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Does old money exist in farming?

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    #16
    I have always found that many of the “cash rich” farms were guys who were established farms with little to no debt and they hit the high grain prices from 1974 - 1982. When the droughts, low prices and high interest rates of the 1980s hit these guys had no debt and money in safe investments such as Term Deposits and Canada Savings Bonds and were getting fairly good interest rates . Many of these guys were born in the 20s and 30s and seen the depression so they were savers and not big spenders all their lives and when the 70s hit they banked the cash. The next generation did one of three things:

    1. Took dads cash expanded and lost everything due to low prices, high interest, poor crops, and overspending.
    2. Took over farm and remained careful but at the same time never took risks and expanded much. Basically farmed paid for land and made it through the tough times.
    3. Took a paid for farm from the early 80s and made careful expansions right up to today. Quite often had wives working as teachers or nurses in small towns bringing in excellent salaries. Quite often had an off farm business or job themselves. Encouraged the next generation to get an ag education , work off farm, but also join the farm and expand “carefully. Were early adopters of life insurance/ savings plans which in many cases was able to compensate non farming children and leave land and cash in the farming operation. These operations are not debt free, but carry a manageable debt load and have good balances sheets and would be considered profitable “cash rich operations.

    Now there is all kinds of other stories ranging from the bachelor uncle who was frugal and left family piles of cash, operations who sold land for big $ in Europe and then came here and started with cash, and others who maybe were growing a little “hemp” in the back 40 and were selling for good cash before it became legal! They will always be a few of them around but overall much of this new wealth is tied up in land and equipment and isn’t fully accessible until the operation comes to an end.

    Comment


      #17
      Around here, some real cash was held by old bachelors who never spent their money.

      Comment


        #18
        I know a fellow that farmed with his dad. Dad always ran the show, cheap as that generation had to be. They farmed 3 quarters with a 4440 and a pull type combine. About 15yrs ago his Dad died, son went out and bought a full line of brand new JD equipment, new pickup and enough hopper storage to fill 3 times, a large modern shop and a very nice new house. He told me was all inherited cash that he had no idea his Dad had, wished they had upgraded the farm years ago. Don't know the amounts but would have been significant. Incase you think the point of my story is the son would lose daddys money, not at all in this case. Guy just enjoys farming his small acres in style without worry.

        Lots of old money in my area, not just ag money, overall just a prosperous area... guess I just dont fit in!

        Comment


          #19
          Originally posted by Rareearth View Post
          Maybe another way to ask the question is :
          “ are there any farmers that aren’t 3, 4, and next generation #5? “

          If there is any old money it was earned, blood sweat and tears, good luck and likely bad luck as well. The most enduring features might be persistence, perseverance, community, church, and most importantly Family.
          Rareearth very well said...

          My Dad worked very hard for the one quarter he got... from the original 1881 homestead our family started.

          We still have that quarter in the family today... yet almost everyone says our farm exists because of intergenerational wealth.

          To the extent we have a spirit/heritage of co-operation and generosity... being frugal and humble... conservative and our family all fear God...

          We believe in practicing 'the golden rule'... the 'Prosperity' and Blessings we enjoy are a multigenerational heritage that is being taught;
          With good hard work habits that are taught... giving us the wisdom to decline 'get rich quick schemes' and too good to be true deceptions...

          Blessings to all who seek honest answers and search for wisdom!

          Read Proverbs for a start!

          Cheers!

          Comment


            #20
            Originally posted by LEP View Post
            Sorry. I have to disagree BIG time. When I was in the banking system was from 1988 to 1998. One job I held was the agrologist in head office. It was during the time of Farm debt and rightsizing the portfolio. One part of my job was to tour the province and meet branches' best customers. So I would have seen the "old wealth". In 1989, I literally did probably 250+ farm calls. Those best customers had net worths a magnitude less than operations do now. Sure there was some with plenty of cash but that was maybe $250k not millions. There was paid for land but remember this was a time of 40 to 70K per quarter land values. A two or three quarter section farmer would not generate millions. Just not enough excess cashflow.

