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Thread: how many acres to farm profitably for the future??

  1. #31
    Senior Member Phil's Avatar
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Courier View Post
    Base rate has little meaning nowadays
    Really ?

    I thought most lending/borrowing is based on the Bank of England's Base Rate.

  2. #32

    Re: how many acres to farm profitably for the future??

    I don't think it is nowadays. Probably why RBS keep trying to get me to change my commercial loan which is fixed at 1% over base. No thanks.

  3. #33

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Phil View Post
    Really ?

    I thought most lending/borrowing is based on the Bank of England's Base Rate.
    In that a lender starts with that and adds some (whatever they want really) on top. So technically it IS based on the base rate...

  4. #34

    Re: how many acres to farm profitably for the future??

    Aren't most loans now LIBOR+ ? I haven't taken a loan out in years but I'm sure it changed as base rate was too low!

  5. #35
    Senior Member Phil's Avatar
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Pasty View Post
    I don't think it is nowadays. Probably why RBS keep trying to get me to change my commercial loan which is fixed at 1% over base. No thanks.
    Over-draft Rates & loans etc are still based on the base rate....just that now the banks are looking for an increase on what they charge "over-base".

    Back in the late 80's/early 90's the farm business was servicing an overdraft at 2% over base, which meant we were paying interest at around 15%.
    We are now paying 3.25% over base rate, so 3.75% in total.
    Trouble is, if we go back through the farm accounts we find that the business was generating a smaller turnover but a much better profit than it is now.
    And we are farming more land now than we were then ?

  6. #36
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    Re: how many acres to farm profitably for the future??

    It would be interesting to have a breakdown of the differences.

  7. #37

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Pasty View Post
    Well if the rent negates the SFP then not. If you own it and you can't make a living then give up and sign on.

    making a living isnt enough. the question, its about future expansion. not about staying static. one of the posters mentioned about requiring 10 acres a year extra for every year he farms. id have to agree with him, that sounds about right.

  8. #38

    Re: how many acres to farm profitably for the future??

    I don't understand the theory behind that. To me, you would put in so much effort bringing the new land into your system, you would fail to fully leverage the existing land you have. Or not?

  9. #39
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by mark5335 View Post
    making a living isnt enough. the question, its about future expansion. not about staying static. one of the posters mentioned about requiring 10 acres a year extra for every year he farms. id have to agree with him, that sounds about right.
    Land is too expensive to be buying at the moment by farmers, people buying it are looking for investments which are safe where we have low interest rates.
    People cannot continue buying land at a value which is way above its productive value as the numbers dont stack up. At some point in future im sure where the economy is more stable and interest rates rise land will return to a more reasonable value (i hope!!)

    Also it worth bareing in mind that as areas in the far east and south america are begging to rapidly industrialize and the std of living increase the demand for meat etc increases meaning that prices for production here become more in line with the rest of the world and demand for our good increase.

    One day if everywhere is industrialized where will your cheap goods come from, probably the nearest place as this will be the deciding factor in global trade as oil will only become more expensive, but who knows we will have to wait and see!

  10. #40

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Pasty View Post
    I don't understand the theory behind that. To me, you would put in so much effort bringing the new land into your system, you would fail to fully leverage the existing land you have. Or not?
    i understand what you mean, if you take your grandad era of farming, i he was able to farm about 30acres and make a living, that cant be done now, one of the previos posters wrote, that years ago, interest rates might have been high, but the ratio between turnover and profit was alot higher then than now. an interesting fact i thought

  11. #41

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Farmer_Joe View Post
    Land is too expensive to be buying at the moment by farmers, people buying it are looking for investments which are safe where we have low interest rates.
    People cannot continue buying land at a value which is way above its productive value as the numbers dont stack up. At some point in future im sure where the economy is more stable and interest rates rise land will return to a more reasonable value (i hope!!)
    land may flucturate in price, but it generally only goes up in price. but i have to agree, the figures dont stack up, the only way to buy land, is by calculating the cost over the whole unit. it still mightnt look as attractive an option as renting land. but long term it is generally better

  12. #42
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by mark5335 View Post
    making a living isnt enough. the question, its about future expansion. not about staying static. one of the posters mentioned about requiring 10 acres a year extra for every year he farms. id have to agree with him, that sounds about right.
    if you own 500acre of reasonable land and making 200/acre profit, is there any point in taking another 500 acre @ 200/acre rent, You will then be working twice as hard for the same profit.

