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Small Farmer's Journal
PO Box 1627
Sisters, Oregon 97759
800-876-2893
541-549-2064
agrarian@smallfarmersjournal.com
Mon - Thu, 8am - 4pm PDT

Starting Your Farm

The Small Farmer’s Journal has decided to run editor and publisher Lynn R. Miller’s book Starting Your Farm as a serial series. Below is Chapter 2.

Chapter Two

“We can lie to ourselves about many things; but if we lie about our relationship to the land, the land will suffer, and soon we and all other creatures that share the land with suffer. If we persist in our ignorance or dishonesty, we will die, as surely as those bighorns perish from not knowing where they are. We are smarter than sheep, in most respects. Seeing the danger in ignorance, we may be moved to invent or recover some of the lore that connects us to the land, and tells us how to live in our place.” – Scott Russell Sanders

Who are You? And How Much is That Farm Worth to You?

Last chapter we started a discussion on the self analyzing procedures that might go into considerations of the purchase of a farm. We discussed the important first questions including; why you want to farm, what kind of farm you want, and where you want to farm? This chapter we’ll look at how much you might, or should, pay for a farm.

Up until the late 1980’s conventional farm lenders used to be proud of the formulas and yardsticks they employed to determine the value of a given piece of farmland and thereby the lending value. Today they are not so quick and ready with the numbers. The devastating farm crisis of the 1980’s and the resultant general farm banking collapse have forced an inch-by-inch, case-by-case, re-evaluation. That’s probably the way it should have always been. Because beyond the obvious variables of proposed crop and/or livestock, prevalent weather, region, soil types, proximity to markets, and such, there are myriad other particulars which can have dramatic effect on the value of a given piece of farm property.

WHO ARE YOU

The most powerful OTHER variable is personal circumstance (and I’m not speaking of class or social position). For example; if you want to increase the size of your farm holding and the neighbor’s twenty acres comes up for sale, it is safe to “suggest” that it will be worth more to you than someone looking for an investment. How do you factor in those two variables when deciding if the parcel is worth 400$ an acre or 2,000$ an acre? Operating farms in Lancaster County Pennsylvania have sold for twice or three times their justified farmland values to Amish families who are culturally, and personally, bound to try to remain within the communities to which they belong. And at the same time suburbia spreads like a pestilence putting altogether different pressures on those Pennsylvania farmland values.

On the flip side, there are hundreds of thousands of lovely farms with attractive buildings and good soils for sale at a fraction of their real value in areas suffering from large-scale out-migration. Portions of up-state New York, the upper peninsula of Michigan, Kansas and even the Ozarks fit that bill. In every case, these cheaper farms are located in regions that are not close to large metropolitan areas. But these depressed farm regions do enjoy strong growing seasons, good soils, proximity to some markets and the well-established fabric of farm communities. YET these are the areas that, for the time being only, many folks don’t want to live in.

That’s the oh-too-simple truth of it. If lots of folks want to live in an area, the land values go up. If they want to leave an area, the land values go down. Lancaster County is a popular place for the Amish who’ve lived there for generations, for the farmers who value the proximity to the Amish communities and other excellent market realities, and to the commuters who just want an acre in the country on a good road to the city.

But let’s get to your situation. The question was something like “how much should I pay for that farm I want?”. We need to approach the same question differently for different folks because the suitable, and/or acceptable, price per acre will vary. So we need to figure out who you are. Let’s oversimplify and lump you into one of these categories:

A. Young adults, few assets, no tools (didn’t know you needed them), no cash on hand, ineligible for conventional financing, limited to no farm experience, college education or part of one, no cultural or community ties to determine location (i.e. Amish, Native America, 3rd Generation S. Carolina Tobacco), but an abundance of health, high moral fabric, enthusiasm, industry, creative intelligence and good humor.

