Capital Requirements For Farming

With fewer people farming, but the amount of land a family farms constantly growing, capital requirements have also grown dramatically over what they were even a generation ago. Borrowed capital is used for everything from operating expenses like labor, fuel, fertilizer, and pesticides to note payments on land and equipment. Bob French has more in this week’s From The Ground Up.

"My dad helped us get started, my brother and I. It’s like you show him one piece of equipment or one tractor, and he goes I ain’t spent that much in 40 years of farming, and that’s just one piece."

"Financing will be more of an issue as the amount of money that we deal with keeps growing."

John Perryman farms in McClennan County.

"It’s harder to buy land that the property right next to it has just been sold for development for a lot more than you can afford to pay to operate it as a farm."

Robert Cossar is an agronomy consultant.

"I don’t think the American consumer realizes how many thousands and thousands of dollars it takes for an American farmer to put a crop in the ground today. I think they get a misconception a lot of times that farmers got a lot of money, they see a lot of tractors running around, but it takes money investing in input costs."

The economics involved in agriculture are unique.

"If I’m running a business for myself, I’m a capital business, I create a product, I supply it to the customer, and I set my price, then based on the customer demand, they’ll either buy it, or I’ll lower it some."

Farmers pay retail prices for their inputs, but sell their products at wholesale prices.

"He really doesn’t have any say so on as far as how much he gets for that crop. He grows it, and at the end of the year he carries it to market and says o.k., what’s it worth? I think a lot of our American consumers, sometimes we forget that the farmer is not out there, if he could set prices, food would not be a cheap as it is now. I mean we have the lowest food costs of anywhere in the world."

And that’s why a farmer will tell you that the farm bill is more of a subsidy to American consumers than it is to agricultural producers. I’m Bob French, tracing the journey our food makes from the farm to our plates From The Ground Up.

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