Posted by BrianV_ on April 13, 2018 at 18:55:18 from (209.87.251.112):
Someday, I want to farm. But I don't think the economics will ever make that possible.
I am in my early 30s, currently self employed where I work from home in a field where I make a good enough income that my wife can stay home and raise our kids with a little extra to pay off lingering debts.
Unfortunately, I know my industry, and I strongly suspect that within 5 years, wages are going to go down as competition from 'offshore' / third world entrants increases. I don't expect this is a field I will be able to retire in, or support of family in past 10 years out.
So, I have been looking at the idea of starting to sideline into small scale grassfed beef. We have family experience raising (and eating) Dexter cattle, and I am convinced they can efficiently produce some of the best beef you can buy in our climate - they grow out before you have to feed them through a second winter. I have 3.25 acres of pasture, that will allow me to get a few cow / calf pairs. I plan to start this next spring after I get my fences built this summer. My goal is mainly freezer beef for me, with maybe a few extra sides to sell.
However, by the time I'm 40 (so say... 8 years?), I'd like to work on scaling up the business so that I can replace a portion of my current income with agricultural activities. And this is the step I'm finding the most difficult to plan out.
In this area (Eastern Ontario), land prices currently average $11k CAD per acre for 'average' land. So let's say I wanted to buy my neighbour's 30 acre field - the cost would be $330k, which I could finance privately at prime + 0.5% (so, 3.95% at the moment).
That puts me at ~$20k per year required to service the debt if I amortise over 30 years (ie, until I retire). It will cost more if and when interest rates rise.
My back of the envelope math tells me I can make something like $1k - 1.3k per acre per year with my beef plans, so $30-$39k per year. However, if the debt servicing eats up $20k of that, it means I am managing the cows for $10-$20k per year, plus whatever equity I earn in the land in that year.
That's fairly low return for the work involved, and primarily due to the amount of debt required to even consider going into the business.
How do people get started in farming these days with land prices where they are at? You can't compete with cash croppers who are willing to make razor margins on hundreds or thousands of acres just to scratch out a single family living.
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