B. Middle ages adults, some assets (including tools), money saved, access to capital, college education, limited or no farm experience, used to convenience and comfort and high rate of pay, BUT absolutely MUST get out of the rat race and onto the farm, not as strong as you once were BUT know how to work, think you have a clear fix on what’s important, long ago determination replaced enthusiasm, in search of good humor that was lost somewhere in the city environment, think “creative intelligence” is a fancy way of saying “nut case.”

C. Middle aged adults, very few assets (unless you count this year’s vegetable garden and the cellar of canned goods plus the side of home-raised beef- Oh, and I almost forgot the old Chevy pickup is free and clear), nearly a thousand saved, bad or no credit, no education worth mentioning except lots of practical hands-on working experience including farming and ranching skills, lots of good tools (thought everyone knew they were important), used to working very hard for everything (except on Sundays), enjoy good health- humor- and outlook, value many friendships, already live in country on small rented place but always dreamed of a small farm of your own.

D. Nearing retirement or early retirement age, considerable assets (including equity in home and a stocks and bonds portfolio), $100,000 in nearly liquid form, pension and/or personal retirement income plan, no tools (or calluses), raised on a farm or ranch, adult life in city, concerned about health, education too long ago to matter, in desperate search for something long ago lost, suspect a return to farm-like setting will bring back quality of life. Concerned about protecting finances as they represent old age security.

E. Middle aged or older. Used to be a commercial scale farmer but lost everything during crisis of the eighties. Slowly building back up. Assets include full range of tools and the complete knowledge to use them plus a dangerously clear fix on how not to get into the same financial mess again. Some education, strong family, good health, moderately good rate of pay working in agri-business industry. A little saved. Not much sense of humor, bitterness overrides, straight ahead intelligence wary of “creativity.” Can’t get the NEED to own your own farmland out of your waking dreams.

I hope you’ve picked up on the fact that there could be an infinite number of different categories. I’m sure that you don’t fit any of these completely, maybe no one does. But this is an exercise in trying to show you how some seemingly insignificant things can have a huge effect on who you are and why you want a farm, and how much you might pay for it (not to mention how you might pay for it). The details of your personal circumstances and prejudices become very significant. A lot of these things bounce back to questions of “why” (or, ultimately, motivations) which we talked about last chapter. And things like tools and fears will have an effect on your success.

It needs to be said that every one of the “example” people painted above could reach their goal to own their own farm. And I’ll be borrowing from these examples in future discussions about how they can do just that. But here let’s get back to the discussion of how much to pay:

DOLLARS PER ACRE

If your goal is to own a farm which pays for itself, and from which you derive your income and you kind-of fit in category A, C, or E, you will most likely have to purchase a farm in an area where land is cheaper. That doesn’t limit you to just a few regions because almost every state of the union has within its boundaries areas of less population and low land prices.

The cheapest land I personally every tried to buy was $85 per acre (offered for sale in 1987 and located in eastern Oregon). It had a small house, a falling down barn and corral, scattered pine trees, good native grazing land, and a hundred acres of farm of hay ground. But there were two catches: you had to purchase the entire 1200 acres and it was twenty miles to the general store, post office, and 75 miles to a city of any size. I resolved to try to buy it and called to make my “offer of terms” only to find out that this ranch property which had been on the market for six months sold the day before I phoned. It was purchased by a group of doctors to function as a hunting retreat. They paid cash.

I know of remote farm and ranch property as low as $100 dollars per acre, as I write this, but the new owner must be prepared to travel 60 to 75 miles to go shopping. (Please don’t call or write me about this property because I’m sure it will no longer be available when you read this; which is an important point in and of itself- there is very little that is static about real estate availability and values.)

In the case of most all these cheaper properties, they are abandoned and can be purchased with little or no down payment (more on that later). If the above figures can be used as a bottom, up from that good farmland can be purchased for any price per acre from $100 to $10,000 per acre. The majority of farmland, sold in close proximity to markets and with a history of intensive farming, changes hands from between $500 to $2,500 per acre. Remember, true value, asking price and selling price may all be far apart from one another.

