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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: Equipment & Facilities

Cole One Horse Planters

Cole One Horse Planters

by:
from issue:

The most populous single horse planting tools were made by Planet Junior. But they were by no means the only company producing these small farm gems. Most manufacturers included a few models and some, like Planet Junior, American and Cole specialized in the implement. What follows are fourteen different models from Cole’s, circa 1910, catalog. We published ten of these in volume 30 number three of Small Farmer’s Journal.

Hay Making with a Single Horse Part 4

Hay Making with a Single Horse Part 4

by:
from issue:

Over the last few years of making hay, the mowing, turning and making tripods has settled into a fairly comfortable pattern, but the process of getting it all together for the winter is still developing. In the beginning I did what everyone else around here does and got it baled, but one year I decided to try one small stack. The success of this first stack encouraged me to do more, and now most of my hay is stacked loose.

Blacksmith Forge Styles

Blacksmith Forge Styles

from issue:

Blacksmith Forge Styles circa 1920.

Farm Drum 26 John Deere Grain Binders

Farm Drum #26: John Deere Grain Binders

by:

Friend and Auctioneer Dennis Turmon told us about a couple of John Deere Grain Binders he has in an upcoming auction, and we couldn’t wait to take a look. On a blustery Central Oregon day (sorry about the wind noise), Lynn takes us on a guided tour of the PTO and Ground-Drive versions of this important implement.

Hay Making with a Single Horse Part 2

Hay Making with a Single Horse Part 2

by:
from issue:

From reading the Small Farmers Journal, I knew that some people are equally happy with either model, but because McCormick Deering had gone to the trouble of developing the No. 9, it suggests they could see that there were improvements to be made on the No. 7. Even if the improvement was small, with a single horse any improvement was likely to increase my chance of success.

A Step Back in Time with the Barron Tree Planter

A Step Back in Time with the Barron Tree Planter

by:
from issue:

The 18th century saw a tremendous interest in landscaping private parkland on a grand scale with the movement of entire hills and mature trees, all by man and horse power, to fulfill the designs of celebrated gardeners such as Capability Brown. In the mid 1800s the movement of mature trees was revolutionised by the introduction of the Barron tree transplanter. The first planter was designed and built by Barron for the transplantation of maturing trees at Elvaston Castle in Derbyshire.

New Buggy Gear Design

New Buggy Gear Design

by:
from issue:

As long back as most of us can remember, the plain people were using buggies for transportation. Buggy frames were mounted atop wood wheels that turned on large solid steel axles. Today, more new technology is available for buggies. Torsion axles, fiberglass and steel wheels, hydraulic disc brakes, LED lights, and sealed batteries — the list could continue.

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.

Building a Community, Building a Barn

Building a Community, Building a Barn

by:
from issue:

One of the most striking aspects of this development is the strength and confidence that comes from this communal way of living. While it is impressive to build a barn in a day it seems even more impressive to imagine building four barns or six, and all the rest of the needs of a community. For these young Amish families the vision of a shared agricultural community is strong, and clear.

Cultivating Questions Cultivator Setups and Deer Fencing

Cultivating Questions: Cultivator Set-ups and Deer Fencing

We know all too well the frustration of putting your heart and soul into a crop only to have the wildlife consume it before you can get it harvested let alone to market. Our farm sits next to several thousand acres of state game lands and is the only produce operation in the area. As you can imagine, deer pressure can be intense. Neighbors have counted herds of 20 or more in our pastures.

Littlefield Notes: A Slower Pace

LittleField Notes: A Slower Pace

by:
from issue:

I will probably never get a chance to sit at the throttle of a steam engine heading up some winding mountain grade and feel the romance of the rails as the lonesome sound of a steam whistle echoes off canyon walls. Nor will I sit and watch out over the bowsprit of a schooner rounding Cape Horn as the mighty wind and waves test men’s mettle and fill their spirits with the allure of the sea. It is within my reach however to draw a living from the earth using that third glorious form of transport – the horse.

McCormick-Deering No 7 Mower Manual in English & French

McCormick-Deering No. 7 Mower Manual in English & French

Instructions for Setting Up and Operating the McCORMICK-DEERING No. 7 VERTICAL LIFT TWO-HORSE MOWERS — Instructions pour le Montage et le Fonctionnement des FAUCHEUSES A DEUX CHEVAUX McCORMICK-DEERING No. 7 À RELEVAGE VERTICAL

Fjordworks Horse Powered Potatoes Part 2

Fjordworks: Horse Powered Potatoes Part Two

These types of team implements for digging potatoes were the first big innovation in horse powered potato harvesting in the mid-19th century. Prior to the horse drawn digger the limitation on how many potatoes a farmer could plant was how many the farm crew could dig by hand. The basic design of these early diggers works so well that new models of this type of digger are once again being manufactured by contemporary horse drawn equipment suppliers.

The Milk and Human Kindness A Look At Butter Churns

The Milk and Human Kindness: A Look at Butter Churns

by:
from issue:

Finding an old butter churn at a flea market, one that is still usable can be a lot of fun, and because there are so many types, it’s good to know a few tips to help you find one that works well for you. For one thing, the size of your butter churn must match your cream supply so that your valuable cream gets transformed into golden butter while it’s fresh and sweet, and that your valuable time is not eaten up by churning batch after batch because your churn is too small.

Illusive Herd of Threshasaurus Sighted

Illusive Herd of Threshasaurus Sighted

by:
from issue:

The Threshasaurus’s large size and curious nature may appear antagonistic, but they are mostly curious and largely non-threatening. Be careful when approaching, however, as they do have sharp teeth and many fast moving, exposed pulleys.

McCormick-Deering Tractor Disc Harrow No. 10-A

McCormick-Deering Tractor Disc Harrow No. 10-A

Small to mid-sized disc-harrows are a most useful tillage implement. Some farmers consider them indispensable. Discs such as the McD 10-A may be used with either tractors or big hitches of work horses. This tool will cut both plowed and unplowed ground. Ahead of the moldboard plow, the disc harrow is a valuable tool to cut up and free tough sod. When employed in tandem with spring tooth harrows, a great deal of work can be accomplished in much less time.

Portable Poultry

Portable Poultry

An important feature of the range shelter described in this circular is that it is portable. Two men by inserting 2x4s through the holes located just below the roost supports and next to the center uprights can easily pick up and move it from one location to another. Frequent moving of the shelter prevents excessive accumulation of droppings in its vicinity which are a menace to the health of the birds. Better use will be made by the birds of the natural green feed produced on the range if the houses are moved often.

Ask A Teamster Neckyokes

Ask A Teamster: Neckyokes

I always chain or otherwise secure slip-on type neckyokes to the tongue so they don’t come off and cause an accident. Neckyokes unexpectedly coming off the tongue have caused countless problems, the likes of which have caused injuries, psychological damage, and even death to horses, and to people as well. Making sure the neckyoke is chained or otherwise secured to the tongue every time you hitch a team is a quick and easy way of eliminating a number of dangerous situations.

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