  13. #43

    Re: how many acres to farm profitably for the future??

    The way its heading,there will be a reasonable living to be made from owning a 200 acre farm,but you wont make any extra by farming it.

  14. #44
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by saltoun View Post
    The way its heading,there will be a reasonable living to be made from owning a 200 acre farm,but you wont make any extra by farming it.
    Is that 200 acre bordering a growing housing estate, 5 tonne wheat land or welsh mountainside.

  15. #45

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Skimmer View Post
    if you own 500acre of reasonable land and making 200/acre profit, is there any point in taking another 500 acre @ 200/acre rent, You will then be working twice as hard for the same profit.
    a valid point. it might be worth looking at it in a different light. would you not be better renting your land out. you'll make the same profit and zero work.

    using the figure you have used, the only benefit in taking on extra land, is the value of stock. not so long ago, fat cattle where 500 a head, now, they 1500. same can be said for cows, sheep etc. livestock has appreciated. which is capital value and not on the p & l sheet

  16. #46
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by mark5335 View Post
    a valid point. it might be worth looking at it in a different light. would you not be better renting your land out. you'll make the same profit and zero work.

    using the figure you have used, the only benefit in taking on extra land, is the value of stock. not so long ago, fat cattle where 500 a head, now, they 1500. same can be said for cows, sheep etc. livestock has appreciated. which is capital value and not on the p & l sheet
    You can put what figures you like in Mark, everyones different but farmers tend to farm as much as they can afford to farm,not many take a better standard of living because they expand. I don;t now many that can't put a decent meal on the table,fuel in the truck,log on the fire ect and those that do work harder and farm more don't seem to do anything different.

  17. #47

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Shooting Mad View Post
    Through out history large estates have come and gone while the small farm has always survived! Take away the SFP, increase interest rates to 8% and do away with the inheritance tax perks and the situation might be a little different. All these things will probably occur in the not too distant future!
    <<Hiya mate doing a bit of research on farms accross the UK for a university project your comment on small farms surviving really caught my attention is it ok if I email you a very short survey would really help with my project? - email me at Shawnboatin@live.co.uk if you have a minute

  18. #48

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Robw54 View Post
    Very true, i've long said find a skill they can't automate, offshore or flog online and you'll be right.

    Then again have sheep been offshored to places they can be produced cheaper and your left needing 1000s to make 1 mans living?

    I suspect land prices will start to re-align, a change in interest rate, tax regime, sfp and improved returns elsewhere will put paid to it. You've only got to look a price of everything these days to realize that 10k an acre is based on paper they've been printing with abandon.
    << Hi mate, really interesting comment on sheep and future production, I was wondering if maybe you'd be interested in doing a 5 minute survey to help me out with a university project? - email me at shawnboatin@live.co.uk if you have a bit of time

  19. #49

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by NeilO View Post
    +2



    There is such a thing as diseconomies of scale too. Once you get over a certain size, then attention to detail has to suffer and/or you need to employ someone, who then has to earn enough extra to cover themselves, etc, etc....... That 'optimum' size will vary according to what enterprise(s) you run and what system you run them on, IMO.
    Totally agree NeilO the bigger you get the more machinery and staff you need and they don't last as long. I am living proof of this but I expanded to create work for family members. I don't regret doing it, but I was making more money as a one man band.
    Come and stay in the Welsh hills, http://www.holidaycambriancoast.co.uk/

  20. #50

    Re: how many acres to farm profitably for the future??

    it is harder to farm with smaller amounts of land, but when you do, the margins are so tight you learn to survive on *uck all. most still have to go out and do a normal job as well as farm.
    its very hard farming under 100 acres and make enough to live on alone, you have to have other things up your sleeve.

    a worrying thing I heard a few years ago from our great welsh labour leader in Cardiff ( he was in charge of farming then) he said I see a future in wales of larger and larger farms with the workforce coming from the redundant smaller farms!
    gulp, I do worry about the people making the decisions.