If your goal is to enjoy a part-time farming experience and you do not need or wish to gain all of your income from the setup- and if proximity to hospitals and town convenience is important to you- a higher price per acre will have to be paid because you’ll find yourself living where many others want to live. If you are in category A, C, or E this could pose a problem (but not insurmountable). If you are in category B or D, this will not be a problem.

Acceptable rates per acre (if there is such a thing) can be, and often are, determined by figuring the production value of the land. If the land produces 60 bushels of wheat per acre (at $3.50 per bushel) the annual gross potential receipt from that acre might be $210. Buying on contract and amortizing the purchase price of the land over twenty years (at today’s interest rates) you’ll end up paying off 10% of the purchase price (or mortgage principle) per acre per year. Add to that figure property taxes and calculate your cost of raising an acre of wheat (with or without a return to you on your investment and labor). It might look like this:

  • purchase price: $300 per acre
  • yearly mortgage: $30 per acre
  • property taxes: $2 per acre
  • seed, tillage, fertilizer, fuel, etc: $80 per acre
  • equip, loan: $50 per acre
  • sub total costs: $162 per acre
  • crop value/income: $210 per acre
  • return on investment: $48 per acre

To translate; a hundred acres of wheat with these numbers would result in $4800 annual potential return to you, 300 acres $14, 400 annually. The numbers improve dramatically when you reduce the price per acre, raise the price per bushel, or reduce your inputs. Conversely, it is easy to see that there is no room to raise the price per acre or any other input without jeopardizing the financial balance.

Readers of the Small Farmer’s Journal know that we are always arguing the importance of diversification and appropriate technologies. The above scenario can be beneficially affected by reducing inputs with low cost appropriate technologies as well as increasing the return per acre of wheat grown by having livestock utilize the straw and help fertilize the acreage.

Imagine that you were considering fertile acreage suitable for market gardening: it is possible that this land could produce crops with a gross return of anywhere from $800 to $10,000 per acre. Of course the higher returns come from intensive perennial cropping with high offsetting inputs. It is a mistake to assume that blueberries or some other high return crop will automatically NET you more money. Net income is what you have left after all else is paid. And, by the economic measures we encourage you to use, what you have left must include waste products suitable for other purposes (i.e. fertilizer [manure] and stock feed [harvest waste] as well as the measured gain you’ve enjoyed in increased soil tilth and fertility along with livestock gains. (Some will argue convincingly that the health, and enjoyment of the working farm family is also an asset which should be taken into the whole economic balance.) Crops that return less in a simple dollar measure may actually return more when you consider all these elements.

Market gardening acreage (with a history of this use) sells frequently for $850 to $2500 or more per acre. And what makes a piece of ground suitable for market gardening has as much to do with proximity to primary, secondary, and tertiary population centers as it does fertility because fresh produce needs to get to the public quickly and easily. But, by the simple practice of drying or canning, shelf life can be extended and the farmer can justify being further from cities and thereby enjoy a cheaper land price (and, I must add, fewer suburban restraints on his farm practices). To oversimplify: it is difficult or impossible to justify a purchase price of over $1200 per acre for any farmland if you depend on the farming to pay for the land and pay you back. Your success after the acquisition of the land will be affected by what you paid for it. You need to get the price down as low as is possible. If you pay too much for your farm, you may be guaranteeing failure.

If you are new to this real estate game, you have every right to ask how someone comes up with a given price for their farm- or even how the tax assessor comes up with a value for property taxes. The answer is that MOST prices and values are set after examination of recent similar property sales. In other words, if five people have recently paid an average of $1,000 an acre for similar farmland, in a set region, these sales establish a current de facto true market value. There is nothing to prevent you as a farm owner from asking ANY price you want when selling. But it is unlikely that you’ll be able to sell for a price that is out of line with what other properties have sold for in the same area because most buyers shop around and are familiar with area real estate market pricing. There are, of course, exceptions to this rule but they won’t include you most likely. If you are wanting to test the validity of a given farm price, you should go to the county seat and ask the records department to let you see the “sales data files for real estate.” Some counties may refer to these records by a different name, but they’ll contain the same information. These records usually consist of real estate tax lot plot maps clearly identifying who owns which acreage. Either with those records or in a separate file, identified by the plot numbers, you will find when that property last sold and for how much. By checking these records you can find out whether the seller purchased the farm and how much he or she paid for it. You can also check to see what neighboring farms sold for in the recent past.

