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> What crop and acreage are you working with? Corn, soys, wheat, edible beans. Understandably, different types of farms will be different. > Labor and managem

> What crop and acreage are you working with? Corn, soys, wheat, edible beans. Understandably, different types of farms will be different. > Labor and management was year round with no off season. In this northern climate there isn't much you can do in the winter under the blanket of snow, save animal husbandry. And even then I know quite a few farmers with animals who only keep animals through a portion of year exactly so that they can have time to themselves. > don't understand excluding the capital input costs and claiming it is lucrative. Funny things can happen, but as a rule your major capital is retained. Farmland, if anything, tends to increase in value. I don't find machinery depreciates much either (the new stuff becomes way more expensive instead). On the day you retire, you expect that you will get back everything you put in and then some. That is why most farmers are willing to work a second job to build up that wealth. Input costs are, of course, already factored in to the income potential of the business. It is a low margin business when you're trying to pay for land (mortgage or lease), but one that is covered, there is significant income potential (with all the caveats of farming being unpredictable). And yes, that income comes as a product of investing. That's what farming is all about.

s1artibartfast 5y ago
Thanks again for sharing. I wonder what keeps prices up or competitors out if returns are so high and work is so low for those crops. For tree crops, land is a pretty negligible cost. Water is about 35% of revenue, Labor is about 35%, and miscellaneous other costs are about 20%. Average profits are around 10% of revenue, but vary, and years with losses are pretty common. Perhaps both of us are generalizing our experience to all or most farmers. Regarding the capital discussion, the magnitude of the capital outlay and returns are relevant, even if capital value is retained. A $100k annual profit is good for a $1M investment, but crappy for a $10M investment.
- randomdata 5y ago
  > land is a pretty negligible cost. Where for me rent is around 25% of revenue and would be more like 35% if I had to rent the acres I own. If you have the capital to buy your land, that's 35% of revenue you can realize as profit right there. The problem for the average Joe without capital is that if you are trying to rent or pay a mortgage, the profit diminishes very quickly. That is why it is pretty much impossible for regular people to enter the industry. > A $100k annual profit is good for a $1M investment, but crappy for a $10M investment. The growth in value of the business is most important, really. A $100k annual profit on a $10M investment is pretty good if the $10M investment is also worth $50M a decade later. That's what farmers bank on. Cashflow is necessary to keep things solvent, but not really why you're there. It is no doubt one of those things that seems unsustainable, and funny things can indeed happy, but every decade I look back I kick myself for not investing more. At the end of the day it's pretty fun, though, so it's worth taking some risks just for the value of the enjoyment.

s1artibartfast 5y ago

Thanks again for sharing. I wonder what keeps prices up or competitors out if returns are so high and work is so low for those crops. For tree crops, land is a pretty negligible cost. Water is about 35% of revenue, Labor is about 35%, and miscellaneous other costs are about 20%. Average profits are around 10% of revenue, but vary, and years with losses are pretty common. Perhaps both of us are generalizing our experience to all or most farmers. Regarding the capital discussion, the magnitude of the capital outlay and returns are relevant, even if capital value is retained. A $100k annual profit is good for a $1M investment, but crappy for a $10M investment.

randomdata 5y ago
> land is a pretty negligible cost. Where for me rent is around 25% of revenue and would be more like 35% if I had to rent the acres I own. If you have the capital to buy your land, that's 35% of revenue you can realize as profit right there. The problem for the average Joe without capital is that if you are trying to rent or pay a mortgage, the profit diminishes very quickly. That is why it is pretty much impossible for regular people to enter the industry. > A $100k annual profit is good for a $1M investment, but crappy for a $10M investment. The growth in value of the business is most important, really. A $100k annual profit on a $10M investment is pretty good if the $10M investment is also worth $50M a decade later. That's what farmers bank on. Cashflow is necessary to keep things solvent, but not really why you're there. It is no doubt one of those things that seems unsustainable, and funny things can indeed happy, but every decade I look back I kick myself for not investing more. At the end of the day it's pretty fun, though, so it's worth taking some risks just for the value of the enjoyment.