [/b:9fec35991e]



[b:9fec35991e]Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.[[/b:9fec35991e]/quote]

Living within its means versus living beyond its means.

The farmer is most likely up to his eyeballs in debt as well.
Click to expand...

The farmer's around here own banks.
Click to expand...
 
(quoted from post at 19:15:02 07/09/15)
(quoted from post at 21:59:51 07/09/15)
(quoted from post at 18:36:42 07/09/15) I can only conclude that farmers must be incredibly rich.[b:8804b14af7] Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book. [/b:8804b14af7]



[b:8804b14af7]Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.[[/b:8804b14af7]/quote]

Living within its means versus living beyond its means.

The farmer is most likely up to his eyeballs in debt as well.
Click to expand...

Many are deep in debt but the difference is that the blue collar worker for the most part isn't using debt to make a living. Debt used in the right way is a necessary tool now days. Not just in farming but in nearly any business. An old farmer once told me that after the 1st seven years your debt should be less than 50% of gross worth. After 15 years it should never exceed 25%. I thought that was a good philosophy.
Click to expand...

Much better reply than mine.
Click to expand...
 
It's a touchy thing but it is a good idea to keep upgrading to stay up with the times and with weather patterns and other factors you need something reliable and if you have new tractors and aren't upgrading I won't say you're dumb but your older tractor is just sitting there depreciating and with dealers getting pressure to move equipment at times with the zero percent interest and rebates and incentives it is silly not too. Leasing is also not a bad idea if you have other capital to use for loan collateral. It's mainly a technology thing tho. It can get very expensive to upgrade tech in older tractors and still you have a tractor with some odd thousand hours. A failed transmission or other major failure you'd wish you spent a good chunk for the newer tractor that would be under warranty
 
Still, when one poster made a comment about knowing a lot of people that could write a check for $300.000 and not bat an eye???? Sorry to say, but that is so far out of the realm of the ordinary worker that it is not even a dream. Even most professionals could not raise that kind of cash on short notice.
I'm no pauper. I have a paid off home, nice SS check, and a reasonably profitable side business doing auto repair. Those huge numbers coming out of corn, beans, wheat, or meat simply boggles my mind.
Just goes to show that those that cry poor the loudest usually have the most put aside.
 
(quoted from post at 07:49:42 07/08/15) Just wondering, considering the absolutely staggering prices of the big players today, how many years or hours on a new tractor would it take to break even on investment using today's market prices for foods as an indicator?
Those of you that got new what were your reasons why ?
Click to expand...

I'm a "Little Player" who will be market-gardening in retirement. But we purchased a new utility tractor when we were new to this all. We lacked experience and mechanical skills.

Now I can fix old equipment, and the old stuff (also tractors in the 25-60 hp range) goes out to work more than it did at first.

0% financing helped, as did buying just a *little* more tractor than we needed. But if someone has skills and patience, a good used machine is more than suitable.
 
(quoted from post at 02:36:42 07/10/15) I can only conclude that farmers must be incredibly rich. Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book.
Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.
Click to expand...

As a business running thousands of acres he has to have some hefty cash reserves. Sure it's also personal "wealth" but it's money that is there to run the business. jimg, you must have never been involved in the business end of anything to have made that statement.
 
We bought a new small tractor because I was tired of needing to use one of the old ones and it not starting, not running right, needing a tire aired up, something always needing fixed and never knowing when it would quit in the middle of a job. I still work full time with a 2 hr. a day commute and a large herd of critters and don't have the time to fix balky equipment anymore.
 
(quoted from post at 02:59:51 07/10/15)
(quoted from post at 18:36:42 07/09/15) I can only conclude that farmers must be incredibly rich.[b:af04b80f91] Anybody that can walk into a dealer and put down $50,000 down payment on a new tractor while trading in a used one worth $100,000 is pretty rich in my book. [/b:af04b80f91]



[b:af04b80f91]Consider that the average blue collar worker lives from paycheck to paycheck, is up to his eyeballs in debt, and likely has less than $10,000 available in savings or liquid cash.[[/b:af04b80f91]/quote]

Living within its means versus living beyond its means.

The farmer is most likely up to his eyeballs in debt as well.
Click to expand...



Most farmers that I know of are in debt up to there eye balls as stated by Bison. When your that far in debt the banks keep you running and keep giving you more money becuase if they sell you out they will never recover all of there money that you own them; it is a vicious cycle. Now, if it was Joe homeowner, they would forclose on the morgage and take what they could get and cut there losses.

What kills me is that when the milk/grain prices are high they spend all thier money becuase they don't want to pay taxes (which I previously explained) and they never save moeny for when the times are lean. Instead they cry poverty.

My question for them is, how could there fathers and grandfathers farm there whole lives, retire and give there farm to the next generation and when he dies he has a crap load of money sitting in the bank? How was that generation able to do it?
To answer that quation: They did not spend every penny they made, they saved for the lean times, thye paid there taxes, and lived with in there means....
Click to expand...
 

