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Farming has been my full time job since I was 16 years old but I'm looking into taking the next step and just go all in several million in liabilities all at once. I wonder what everyone's opinions are on 10 year investment returns.if I take over for my father and branch out on my own completely; pattern tile everything. 500k roi over 10 years. Contracted hog buildings for manure ; could be a million in fertilizer and soil improvement over 10 years. List goes on and on! Why not go big?
 

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I always think of what my grandfather's mindset was in the 80s and before that. Just survival. The way debt works and the way subsidies are set up it's not about survival anymore it's just more acres for one dollar more profit per acre over and over
 

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Guessing this will take a while to pay off? Plan for the bad years while you are doing this. I did similar when I was just a bit older than you. I came back to farm life after over 10 years away. I started from scratch on my own leases, equipment, everything. Go with what you know, not what others tell you. That almost broke me one year. Took a bunch of advise spent lots on inputs. Almost went broke. I wouldn't say don't do it. Be careful about it.
 

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Discussion Starter · #4 · (Edited)
Yeah well, thats the thing I guess. There is no pay off, as it is with farming. It would be count on assets for retirement or pass it all along at the end. My plan is to accrue assets but really try to be at 0. Input costs and budget at the minimum insurance guarantee. Which probably maxes out at $600 USD an acre at the moment.

Im born and bred from bad times, I'm ready to take more risks.

As deeply as I can calculate, my familys assets are at least 3-4x what our liabilities are. Seems far too low and safe.

And thats the thing about mentioning 10 years, thats the minimum length of time my mind works regarding finance in farming. If it is profit in 10 years, I am interested in doing it.
 

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Discussion Starter · #5 · (Edited)
My grandfather bought the biggest and best combine on the market in 1990. I asked him years before he died... did you pay cash or did it take a while? Hell no he said, it took 30 years to pay off... My grandfather was the biggest farmer around in the 80s.

It just gives you a perspective of the market, the times, the mindset. My grandfather thought paying $200 an acre for more ground was a waste 20 years ago. Its worth $15k now. Its perspective and Im thinking long term.

The times are actually incredible. I was raised with the mentality interest rates are 25% and we are done tomorrow. Time to take advantage for sure

As low as interest rates are... If you borrowed millions on a 30 year loan you are golden because of inflation. Funny how it works.
 

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Well it is good to see somebodys ambitious. lol
My grandfather bought the biggest and best combine on the market in 1990. I asked him years before he died... did you pay cash or did it take a while? Hell no he said, it took 30 years to pay off..
According to my calculation it got paid off last year.
And when it was new interest cost would have been 8 or 9%.
 

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The way of the world. Debt debt and more debt
 

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My perspective: Inflation is coming and interest rates are on the rise. Similar scenario to late 70s. If it will occur the same is unpredictable. Land prices went up for a while, then backed off. Last land prices increased when ethanol and bio-diesel mandates caused a surge in commodity demand and pricing. That was done in the name of "creating" renewable energy sources and really created in my opinion an artificial industry which allowed taxation of carbon fuels twice and it did likely enhance greenhouse gas emissions. By this I mean, use carbon fuels to make this "free" energy (likely 1:1 energy conversion) instead of just using the energy to produce food. However, more people employed and more taxes collected as a result and so it was a win-win for governments. Not only do you gain tax revenue, once but the second time as well as you expanded your economy and pulled in more revenue and kept people working.

Currently debating whether or not this will totally repeat itself once more. Those people that stuck their neck out and bought expensive land in the early 80s were lucky enough to have banks refinance their operations at 40 cents on the dollar when interest rates became unbearable. They didn't make it but and so were bailed out because they were "good" farmers. The new game will be how this push for possible global depopulation (decreasing food demand) will balance with a global green energy initiative, windmills and electrics. Will it force out traditional power supply, mandate electric tractors and robotic machines which do not use humans? I think it is a rather scary time and I hope to keep some land (until they take it away) so I have a place to eek out an existence!

