AS a little piss ant farmer i often wonder and question why does some one care to just farm a bunch of land and probably at the end of the day just spin their wheels and really build no real wealth.
Seems years ago all the Big Chartered banks wanted farmers to Incorporate. They all said farmers needed to do this to protect their farms from lawsuits etc. But do most farmers know that you gave up all your rights if the banks decide to call your loans. Oh you say you put your land in private hands. Well most banks have you sign a personal guarantee so they have your land. The FLSB and Bankruptcy rules don't work for Corporations. The bank says your done your done they tell you give back your leased equipment and then take the land and good bye.
My take on all this started years ago when some accounting firm or bank decided the last shit show in Ag really hurt them and they needed a new way to protect their interests. It was easy to get farmers to follow as if you want opp loans and equipment loans you have to do this to get that.
Now they got the or both worked together the Accounting firms and Banks where one would get you Mr farmer into the Other real fast and they would set it up this new super Corporation. Most followed the rules and did just that. It actually was a great template for new modern farm. Some had land some rented and bought land and in a rising up trend all works awesome.
If you had land and lets say 10 quarters clear when most incorporated it was worth some 1,600,000.00 So the banks would lend that farmer $1,280,000.00 in either Opp or special equipment lines or just even land loans that one could access any time. Quarter comes up and the guy wants $185,000 you said yes went to your lawyer and did papers up gave the lawyer a check for the total amount called your bank it was put in your checking account and you paid cash for the new quarter. Really good program quick done deal. That account paid off over 10 years. But Mr farmer they had all your assets remember under the Company and personal guarantees etc. But money was free to flow. Now you had 11 that the bank the next year valued at $2,350,000.00. They increase Every thing up to $1,628,000.00.
This continues to today where the same farm purchased each year a little more land and switched from owning equipment to leasing. One simple payment and new each year.
Today say the guy owns 20 quarters with the last he purchased at $428,000.00 his farm has a value in 15 years as 4 to 5 of the first are paid for. $8,560,000.00 of which they will cover up to $5,000,000.00. But now you have to rent more land as the payments on new equipment are going higher. So hints start that you should get bigger yet to cover your costs and continue. Whats another section well give you the money to keep going. So Joe Farmer rents on top of the 40 already he is farming another 20 more.
Then it goes to 2017 and land hits the magic $550,000.00. This number is now turns you into a 11,000,000.00 Dollar farm meet the big boys from Calgary maybe go golfing or taken out for skiing. You've made it baby. $7,150,000. they now will lend you.
Go buy more dirt or build a new home go big or don't bother at all. Maybe pull out cash and buy a home in USA or Home in Hawaii. Your a Big time corporation. Oh rent some more land because guess what we did the numbers and you have to get a little bigger yet to keep every one happy.
Now in a up trend with strong prices this scenario (Boys its a scenario not me got that) things keep rolling hell if you purchase for a higher amount each time what can go wrong. Your getting big yields (ok no bigger than the neighbours but your doing just fine. Have a work crew of hired employees and you made it baby.
Then something changes. Either other countries start to subsidize or halt sales or make up ergot or weed requirements. No round up or tariffs of 50% on your product. Sales dry up youll keep for a year you say. Ah your banker might go along or he will say sell. Then add a massive hail event or rain event or drought and guess what. The guys in Calgary won't take your calls. Who is calling. Ah were busy.
You look to others like a borrower of last resort. Oh goodie just grow wall to wall canola and were happy.
Farming is tough and any one can make in a rising market with no problems but the world has lots of grain and the world is a huge place and the world has cheaper producers than us which are not land locked.
Remember its fun to go up but if they decide your done under the new corporation you created your done.
Bankruptcy rules for corps dont give you one tractor combine truck seeder auger swather and your 40 acres.
Again this is a example if I missed a spot correct me if im wrong but from what i have observed this is the template for MEGA BTO 1.01 for Dummies.