            I believe those with paid for land eventually allowed for leveraging. Remember debt was hard to come by, even with paid for land for collateral until the Mid 2000's. I put together a 3.2 million dollar deal in 1998 and received national recognition for it. There was a personal guarantee from a guy with $18 million in retained earnings in his small manufacturing business in Alberta. It was tough as hell to get passed, because it was tight even though it had scale for the time. I finally had to argue, look, this wealthy businessman wants to farm. He put $1 million down and fully backed the loan with mortgage security and a guarantee. Who are we to say it is or isn't the right thing to do... It went bad 2 years later but the bank never lost any money.

            Anyway, I saw alot of net worths all over the province. Including your area Sheep. There were wealthy people, just not with millions of cash or off farm investments. What I did find is coffee talk always made situations way better or way worse than reality.

            However I would say if there isn't a big crash in land values 10 or 15 years from now there will farms turning over 10's of millions in land and millions in cash.
            That is exactly the info I was looking for. And the answer I expected ( although, of course, I'd ,much rather believe the opposite to be true so I can claim victim status) Thanks for posting.

            Interest rates only spent about 3 years total in the teens, and that was 40 years ago. That only goes so far, averaged out with the almost zero rates of recent times, especially when land has been increasing at those same high rates in recent times quickly eroding the purchasing power of those savings.

            Here, not only is there no old money, I don't think there is any young money, and not much outside money lately either. Cattle will do that. If there was old money, safe to say the BSE years solved that.

            Not saying there can't be exceptions, but it would take a massive amount of after tax 1970's dollars, and some very good investing through some very low return periods, to have enough in 2021 to buy even a quarter of land at these prices.

            Comment


              #21
              Like I said earlier If the Bank was coming out to meet with potential borrowers most guys with cash don't give a rats ass. So you would have gone to people who borrow money.

              I have a friend that farms close to us and he could buy out most neighbors today with Cash. Lock stock and barrel. Yes, he has never been married or gone anywhere.

              Here is how it happened, get to know your history.

              Back in the 70s land was cheap and guys who bought could double the farm or triple a farm in a few years. Equipment became better and away a farm went. These guys were in the 40s to 60s. They also were of the generation that saved. Then along came the 80s much like we have today. Land went Boom through the roof. We had some that were bought for 15000 total for three quarters and sold for 483,000 a few years later. Yes boys and girls the 80s were interesting. But if land went stupid smart farmers sat back and had lots of land so why buy or rent. Rent also was insane.

              In came the stupid interest rate hikes. You could get for your money 15% on Savings. Oh, borrowing was 18% but hey it works, yea the borrowers didn't fair very well.

              Take the $483,000. it was a year later $72,450 more. So now you took that and invested again $555,450.00 and so on and so on. Oh, but the taxman had to get some. Yes, he did but you were a farmer where do they make any money. Fertilizer and chem and droughts helped out min tax was paid over the 80s. Also, these guys never were big spenders. Had a good home, maybe a cottage, and a few minor toys.

              That original investment could be worth in the end. Well over a million in tax paid CASH.

              The 90s on the farm were not a time to spend money and most didn't.

              Now these guys are gone and that amount is transferred down it would be like winning lotto 6-49. Some will piss it away some will quietly enjoy the time and play farm.

              It's always about the money.

              I also said earlier look at this weekends Telemiricle in Sask some farmer is going to always give a little to the cause.

              Enjoy the day.
              Last edited by SASKFARMER; Feb 27, 2021, 07:50.

              Comment


                #22
                Interesting thread.

                My one neighbor who admitted to have inherited his six quarters, mentioned to me once that the first million was much harder to attain then the next millions. With an ‘S’.

                The thing that may be different in this area, is that it had been for most of history, literally a farming eden, with scarcely a blip of production difficulties. So that would have helped too.

                Most I would say never inherited so much cash, true enough as they did in land and therefore leverage power. Being a third generation farm, and buying the exact same land over again each generation due to circumstances, tends to slow progress down, because the leverage factor never kicks in.