That specific recent sales data is the important information. If the asking price is way out of line with those actual recent sales, you owe it to yourself to find out why or to give up on that parcel. There may be a perfectly legitimate reason why this is priced higher (i.e. gas or oil discovery or development, proximity to new zoning changes or developments, or other unusual extenuating circumstances) but there will be less reason for you to pay that much more than others have for comparable properties.

In some areas that have experienced increasing demand for real estate, less than scrupulous realtors will approach landowners with no desire to sell with the suggestion that they might realize enormous profits from the sale of their property. In our own area it is quite common for a realtor to suggest, “let’s list it and ask twice (or more) what you think it’s worth. If it sells, we both win out big. If it doesn’t, you haven’t lost anything.” It can be confusing for you and seem somewhat dishonest but the fact remains that the asking price for a given piece of real estate may mean little or nothing. You may desire a certain listed farm property only to find out that the owner is far from serious about selling.

How do you learn the true status of that farm with the “for sale” sign? Here are some important pieces of information for you to learn about a given selling farm. The answers will most probably tell you how serious the seller is.

  1. How long has it been on the market?
  2. How much is owed against the property?
  3. Is the seller living on the farm?
  4. Are there back taxes owed against the property?
  5. Are there any outstanding liens against the property?

Numbers 1, 4 & 5 may suggest some urgency to the sale that would help you determine what is an acceptable offering price. It may also spell trouble in clearing up all the indebtedness with the sales transaction. We’ll get into that in a future chapter.

Number 2 can be a very important piece of information when it comes to structuring a deal (more later) but for now it could translate to some inflexibility on price and terms.

Number 3 can give some clear indication of the up front cash needs of the seller. A family that needs to buy another home to move will need more cash than an absentee landowner who is not looking to physically move. Absentee ownership might indicate that the farm property in question is but part of larger holdings suggesting that the owner may be best served by a land sales contract with a small down payment thereby avoiding or postponing some taxation. If you are able to give more of a down payment you will have a strong negotiating point to reduce the total price, especially if the seller is in great need. If you are willing to sign up to a creative land sales agreement with a slightly high than standard interest rate you may be able to acquire land for little or no down payment, especially if the seller needs to unload the property but is not in need of a lump sum of cash.

Keep in mind that the price you may pay per acre over time can be justified or offset in your budget by the amount you pay initially. If you are looking at the farm income to pay or help pay for the farmland, it becomes critical that your mortgage payments be structured to your advantage. We’ll get into greater detail on this in another chapter, but for not let me say that whether you have monthly payments, quarterly payments, or annual payments- or whether you split your interest payments month with an annual principle payment- or whether you set up a mortgage with lower initial payments for a couple of years- or any other custom variety of mortgage- these determinations can have a tremendous effect on your financial solvency or insolvency. And there is NO one best way to structure your payment schedule, but there are several ways that a payment structure could hurt you. You need to have a clear picture of what you will try to raise and how you will market it and when you will market it to help you customize a schedule that at the very least will not set you up for hardship. For example; if your livestock and crop receipts will be coming in annually some time in October, it would be doubly foolish for you to have a large mortgage payment in March. I say doubly because March will be a month of little or no receipts plus the possibility of many expenses for seed, fertilizer, equipment, repairs, fuel, oil, etc. in preparation for Spring work. In such a scenario, November would be a better month to have a big payment come due. (At the same time such a schedule provides yet another argument in favor of greater diversification and marketing creativity to spread the receipts- and expenses- out over the whole year.) All of this to say that you may well be able to afford a slightly higher price per acre in exchange for some consideration in structuring a payment schedule. And don’t forget the interest rate may well be a negotiable bargaining chip in the mortgage terms negotiations. Of course, if you can keep the price low AND get creative payment scheduling, you will be better off yet.

