From the Ground Up - Economics of Farming

Farmers operate on very thin margins, and with the capital required to farm today, it would be easy to understand why some might choose a different career path, but thankfully enough people choose to farm, and that’s what keeps the rest of us fed. Jim Bone is a retired agricultural chemical field researcher.

“The economics, if nothing else, just dictates that a farmer has got to be very cost effective. I can remember, my father-in-law was a rice farmer, cattle raiser, and he kept two shoe boxes. In one box, he put all the receipts for what he spent for inputs to his crop. The other box he’d put all the receipts for what he got as far as income for the cattle or the rice. At the end of the year he added both, and if he’d spent more than he’d got back in, he had a bad year. If he got more back in than he spent, he had a good year.”

Bone points out that there many ways to make a dollar that are a whole lot easier than farming.

“He didn’t take into account all the dynamics of accounting and what he was really losing on land appreciation and rental values, things like this, and I think once we really got down and analyzed what that all meant, we found out that while we’d been fairly profitable, we really hadn’t been, and that if you look at just a normal investment, and taking that capital and putting it where, my neighbors might put theirs in a money market account or something, we’d have been far ahead.”

Men and women who make their livings as agricultural producers have chosen more of a life style than a job.

“If every farmer chose to take his capital and invest it in stocks, or money markets or something, then we would be in terrible shape, because there would be no food source. The American farmer is probably the biggest gambler in the world because he gambles on an environment that’s not controllable, he gambles on rain that is not controllable, he tries to use irrigation which is becoming more of a question all the time, and he hopes that he will get a fair return reward for his output, selling that output to a customer who doesn’t realize what he does.”

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