                A thing often overlooked unless you didn’t have it: most farms, even if they didn’t outright get a bunch of ‘help’, according to them, did have help. They just don’t see it much. An example is a farm where he swears he built what he has on his own. Well, looking at rm maps from the sixties before he was born, it shows that his grandpa and dad had ten quarters of land in a block. Land he didn’t have to chase after or fight for. And his wife happens to have an 80 g job.

                Another neighbor, very well off, fully admits and shows appreciation that he was very well set up. His dad paid for his first years inputs on 500 acres, co-signed his mortgage, etc. So you kind of have these extremes as well, where some will never see it, others do see it. It’s just interesting.

                I’ll throw it out there now. I appreciate that my grandparents came to this spot. I appreciate my dads skills and his ability to make us never feel poor growing up. I appreciate that my mom helped me as much as she could. Just because it wasn’t easy for me, and that it still isn’t easy, because of financial constraints due to terrible circumstances, I want to say I am not bitter. I used to be quite self deprecating because I felt frustrated by my personal situation. But lately I have been coming to terms with it.

                Just wanted to throw that out there, because I can see in text, how words could be construed. I ain’t jealous, I ain’t bitter. I just see things from a very different perspective due to circumstances. If you ain’t lived it, it’s hard to see, I get that.

                Comment


                  #23
                  SF3 - exactly... I never voluntarily visited a farm in my 12 year lending career without a reason and pebbles in my pocket to check on inventory or to ensure there was no excuse for the wife not to involved in the discussion.

                  Most guys that wanted to borrow money found away to come into my office.

                  Serious investors met advisers not me in the office as well. Why would anyone with a portfolio of any size invest with a lender?

                  My investment professional had a zoom meeting with my wife and I; my brother meets in person with his professional at least monthly. Pretty sure I know whose business is a priority.

                  Comment


                    #24
                    Originally posted by SASKFARMER View Post
                    Like I said earlier If the Bank was coming out to meet with potential borrowers most guys with cash don't give a rats ass. So you would have gone to people who borrow money.

                    I have a friend that farms close to us and he could buy out most neighbors today with Cash. Lock stock and barrel. Yes, he has never been married or gone anywhere.

                    Here is how it happened, get to know your history.

                    Back in the 70s land was cheap and guys who bought could double the farm or triple a farm in a few years. Equipment became better and away a farm went. These guys were in the 40s to 60s. They also were of the generation that saved. Then along came the 80s much like we have today. Land went Boom through the roof. We had some that were bought for 15000 total for three quarters and sold for 483,000 a few years later. Yes boys and girls the 80s were interesting. But if land went stupid smart farmers sat back and had lots of land so why buy or rent. Rent also was insane.

                    In came the stupid interest rate hikes. You could get for your money 15% on Savings. Oh, borrowing was 18% but hey it works, yea the borrowers didn't fair very well.

                    Take the $483,000. it was a year later $72,450 more. So now you took that and invested again $555,450.00 and so on and so on. Oh, but the taxman had to get some. Yes, he did but you were a farmer where do they make any money. Fertilizer and chem and droughts helped out min tax was paid over the 80s. Also, these guys never were big spenders. Had a good home, maybe a cottage, and a few minor toys.

                    That original investment could be worth in the end. Well over a million in tax paid CASH.

                    The 90s on the farm were not a time to spend money and most didn't.

                    Now these guys are gone and that amount is transferred down it would be like winning lotto 6-49. Some will piss it away some will quietly enjoy the time and play farm.

                    It's always about the money.

                    I also said earlier look at this weekends Telemiricle in Sask some farmer is going to always give a little to the cause.

                    Enjoy the day.
                    Actually the clients that I met were picked by the Branch Manager. Some were top borrowers, many had the largest deposits. Those were the people that actually just about fell over when you came to visit because they didn't know they mattered.

                    I still think over the years I saw a good cross section of the "real" numbers.

                    Comment


                      #25
                      I will say this. Not many farms that are 3rd , 4th , 5th generation would still be here without some sort of government handout through out the years.

