Iowa farms minting millionaires (sales, loan, transfer)

[SpeedyAZ]

Originally Posted by duster1979

I have no problem with making sure farmers are able to keep their farms in poor years. The problem is that it's been awhile since most farmers have seen a poor year yet many are still getting subsidies. We expect people in other businesses so set aside some of their excess earnings in good years to hedge against the lean years, but for some reason we think it's okay for farmers to sink all of their profits into more land an/or newer equipment rather than set something aside.

It's VERY expensive to operate a large farming operation nowadays. Most farmers don't own thousands of acres but they need to rent them to stay profitable. Quite a few small farmers may own a section of land (640 acres) and then, to stay competitive in the market, will rent out another 1000 acres. Before my dad retired, he farmed his 960 acres and rented 1200 acres to afford the price of labor, equipment, and other expenses. Now 5-10 years ago equipment didn't cost $600K for a John Deere combine, $300K for a tractor, $100K for a planter, etc etc. When you need to purchase millions worth of equipment to stay competitive, it's difficult to do with just the farming income.

Farming is an interesting occupation, I've always wanted to do it but I just don't know if I could make a go of it. I have a love of nature and the outdoors but to be a successful farmer, you need the capital that I just don't have.

[601halfdozen0theother]

Originally Posted by SpeedyAZ

I think you're really estimating on the low end. If you have 40 acres of land and yield 210 bushels/ acre with the price of a bushel at around $7.50/ bushel, for those 40 acres you're averaging $1575/ acre. Multiply that by 40 acres and you're at $63,000. Those 40 acres in my part of Iowa (Plymouth and Sioux counties) would sell for around $15,000/ acre at market prices which translates to $600,000. . . . (blah blah blah) Now obviously this is oversimplified but in a broad sense, you're not going to own a $2 million farm and make $40K/ year.

Well, I can tell you exactly what our income was this year on a 300 acre farm in Iowa, and on a 240 acre farm in Illinois - and your math regarding income would be proved to be wackaloony! I'm not estimating, I'm talking about personal pocketbook reality.

Think of it like another sort of business - a store or manufacturer. A business's gross revenue is far different from the take-home income for the owner. And when it comes to a farm you surely can't assume that every acre owned produces at top dollar.

[Ollie1946]

Unless congress acts and Obama signs, the estate tax will kick back in soon and more family farms will disappear. The feds seem intent on killing off the last family farms.

[Mathguy]

I know a farmer near the Iowa\IL border that has now retired an makes 300k a year RENTING his land.

Not too shabby. wow.

[smpliving]

I know a neurosurgeon who owns A LOT of land in eastern Iowa, and rents out the land to several farmers who scramble for his business. Can only imagine how much money he makes.

[WyoNewk]

A good, hard working farmer can amass a good sized estate in the midwest, just as a good, hard working businessman can. For either to do so requires lots of long days, a bit of luck, smarts, and doing without at times. I was raised on a farm in NE Kansas. My dad was a share-cropper. He was smart and hard working, but luck wasn't on his side. His dreams of buying the farm came to an end after a few years of drought and some low livestock prices when the owners of the farm decided to sell. He just didn't have the funds and determination to move to another farm and start over, so we moved to town. He did okay from there on out, but his heart was always on the farm.

My sister and her husband started much the same way in Iowa, sharing crops with the land owner, but they'd had some good years with bumper crops just before the owner decided to sell, so they were able to borrow enough money from the bank and buy their farm (320 A iirc). Before it was completely paid off, they bought another small farm, then another. Into their 70s now, they own about 1000 acres and rent another 1000, plus he does custom combining for a couple other farms, and in his off time (winters) works construction, just as he has for the past 50 years.

Buying a farm has never been easy. If you don't love working from before sunrise until after dark, tending livestock and tilling the fields, you won't make it. If you can't make it through the lean years, especially in the beginning, you won't make it. That's always been true, even when the government was giving away land to those who would clear it and plant crops.

I tip my hat to those who've had successful farming and ranching careers and built small empires. They did it with sweat a tears. They were determined to succeed and did so. Some starting out today will succeed too, but the vast majority, just as in years past, will give up or be forced to quit when they reach the end of their rope. The more things change, the more they remain the same.

[jeffredo]

Sounds like the Central Valley of California - rich farmers with huge, consolidated holdings driving around in fancy new pickups through towns with grinding poverty. Its almost like a third-world country with the income disparity. It just happened here 20-30 years earlier.

[yousah]

The majority of small businesses fail in this country. The difference with farming is that those other types of businesses don't get gov't money when they have a bad year or low to no interest rate loans.

I'm in a southwest suburb of Chicago in a county that was the fastest growing county in the country not too long ago. There was a transition from the rural areas into single family housing during the building boom. Those farmers who paid next to nothing in property taxes for many years are all millionaires now. And the same farmers who complain about the family farm dissapearing are the same ones who choose to sell out to developers. The family farm is going away because the farmers themselves are cashing in on their land values.

I can understand some form of gov't assistance to farmers but there should be some sort of recapture of the assistance when they sell and there's a massive amount of profit.

Any story that a farmer can tell about the hard times is no different than many other small businesses. It's just that the farmer's hard times as tempered with all sorts of gov't programs too numerous to mention while other businesses just go belly up.

[SpeedyAZ]

Originally Posted by 601halfdozen0theother

Well, I can tell you exactly what our income was this year on a 300 acre farm in Iowa, and on a 240 acre farm in Illinois - and your math regarding income would be proved to be wackaloony! I'm not estimating, I'm talking about personal pocketbook reality.

Think of it like another sort of business - a store or manufacturer. A business's gross revenue is far different from the take-home income for the owner. And when it comes to a farm you surely can't assume that every acre owned produces at top dollar.

This morning I talked to my father so my information would be correct and up to date. Keep in mind that we rent out the entire 960 acres to other farmers in the area as my dad is retired.

320 Acres N 1/2 Section (corn)- $1650/ acre average yield= $528,000
160 Acres E 1/4 Section (soybeans)- $980/ acre average yield= $153,600
320 Acres W 1/2 Section (corn)- $1560/ acre average yield= $499,200
160 Acres S 1/4 Section (soybeans) - $920/ acre average yield= $147,200

These are gross numbers, not net of course. I couldn't tell you the net income as I don't have that information but those are correct in terms of gross income.

We currently get anywhere from $425 to $500/ acre for different 1/4 sections. Some 1/4 sections might be $500/ acre that yield high corn prices while the less desirable tracts are $425. Probably average about $450 or $460 for cash rent per acre.

Unless congress acts and Obama signs, the estate tax will kick back in soon and more family farms will disappear. The feds seem intent on killing off the last family farms.

That's currently one of my biggest fears. Luckily we pay taxes on assessed value and not REAL value. The land might be assessed at $1200 or $1400/ acre while the real value is more like $16,000/ acre. Some very scary tax policies from this administration that are truly screwing the small farmer.

[yousah]

The lower taxation of farmland is a huge benefit to farmers. In our area we have farmers sitting on literally millions of dollars worth of acreage and only paying taxes based upon ag use. That's Ok so long as they want to continue as farmers. The problem is that many of these farmers end up holding onto their land and eventually selling it for prime residential usage and garnering the income that the res use entails.

There needs to be some way to phase out the low tax structure for those properties that eventually turn into residential development use as their highest and best use. Or, give the farmer the low taxes in exchange for agreeing that they won't sell their land as residential use. Right now it allows them to be real estate investors with a unique advantage that other investors don't have.