Hopefully this discussion, and that of the previous chapter, will convince you that there is much to think about and prepare for in the process of buying a farm. Advanced preparation will be beneficial to you. And we’ve only touched on the beginnings.

Here are a few off the cuff rules: MOST ALWAYS TRUE

STANDARD RULE OF THUMB NUMBER ONE:
the fewer acres you purchase, the higher the price per acre.

STANDARD RULE OF THUMB NUMBER TWO:
the closer you are to markets, the higher the price per acre.

STANDARD RULE OF THUMB NUMBER THREE:
the closer you are to social services, the higher the price per acre.

STANDARD RULE OF THUMB NUMBER FOUR:
the more other people want the property, the HIGHER the price per acre.

STANDARD RULE OF THUMB NUMBER FIVE:
seven times out of ten the asking or listed price per acre can be negotiated down (or up – yes and perhaps to your advantage – more later).

STANDARD RULE OF THUMB NUMBER SIX:
realtors are NOT working for you or for the farm owner- they are working for themselves.

Please don’t let all this material discourage you. The point in writing this is to try to help you succeed at your dream of buying a farm by providing information that will, hopefully, encourage you to be well prepared.

Spotlight On: How-To & Plans

Retrofitting a Fireplace with a Woodstove

How to Retrofit a Fireplace with a Woodstove

Because the venting requirements for a wood stove are different than for a fireplace you need to retrofit a stainless steel chimney liner. A liner provides the draft necessary to ensure that the stove will operate safely and efficiently.

The Milk and Human Kindness Making Swaledale

The Milk and Human Kindness: Making Swaledale

by:
from issue:

Swaledale is one of the lost British cheeses, nearly extinct, along with other more obscure farmstead cheeses which were dropped because they were not suited for mechanical cutting – too crumbly. Too much loss. I dug the basic method out of Patrick Rance’s wonderful book of British cheeses and I’ve made it for years. I love it, everybody loves it, it’s a perfect cheese for rich Jersey milk, it takes very little time and trouble to make, it’s easy to age, delicious at one month, or a year.

Barn Door Plans

Barn Door Plans

Good barn doors, ones that will last a lifetime of opening, sliding and swinging in the wind, require careful design and construction. In 1946 the Starline Co., a barn building firm from the midwestern US, compiled a book of barn plans. These two diagrams were in that book and presented excellent information.

On The Anatomy of Thrift Fat & Slat

On the Anatomy of Thrift Part 3: Fat & Salt

On the Anatomy of Thrift is an instructional series Farmrun created with Farmstead Meatsmith. Their principal intention is instruction in the matters of traditional pork processing. In a broader and more honest context, OAT is a deeply philosophical manifesto on the subject of eating animals. Fat & Salt is the third and final video in the series. It is the conceptual conclusion to the illustrated, narrated story that weaves throughout the entire series, and deals instructionally in the matters of preserving pork.

Horseshoeing Part 3A

Horseshoeing Part 3A

An examination should be made while the animal is at rest, and afterwards while in motion. The object of the examination is to gain accurate knowledge of the direction and movements of the limbs, of the form and character of the feet and hoofs, of the manner in which the foot reaches and leaves the ground, of the form, length, position, and wear of the shoe, and distribution of the nail-holes, in order that at the next and subsequent shoeings all ascertained peculiarities of hoof-form may be kept in mind and all discovered faults of shoeing corrected.

McCormick Deering/International No 7 vs no 9

McCormick Deering/International: No. 7 versus No. 9

McCormick Deering/International’s first enclosed gear model was the No. 7, an extremely successful and highly popular mower of excellent design.

How to Grow an Acre of Potatoes

How to Grow an Acre of Potatoes

by:
from issue:

Heretofore potato production in this country has been conducted along extensive rather than intensive lines. In other words, we have been satisfied to plant twice as many acres as should have been necessary to produce a sufficient quantity of potatoes for our food requirements. Present economic conditions compel the grower to consider more seriously the desirability of reducing the cost of production by increasing the yield per acre.

