Sound advice for young farmers and ranchers from industry professionals
|Advice from successful farm and ranch operators.
“Build up something. Watch the debt thing. Learn how to build. Get as much machinery as you can. Get by. Use old equipment. Start with old cows and bum lambs. Watch the capital expense. The wife makes a difference.
“Don’t expect to start out where Dad left off. Don’t go too far in debt. Make the improvements you know you can handle. Start with used machinery. Think out your moves. Avoid easy credit.”
“Don’t over borrow. Build gradually. Start slowly. Build as you go. Don’t start out with the biggest and the best. Live within your means.”
“Look around your community for an older farmer who is well thought of and respected. Learn from him. Use him as a measuring stick. Seek advice. Use his knowledge.”
“Work hard. You’ve got to produce. Live within your means.”
“Both partners need to be involved. They should know exactly what they owe and their assets. You have to know every phase the operation. Plan things out.”
Advice from a lender on how to avoid debt.
Being from cattle country, he cautioned against big machinery, fancy horses, gooseneck trailers, exotic cattle, big trips, new pickups, fancy saddles and expensive rodeo hobbies.
“Good cattle prices are a pickup dealer’s heyday.” He noted the peer pressure in the countryside, the temptation to go deluxe in order to keep up with their counterparts.
He recommended that in planning budgets and borrowing, it is better to overestimate expenses and underestimate income. He noted the feeling of accomplishment people have when their results are better than their projected figures. He also felt producers need to resist the tendency to spend or expand after a good year. Farm and ranch operators can use their good years to improve their equity position (reduce debt) so they have more leeway during poor years.
He also said that if you owe more than $40 against $100 worth of assets, the rewards of your hard labor will go to bankers and finance companies.
Advice from a farm management specialist.
“Stay away from depreciable assets (pickups, cars, newer machinery). Avoid capital investment (land, buildings, machinery) by entering into share agreements. Share the risk with older established operators who already have large investments and are looking for high intensity labor and management.
“Work part time or full time for someone else and take the opportunity to build your own herd as part of the compensation. Find someone who wants to slow down or retire, and work out a plan that eventually allows you to buy into the operation.
“Have a realistic plan. Don’t move too fast. Be patient. Know your industry and wait for the right time before making a major move. Follow the hog or cattle cycles. Wait for low prices on machinery.
“Choose labor-intensive and low investment entries (hogs, dairy, lambs) into farming. Delay major land purchases until you have 30 to 50 percent of the money available for a down payment. Invest in working assets.”
He cautions against new pickups, fifth-wheel trailers, and rodeo expenses. He worries that profits from good years are spent for luxury items instead of being used to strengthen their position (reducing debt, adding more working assets).
He also cautions against too much reinvestment in non-liquid assets. Enough money should be set aside to make one year’s land payment to cushion against a bad year. During bad years, living expenses should be cut instead of living off the operating loan.
He feels paying off debt makes income potential much greater while increased debt make it much tougher. Paying less interest means more profit. Also, off-farm income is helpful in providing for the family’s living expense while the farm income is being reinvested.
Quick points from a farm psychologist. (That would be me!)
For more information on farm management, visit Val Farmer’s website at www.valfarmer.com. Val Farmer’s book, “Honey, I Shrunk the Farm,” can be purchased by sending a check or money order for $7 to: Honey, I Shrunk the Farm, The Preston Connection, PO Box 1135, Orem UT 84059.