I was asked a good question yesterday, “How do some farmers seem to barely scrape by and some seem to be rich and have all kinds of fancy toys?”
Of course this is a very complex question. I’ll work to share some of the variables in as simple of a way as possible.
I think expenses, weather and off-farm income are the top variables.
Here are some personal examples: The turkey farmer has purchased two farms at significantly different prices per acre. The yield and income per acre is similar at the farms, but the cost of the ground is different. When he gets those loans paid off that will significantly decrease the expenses and thus there will be more income.
Another big help is that his parents share their equipment with him to use on his land. He wouldn’t be able to start farming by purchasing all of the tools needed at once. His parents are very generous and want to do what they can to help their kids get started farming.
Weather is another huge variable. Weather affects the yields, which affects the market price offered for the crops, which affects how much money is in our bank account. The weather is a big deal to farmers. Farmers watch the forecast regularly. Farmers discuss and analyze the weather and how crops are growing continually. I’m sure you’re tracking how drastically the weather affects a farmer’s income.
I’d like to give more examples on expenses. The members of the turkey farming family that I’m proud to call my in-laws are all REALLY handy. When things break they fix, weld, mend, and often improve the design in their shop. Disposing of the item and buying new is often not the most efficient way to farm. I have been so blessed by the skills that the turkey farmer has learned growing up in this type of ultra-DIY environment!
For example, gates in pig pens get wear and tear and weaken over time. The quickest solution would be buying a new gate when an old one breaks. I was helping in the shop one day this spring when my father-in-law (Grandpa O) was welding new pieces of metal on an old gate.
Don’t buy toys, just give kids tools to play with.
I was impressed when Grandpa O bought a new grease gun, walked by the Little Farmer, and without missing a beat handed him the new tool and asked him to put it together. I think hands on practice helps build experience. Hopefully the Little Farmer will learn some strong DIY skills of his own!
A part of me wishes this was sarcastic, but it’s not…at all…in any way. Don’t buy clothes. When we were dating and discussing serious things like budgeting, I asked the turkey farmer how much he spends a year on clothes. He gave me a serious look and had an unusual, slight “duh” undertone in his reply, “I don’t buy any clothes. I get all I need at Christmas or at work.” I’ve since learned that his work pants come from a used uniform store and run a few bucks each.
I couldn’t resist posting this picture to prove that it’s okay to splurge on a new coat in the winter if yours is grease covered, stained and from the last century. But I also really respect the counter-culture value he puts behind his belief, “if you don’t need it, don’t buy it.”
Trucks and tractors are essential on most farms. Having the latest and greatest can be very expensive. Costs can often be cut by using older equipment until there is enough equity to upgrade.
The final variable I’ll share is off farm income. If a farmer works off the farm and has that money for living expenses (house, transportation, utilities, food, etc) he or she may be able to re-invest all of the income from the farm back in the farm. If the farmer needs to deduct living expenses from farm income, that leaves less money to use for farm expenses. My Turkey Farmer has always worked off the farm and had some of that income available in case he needed it to help cover farm expenses.
Farmers are often self-employed and work to keep their business profitable just like other business people outside of agriculture.
I like to fill-up at this gas station. They are typically the cheapest in my western Ohio route to Turkeyville.
As my Turkey Farmer pointed out, their overhead is pretty low, so they don’t have to charge as much to make a profit.
So the answer to the question, “Are farmers really rich or poor?” depends on how well they manage money as well as many other aspects of the farm.