I've known a few like that but they didn't last long. Most of the farmers I know have college degrees in business and may be in debt more than most can imagine but owing $1 million when your assets are over $4 million isn't a big deal. When you add in land, a modest crop farm can easily top $5 million. As long as you cash flow in the down years a 25% debt isn't unreasonable. Any that have been in business any time at all know this. As far as their fathers, there were a lot of them that were bailed out by the government in the early 80's. That safety net has bigger holes now.
 
(quoted from post at 17:00:18 07/10/15)
I've known a few like that but they didn't last long. Most of the farmers I know have college degrees in business and may be in debt more than most can imagine but owing $1 million when your assets are over $4 million isn't a big deal. When you add in land, a modest crop farm can easily top $5 million. As long as you cash flow in the down years a 25% debt isn't unreasonable. Any that have been in business any time at all know this. As far as their fathers, there were a lot of them that were bailed out by the government in the early 80's. That safety net has bigger holes now.
Click to expand...

What about all of the government subsidy programs that they are all involved with and receiving free money from Uncle Sam whether it is a good year or a lean year? It’s like welfare, the more kids you have the more money you get. There are few farms that do not receive subsidies; these are the “old school” farmers that believe in the cash system not the debt system. There are also a lot of farms that rent/lease a lot of their acres that they run and do not have nearly enough assets to cover their debts. I see this with farms all around me.
It’s hard to accumulate any assets when they keep signing their name on the dotted line and take on another payment.
There is nothing wrong with taking on some debt and updating your business, but most of these people don’t realize that they need to pay off one thing before buying three more things.

The farm industries are not much different than the housing industries. Remember 2008 – 2009 and the housing market collapse? Most of these farms are not much further ahead of what happened to the housing industries. They take on more debt than they can afford and will never see day light.
 
(quoted from post at 12:23:48 07/10/15)
(quoted from post at 17:00:18 07/10/15)
I've known a few like that but they didn't last long. Most of the farmers I know have college degrees in business and may be in debt more than most can imagine but owing $1 million when your assets are over $4 million isn't a big deal. When you add in land, a modest crop farm can easily top $5 million. As long as you cash flow in the down years a 25% debt isn't unreasonable. Any that have been in business any time at all know this. As far as their fathers, there were a lot of them that were bailed out by the government in the early 80's. That safety net has bigger holes now.
Click to expand...

What about all of the government subsidy programs that they are all involved with and receiving free money from Uncle Sam whether it is a good year or a lean year? It’s like welfare, the more kids you have the more money you get. There are few farms that do not receive subsidies; these are the “old school” farmers that believe in the cash system not the debt system. There are also a lot of farms that rent/lease a lot of their acres that they run and do not have nearly enough assets to cover their debts. I see this with farms all around me.
It’s hard to accumulate any assets when they keep signing their name on the dotted line and take on another payment.
There is nothing wrong with taking on some debt and updating your business, but most of these people don’t realize that they need to pay off one thing before buying three more things.

The farm industries are not much different than the housing industries. Remember 2008 – 2009 and the housing market collapse? Most of these farms are not much further ahead of what happened to the housing industries. They take on more debt than they can afford and will never see day light.
Click to expand...


Can you be specific on this "welfare"? I must be missing something. I saw that back in the 80's but not much now.
 
(quoted from post at 18:36:09 07/10/15)
(quoted from post at 12:23:48 07/10/15)
(quoted from post at 17:00:18 07/10/15)
I've known a few like that but they didn't last long. Most of the farmers I know have college degrees in business and may be in debt more than most can imagine but owing $1 million when your assets are over $4 million isn't a big deal. When you add in land, a modest crop farm can easily top $5 million. As long as you cash flow in the down years a 25% debt isn't unreasonable. Any that have been in business any time at all know this. As far as their fathers, there were a lot of them that were bailed out by the government in the early 80's. That safety net has bigger holes now.
Click to expand...

What about all of the government subsidy programs that they are all involved with and receiving free money from Uncle Sam whether it is a good year or a lean year? It’s like welfare, the more kids you have the more money you get. There are few farms that do not receive subsidies; these are the “old school” farmers that believe in the cash system not the debt system. There are also a lot of farms that rent/lease a lot of their acres that they run and do not have nearly enough assets to cover their debts. I see this with farms all around me.
It’s hard to accumulate any assets when they keep signing their name on the dotted line and take on another payment.
There is nothing wrong with taking on some debt and updating your business, but most of these people don’t realize that they need to pay off one thing before buying three more things.

The farm industries are not much different than the housing industries. Remember 2008 – 2009 and the housing market collapse? Most of these farms are not much further ahead of what happened to the housing industries. They take on more debt than they can afford and will never see day light.
Click to expand...