                      The people representing farmers with bios of being a 3rd, 4th , 5th generation farm don't realize this..

                      IF you do the math on some of the handouts and indexed them what most farm groups are asking for is peanuts.

                      For perspective. The federal government funded Merit 100 million dollars for 25000 tonnes of annual raw material through that plant.

                      70 million tonnes are grown in western Canada.

                      My guess in a lot of instances guys didn't know how to write a cheque until they were in their 50s.

                      IMHO some guys on boards are sent there because they do less damage and are less irritating away from the farm...

                      Like John Dutton said to Beth in Yellowstone.." now go ruin someone else's day"
                      Last edited by bucket; Feb 27, 2021, 08:23.

                      Comment


                        #26
                        There are all sorts of ways to make a situation work, but leveraging on an already established business is certainly a big leg up just from a lending point of view.

                        You can stumble into the bank all day with your good looks and a job wage, but the bank knows that can all end in a heartbeat, so they want an asset and most assets will ride inflation. Look at some of the richest families in the world. They add new members every generation to their establishments but I dont see their kids sent off to get jobs pumping gas.

                        My dad had already retired and sold his place off before I entered the business. This was the late 90s when everyone wanted out and like a fool I got in. I had a six figure job in the cube farm in downtown Calgary and gave up 15 yrs of vacations trying to farm at the same time. I had a city mortgage and commuting and hour a day on top of that. My boss always wondered why I was more tired after my vacation than before. Then they found out I was moonlighting and then the flexible vacation time stopped pretty abruptly.

                        Comment


                          #27
                          The young pups around here on OLD money farms work very hard to keep it running smoothly. With labor shortages ,expanded acres and diverse crops it's a spray,seed,spray,spray, combine,spray,fert and go like hell to get crop sold. Some sell there campers cause they never get to use them and the kids choose other careers .

                          Comment


                            #28
                            I'm a 2nd generational farmer, my parents picked up and left one farming area and started farming in another area.

                            My parents slowly bought a 1/4 at at a time. Our mixed farm grew slowly with out dated equipment and lots of hard manual work. My parents were extremely frugal and kept their debt load to a minimum.

                            My parent's frugalness was pasted down along with expanding slowly but surely. Newer and better equipment along with more land. More net income.

                            So when there was money left over from the farm it was put to work, off farm investments in real estate, stock market, and also off farm jobs. Anything was done to earn more income with the goal to prosper and independency.

                            The farm is a business and the money it makes can be put to work in any matter I see fit to improve my net worth.

                            Diversification with net income from the farm is the most important thing a farmer can do, it spreads the risk out. There is always two or three sectors pulling the load if one is hurting.

                            If you were to dissect the the majority of successful farms you would find that off farm diversification would be found in several areas.

                            Comment


                              #29
                              Originally posted by foragefarmer View Post
                              I'm a 2nd generational farmer, my parents picked up and left one farming area and started farming in another area.

                              My parents slowly bought a 1/4 at at a time. Our mixed farm grew slowly with out dated equipment and lots of hard manual work. My parents were extremely frugal and kept their debt load to a minimum.

                              My parent's frugalness was pasted down along with expanding slowly but surely. Newer and better equipment along with more land. More net income.

                              So when there was money left over from the farm it was put to work, off farm investments in real estate, stock market, and also off farm jobs. Anything was done to earn more income with the goal to prosper and independency.

                              The farm is a business and the money it makes can be put to work in any matter I see fit to improve my net worth.

                              Diversification with net income from the farm is the most important thing a farmer can do, it spreads the risk out. There is always two or three sectors pulling the load if one is hurting.

                              If you were to dissect the the majority of successful farms you would find that off farm diversification would be found in several areas.

                              Then it isn't really the farm that is successful its the other businesses...why drag down profit with a farm?

                              Comment


                                #30
                                Originally posted by bucket View Post
                                Then it isn't really the farm that is successful its the other businesses...why drag down profit with a farm?
                                Eye opening isn’t it? Ugh

                                Comment

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