Certainly cash is not king in an inflation scenario as real valued assets such as land continue to appreciate and become more valuable while buying power decreases. You do not want to be retired then this occurs! When governments however start talking taxing people on land value before they ever sell it based on inflation - that will tell a different story. The safe haven will disappear if you will be forced to pay every year for its increased value - hope that doesn't happen as it will force all farmers off the land and the mega rich will buy it up and you will rent/lease from them. Those are rumours which none of us land owners hope to face. Troubling times ahead and I may just be a coward for looking at it from that perspective!
 

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My grandfather bought the biggest and best combine on the market in 1990. I asked him years before he died... did you pay cash or did it take a while? Hell no he said, it took 30 years to pay off... My grandfather was the biggest farmer around in the 80s.

It just gives you a perspective of the market, the times, the mindset. My grandfather thought paying $200 an acre for more ground was a waste 20 years ago. Its worth $15k now. Its perspective and Im thinking long term.

The times are actually incredible. I was raised with the mentality interest rates are 25% and we are done tomorrow. Time to take advantage for sure

As low as interest rates are... If you borrowed millions on a 30 year loan you are golden because of inflation. Funny how it works.
Early 20s I would say risk more debt, but when you get older you have more to lose. That is what I would of told myself when I started at 22. At that time half million mortgage was a big deal. Now if you buy three quarters its 2.5 million debt.
I was thinking about this very same situation and I wondered what young guys think is high debt. Is 15 million total for a farm normal. Whats normal now? If you farm 20 000 acres which is maybe average in sask(not sure but I hear a lot of 50000 and up for acres) what kind of debt would they have to service to keep the operating loan cycling.

At 31, its getting late to go all in I think. A lot of guys like to retire from farming in there early fifties and by that time you dont want high debt. You also have to figure in health scares and what that impact will have on your family.

If you have enough land to make a good living presently dont worry about keeping up with the jones! You will never be happy, trust me , When I was 31 I thought it would be a cinch to expand every year. Doesnt always work out.

When you retire and are enjoying your coffee and dangling your feet into the water off the dock you will not care what kind of combine or tractor you drove. You also may wish you didnt buy those 5 extra quarters!
If land is 12000 dollars an acre it will cost you at least double in 25 years. To break even on your investment you will need at least 24000 an acre by 2046 or so!

Sory for the rambling skunk river! I do wish you the very best!
 

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And thats the problem that we're in now.. the 800 k loan on a million buck purchase spread out over 15 or 20 yrs ..even at 4 percent still increases the cost of that land by 300 k... jack that to 6 percent and you are looking at 400 k plus.. so what does your land TRULY cost you. In the end.. debt is debt..but its the interest rates that will crush you. A local big farmer up here in northern alberta ( KALCO) farms wound up so far in debt and owned so little ( impossible to purchase significant acres so 90 percenr were leased) same as equipment ... didnt allow them to sell anything. I always laughed when i saw the 6 new combines every year while we gross revenue the same $ per acre.. had alot less headache..and still manage to do it every year. ( and isnt that the true reason why we farm?)
I think alof of us worry about the end goal.. especially when the end goal is truly controlled by nobody other than mother nature : see, my crop insurance payouts for the last 3 yrs in northern alberta.
The question you truly have to ask yourself when going " all in" is.. who do I want to work for... yourself, the banks... or the paint color in your shed.
The key to the next 5 yrs if rates do go up is that TANGIBLE assets that you own free and clear are worth infinitely more than anything you are still making payments on.


Again, every situation is different..just like everyONE is different and we all value different things. Me, however, well i like to own things...and some ( see, KALCO) like(d) to drive things.
 

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Going all in with your own money is a brave decision even with an established farming business,going all in with dads and granddads assets is gambling their retirement and all their hard work from a lifetime of Careful money management, a business plan of expecting inflation to provide valuable assets down the line could be one of disappointment. I doubt land values will fall overall but nothing to say they will rise above what you’ll pay plus interest on the money. the past ten years have been relatively good for crop prices overall and are experiencing hyper gain at the moment but this isn’t going to last. How does your wife and family feel about it all. Sorry to sound negative but I’ve seen a few younger guys in the past few years expand off the back of a multi generation farm only to be crying over payments since experiencing a severe drought Followed by major input increases fir the coming year. expand at a sustainable pace and build on what you have without the headache of a massive debt burden.
 
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