Can you be specific on this "welfare"? I must be missing something. I saw that back in the 80's but not much now.
Click to expand...


The bigger you are the more government subsidy you get
 

What I am getting at is that they need to watch what they spend and not put themselves into so much debt. There is nothing wrong with making a payment and updating the business, but you got to pay it off before you continue to keep buying other things and dig yourself deeper in the hole.
 
(quoted from post at 13:38:37 07/10/15)
(quoted from post at 18:36:09 07/10/15)
(quoted from post at 12:23:48 07/10/15)
(quoted from post at 17:00:18 07/10/15)
I've known a few like that but they didn't last long. Most of the farmers I know have college degrees in business and may be in debt more than most can imagine but owing $1 million when your assets are over $4 million isn't a big deal. When you add in land, a modest crop farm can easily top $5 million. As long as you cash flow in the down years a 25% debt isn't unreasonable. Any that have been in business any time at all know this. As far as their fathers, there were a lot of them that were bailed out by the government in the early 80's. That safety net has bigger holes now.
Click to expand...

What about all of the government subsidy programs that they are all involved with and receiving free money from Uncle Sam whether it is a good year or a lean year? It’s like welfare, the more kids you have the more money you get. There are few farms that do not receive subsidies; these are the “old school” farmers that believe in the cash system not the debt system. There are also a lot of farms that rent/lease a lot of their acres that they run and do not have nearly enough assets to cover their debts. I see this with farms all around me.
It’s hard to accumulate any assets when they keep signing their name on the dotted line and take on another payment.
There is nothing wrong with taking on some debt and updating your business, but most of these people don’t realize that they need to pay off one thing before buying three more things.

The farm industries are not much different than the housing industries. Remember 2008 – 2009 and the housing market collapse? Most of these farms are not much further ahead of what happened to the housing industries. They take on more debt than they can afford and will never see day light.
Click to expand...


Can you be specific on this "welfare"? I must be missing something. I saw that back in the 80's but not much now.
Click to expand...


The bigger you are the more government subsidy you get
Click to expand...

I was just wondering where you were getting your information. You mentioned "most of these people" and it seemed like you have an inside line of information that might be interesting. In my region "most of these people" are generally hard working fairly conservative that are good business men and women. I'm sure some areas may be different.
 

The Farmers around here are hard workers too. Some farms around here are in debt up to their eye balls and some are not. Whether the owner/operator is collage educated or learned through the school of hard knocks; a lot of them lack financial back ground. A lot of farms do their own accounting and hire a local CPA for tax season. They need to have a financial adviser to help them understand what they can spend, what they need to save for the lean times, and what they need for the long term. It is too easy for farms to get into debt and too hard to get out of debt.

We all hear the wore stories of college grads getting into the workforce and not being able to pay the tuition back. We hear the stories of people accumulating massive credit card debt. The homeowners that bought a house well outside of their means. The Farms are no different, they need better education and understanding of money and the financial impact that their choice have on their wellbeing and livelihood.

And by all means, there are farmers out there with excellent understanding of the financial impacts that may be associated debts and savings. They are no different than the average Joe….
 
There have been several dealership buyouts and layoffs since corn prices slid so methinks in my area people are starting to watch their pennies again. Corn prices being more than cut in half in 2 years took a lot of wind out of their sails.

My newest tractor was made in 1953 and I have no real plans to upgrade for my 10 acres. One a little bigger from the 60's would be nice for two way hydraulics and more beef if I have to move more modern big bales but I don't really need it now. What I have plows, disks, mows, plants, cultivates and pushes snow just fine and is a heck of a lot easier to work on.
 
(quoted from post at 13:11:02 07/10/15)
The Farmers around here are hard workers too. Some farms around here are in debt up to their eye balls and some are not. Whether the owner/operator is collage educated or learned through the school of hard knocks; a lot of them lack financial back ground. A lot of farms do their own accounting and hire a local CPA for tax season. They need to have a financial adviser to help them understand what they can spend, what they need to save for the lean times, and what they need for the long term. It is too easy for farms to get into debt and too hard to get out of debt.

We all hear the wore stories of college grads getting into the workforce and not being able to pay the tuition back. We hear the stories of people accumulating massive credit card debt. The homeowners that bought a house well outside of their means. The Farms are no different, they need better education and understanding of money and the financial impact that their choice have on their wellbeing and livelihood.

And by all means, there are farmers out there with excellent understanding of the financial impacts that may be associated debts and savings. They are no different than the average Joe….
Click to expand...

I've known several farmers, and while it might not be statistically valid, every single one of them has a least one college degree. And usually the wife has one also, and is frequently a professional. And every one I know inherited or married into it. I've never known anybody who worked their way into farming, you simply need a lot of assets ( land ) and money. A few guys farm our whole county, and I don't know how a young person could ever "bootstrap" their way into this.
 
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