  21. #51
    Senior Member wellington53's Avatar
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by banjo View Post
    it is harder to farm with smaller amounts of land, he said I see a future in wales of larger and larger farms with the workforce coming from the redundant smaller farms!
    gulp, I do worry about the people making the decisions.
    I hate those kind of remarks banjo don't you?

  22. #52

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by wellington53 View Post
    I hate those kind of remarks banjo don't you?
    its worrying when they talk like that, and not very helpful to people trying their best on smaller farms.
    does my head in.

  23. #53
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by Skimmer View Post
    if you own 500acre of reasonable land and making 200/acre profit, is there any point in taking another 500 acre @ 200/acre rent, You will then be working twice as hard for the same profit.

    That's entirely true, but if people could routinely make 100k net on 500 acres, then farming would be a very easy profession. I'm fairly sure that not many managed it over the last 20 years.

  24. #54

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by banjo View Post
    its worrying when they talk like that, and not very helpful to people trying their best on smaller farms.
    does my head in.
    Two brothers locally got left a farm each by their parents. The eldest got 200 acres and the youngest 100 acres. The youngest reckons he's better off when times are hard because he has a job which brings in income that isn't dependent on the lamb trade / weather etc. The oldest doesn't have time to get another job.

    Size isn't everything (according to the wife).
    Come and stay in the Welsh hills, http://www.holidaycambriancoast.co.uk/

  25. #55

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by stu b View Post
    That's entirely true, but if people could routinely make 100k net on 500 acres, then farming would be a very easy profession. I'm fairly sure that not many managed it over the last 20 years.
    really? so out of that you need to live pay tax and reinvest ? not a lot left really. 100k not enough i would suggest

  26. #56
    Senior Member b slicker's Avatar
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by lazy farmer View Post
    really? so out of that you need to live pay tax and reinvest ? not a lot left really. 100k not enough i would suggest
    If two families (Parents and offspring) run the business,

    Personal drawings 30,000
    Income tax 25,000
    Buildings' investment 25,000

    Total 80,000

    So that leaves 20,000 to play with. I am assuming that machinery replacements have already
    been accounted for by deducting machinery depreciation before arriving at a profit figure. But the
    amount and reliability of any SFP included in the profit figure will also have to be considered.

  27. #57
    Senior Member wellington53's Avatar
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by b slicker View Post
    If two families (Parents and offspring) run the business,

    Personal drawings 30,000
    Income tax 25,000
    Buildings' investment 25,000

    Total 80,000

    So that leaves 20,000 to play with. I am assuming that machinery replacements have already
    been accounted for by deducting machinery depreciation before arriving at a profit figure. But the
    amount and reliability of any SFP included in the profit figure will also have to be considered.
    Why does it never work like that!!

  28. #58
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    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by lazy farmer View Post
    really? so out of that you need to live pay tax and reinvest ? not a lot left really. 100k not enough i would suggest
    I think you need to look at what net means.
    all drawings reinvestment etc come out before tax, therefore if you can make 100k net then you are really doing something right.
    I'll say again. I don't think many businesses can consistently make 100k net on 500 acres. Particularly when you consider the problems with grain quality, lamb prices, cattle fertility etc that we have had over the last twelve months.

  29. #59

    Re: how many acres to farm profitably for the future??

    Quote Originally Posted by stu b View Post
    I think you need to look at what net means.
    all drawings reinvestment etc come out before tax, therefore if you can make 100k net then you are really doing something right.
    I'll say again. I don't think many businesses can consistently make 100k net on 500 acres. Particularly when you consider the problems with grain quality, lamb prices, cattle fertility etc that we have had over the last twelve months.
    no only the depreciation comes before tax and drawings that can't be "hidden" come after tax . and I would suggest there are plenty of dairy units which meet your criteria(on less acres) but then the capital investment involved does mean a higher profit is needed to justify the businesses existence.

    lazy

  30. #60
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    Re: how many acres to farm profitably for the future??

    I tend to agree with lazy there. Net profit is usually the figure when total expenses including interest are deducted from gross profit, me thinks. Then it is adjusted according to depreciation (probably covers a lot of the reinvestment). This figure is taxed. After that, drawings are up to you.

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