A Pony-Powered Garden Cart

A Pony-Powered Garden Cart

by:
from issue:

One of the challenges I constantly face using draft ponies is finding appropriately sized equipment. Mya is a Shetland-Welsh cross, standing at 11.2 hands. Most manure spreaders are big and heavy and require a team of horses. I needed something small and light and preferably wheeled to minimize impact to the land. My husband and I looked around our budding small farm for something light, wheeled, cheap, and available, and we quickly noticed our Vermont-style garden cart.

Multiple Hitching with One Set of Lines

Multiple Hitching with One Set of Lines

by:
from issue:

A great deal of interest has been shown the last several years in using multiple hitches in horse farming, especially in spring fieldwork. The question often asked is how to keep it simple and easy in driving and assembling the hitch as far as lines are concerned. We demonstrated our method at the Horse Progress Days at Mt. Hope, Ohio in 2003 and have been asked numerous times how we drove four, six and eight-horse hitches using only two lines.

The Horsedrawn Mower Book

Removing the Wheels from a McCormick Deering No. 9 Mower

How to remove the wheels of a No. 9 McCormick Deering Mower, an excerpt from The Horsedrawn Mower Book.

Posts

Driving Fence Posts By Hand

Where the soil is soft, loose, and free from stone, posts may be driven more easily and firmly than if set in holes dug for the purpose.

Book Review Butchering

Two New Butchering Volumes

Danforth’s BUTCHERING is an unqualified MASTERPIECE! One which actually gives me hope for the furtherance of human kind and the ripening of good farming everywhere because, in no small part, of this young author’s sensitive comprehension of the modern disconnect with food, feeding ourselves, and farming.

Horsedrawn Plows and Plowing

Setting Up A Walking Plow

Here is a peek into the pages of Horsedrawn Plows and Plowing, written by SFJ editor and publisher Lynn R. Miller.

Lightning Protection for the Farm

Lightning Protection for the Farm

by:
from issue:

Lightning-protection systems for buildings give lightning ready-made lines of low resistance. They do this by providing unbroken bodies of material that have lower resistance than any other in the immediate neighborhood. A protection system routes lightning along a known, controlled course between the air and the moist earth. Well-installed and maintained, a lightning-protection system will route lightning with over 90-percent effectiveness.

The Use and Construction of Home Made Implements

The Use and Construction of Home Made Implements

by: ,
from issue:

It is now possible to purchase a make of machine to suit almost any condition if the money is available. There is no doubt that eventually they will be quite generally used. However, the dry farmers are at present hard pressed financially and in many instances the purchase of very much machinery is out of the question. For the man of small means or limited acreage, a homemade implement may be utilized at least temporarily.

Horse Powered Snow Fencing and Sleigh Fencing

Horse Powered Snow Fencing and Sleigh Fencing

by:
from issue:

We were planning on having our cattle out in a sheltered field for the winter but a busy fall and early snows meant our usual fencing tool was going to be ineffective. Through the grazing season we use a reel barrow which allows us to carry posts and pay out or take in wire with a wheel barrow like device which works really well. But not on snow. This was the motivation for turning our sleigh into a “snow fencer” or a “sleigh barrow”.

Planting Calendar and Other Diagrams

From Dusty Shelves: A 1943 calendar for seeding your vegetable garden.

Audels Gardeners and Growers Guide

How to Store Vegetables

Potatoes may be safely stored in bits on a well drained spot. Spread a layer of straw for the floor. Pile the potatoes in a long, rather than a round pile. Cover the pile with straw or hay a foot deep.

Small Farmer's Journal

Small Farmer's Journal
PO Box 1627
Sisters, Oregon 97759
800-876-2893
541-549-2064
agrarian@smallfarmersjournal.com
Mon - Thu, 8am - 4pm PDT