Have a great Saturday Im going to the Shack. Got to cut wood for the winter so others can have a great outdoor experience and a little warmth from a day of fun.
Seems years ago all the Big Chartered banks wanted farmers to Incorporate. They all said farmers needed to do this to protect their farms from lawsuits etc. But do most farmers know that you gave up all your rights if the banks decide to call your loans. Oh you say you put your land in private hands. Well most banks have you sign a personal guarantee so they have your land. The FLSB and Bankruptcy rules don't work for Corporations. The bank says your done your done they tell you give back your leased equipment and then take the land and good bye.
My take on all this started years ago when some accounting firm or bank decided the last shit show in Ag really hurt them and they needed a new way to protect their interests. It was easy to get farmers to follow as if you want opp loans and equipment loans you have to do this to get that.
Now they got the or both worked together the Accounting firms and Banks where one would get you Mr farmer into the Other real fast and they would set it up this new super Corporation. Most followed the rules and did just that. It actually was a great template for new modern farm. Some had land some rented and bought land and in a rising up trend all works awesome.
If you had land and lets say 10 quarters clear when most incorporated it was worth some 1,600,000.00 So the banks would lend that farmer $1,280,000.00 in either Opp or special equipment lines or just even land loans that one could access any time. Quarter comes up and the guy wants $185,000 you said yes went to your lawyer and did papers up gave the lawyer a check for the total amount called your bank it was put in your checking account and you paid cash for the new quarter. Really good program quick done deal. That account paid off over 10 years. But Mr farmer they had all your assets remember under the Company and personal guarantees etc. But money was free to flow. Now you had 11 that the bank the next year valued at $2,350,000.00. They increase Every thing up to $1,628,000.00.
This continues to today where the same farm purchased each year a little more land and switched from owning equipment to leasing. One simple payment and new each year.
Today say the guy owns 20 quarters with the last he purchased at $428,000.00 his farm has a value in 15 years as 4 to 5 of the first are paid for. $8,560,000.00 of which they will cover up to $5,000,000.00. But now you have to rent more land as the payments on new equipment are going higher. So hints start that you should get bigger yet to cover your costs and continue. Whats another section well give you the money to keep going. So Joe Farmer rents on top of the 40 already he is farming another 20 more.
Then it goes to 2017 and land hits the magic $550,000.00. This number is now turns you into a 11,000,000.00 Dollar farm meet the big boys from Calgary maybe go golfing or taken out for skiing. You've made it baby. $7,150,000. they now will lend you.
Go buy more dirt or build a new home go big or don't bother at all. Maybe pull out cash and buy a home in USA or Home in Hawaii. Your a Big time corporation. Oh rent some more land because guess what we did the numbers and you have to get a little bigger yet to keep every one happy.
Now in a up trend with strong prices this scenario (Boys its a scenario not me got that) things keep rolling hell if you purchase for a higher amount each time what can go wrong. Your getting big yields (ok no bigger than the neighbours but your doing just fine. Have a work crew of hired employees and you made it baby.
Then something changes. Either other countries start to subsidize or halt sales or make up ergot or weed requirements. No round up or tariffs of 50% on your product. Sales dry up youll keep for a year you say. Ah your banker might go along or he will say sell. Then add a massive hail event or rain event or drought and guess what. The guys in Calgary won't take your calls. Who is calling. Ah were busy.
You look to others like a borrower of last resort. Oh goodie just grow wall to wall canola and were happy.
Farming is tough and any one can make in a rising market with no problems but the world has lots of grain and the world is a huge place and the world has cheaper producers than us which are not land locked.
Remember its fun to go up but if they decide your done under the new corporation you created your done.
Bankruptcy rules for corps dont give you one tractor combine truck seeder auger swather and your 40 acres.
Again this is a example if I missed a spot correct me if im wrong but from what i have observed this is the template for MEGA BTO 1.01 for Dummies.
Have a great Saturday Im going to the Shack. Got to cut wood for the winter so others can have a great outdoor experience and a little warmth from a day of fun.
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