Non Equity Farmer

[Sheepwheat]

In every aspect of life you need to own something to be able to borrow money.

And even if you own things worth twelve times the ask, you still need income tax proof that you can repay. Even on a little loan. And that was just what I offered. Loan would have been for an amount about .5 % of my equity. No dice.

[LEP]

And even if you own things worth twelve times the ask, you still need income tax proof that you can repay. Even on a little loan. And that was just what I offered. Loan would have been for an amount about .5 % of my equity. No dice.

You say it was a small loan, .5% of your equity, but you didn't want to show the information on the whole operation. That was the issue. I have done several ventures , some small some bigger. But when I apply for credit it is always backed by the full picture of my operation.

If you wont share the whole picture don't expect them to feel real comfortable with you.

[Sheepwheat]

J

You say it was a small loan, .5% of your equity, but you didn't want to show the information on the whole operation. That was the issue. I have done several ventures , some small some bigger. But when I apply for credit it is always backed by the full picture of my operation.

If you wont share the whole picture don't expect them to feel real comfortable with you.

Well I offered them 12 to one equity. I offered them projected revenue, past revenue, a long term business plan, off farm income. They balked when I projected 350 to 400 dollars a lamb produced. No one sells lambs for that! Here are the market prices they said. I showed them proof that we do sell lambs for that. Well but what if the price goes down? Well, it doesn’t because I control the price I said. They could not wrap their head around this, so I see part of the problem being that in spite of what they say, they are only here to offer big loans to commercial, commodity producing farms. Farms that farm their way, their style, farms that are in hyper growth mode like the kid growing to 5000 acres in a few years. And only then if they are well heeled or have tremendous off farm income, or are co signed for. I think your right in why they said no. I see it as a lazy excuse to stifle new ideas that can change agriculture. But it still mystifies me as to how they have young farmers loans, women’s loans, 123 grow loans, Interest only loans for years. But when push comes to shove, they don’t helps stimulate new growth. They only help well healed growth. I get it to an extent. But I don’t to a large extent as well. Helps me understand the young neighbour's better though! Lol

Thankfully I don’t really care. We never needed the loan that badly I just mainly wanted our new company/business to have a credit history on its own, as it comes in quite handy for a lot of reasons. I am not a firm believer in envelope filing, or big pot filing. I want to track each entity and track them accurately and well. I guess I thought they would understand this??? I am 43 now. A proven track record of survival through some awfully lean years. I am certainly not going to ask my relatives to co-sign a loan. Even if this is the general course of action. So we pinched pennies and paid our own way.

Ahh farming!

[Marusko]

Own ZERO acres... Absolutely no way I can even begin to afford going rate around here.

Went to work in the patch right out of university, and started trying to save up to buy a few quarters. 1 opportunity came up in the 5 years I was working. I offered 25% above market on 3/4's and was BTFO by an outside investor.

There have been exactly ZERO other opportunities since then... Some land has traded hands, but it has been sold to long term renters of said land who are rather well healed and there is absolutely ZERO benefit to me long term to get into a bidding war on dirt they were renting.

Since then, land has appreciated somewhere in the neighborhood of 300%. Only avenue available for me to farm was to rent. Those that I've been renting off of, have ZERO desire to sell as they see nowhere for land prices to go but UP, so why not rent in the meantime and let their descendants decide whether to hold the asset or liquidate it.

That's rough. I'd be uncomfortable with rent only operation - I've always seen land ownership as the ultimate goal, providing stability and collateral, and a retirement plan. On retirement, what's your long-term plan? If you're not paying principal payments to have paid-off land some day, are you socking away money into investments, or just building cash? Hopefully you've been profitable enough lately to save beyond living expenses.

In hindsight, would you have bought land elsewhere just to have something? Like Jazz mentioned earlier, buy land far away and rent it out.

[jazz]

Helmsdale, owning at least home quarter is an absolute must if you are an active farmer. The security protection and land owner rights associated with that piece of land are huge and can be conferred to your decendents.

Nobody in Canada can f with your home quarter, not the bank, not the govt, not the protestors, not the natives. And your children can get the same protections if they decide to live there as well.

[foragefarmer]

I have taken out numerous loans and mortgages and have never had any problems getting them, as I always provided the information the lender required. If I'm not mistaken I'm going to them to borrow money.

I had solid business plans and the collateral right from the beginning which made it a bit easier every time.

I agree with lenders 100% on their borrowing requirements. The rules apply to everyone. I sure as shit don't want them lending out money to some pie in the sky business plan, because in the end lenders do get their money back to make up for bad loans and it comes out of the pockets those who full fill their obligations.

[jazz]

Sheep with respect, you may have gone about your lending application backwards. Always use an established business to fund a new venture. You wanted to keep your grain biz seperate and expand your other side with a more risky venture. You might be able to sell lamb for $400, but those are iffy local markets. Your grains are being sold into a massive market with basically instant movement and visible pricing. Just like owning stocks, the market cap and liquidity of the sector matters.

I one time asked the bank for a million dollar credit line to put in the stock market. banker was rolling on the floor. Shouldn't have told him what it was for.

[Sheepwheat]

I have taken out numerous loans and mortgages and have never had any problems getting them, as I always provided the information the lender required. If I'm not mistaken I'm going to them to borrow money.

I had solid business plans and the collateral right from the beginning which made it a bit easier every time.

I agree with lenders 100% on their borrowing requirements. The rules apply to everyone. I sure as shit don't want them lending out money to some pie in the sky business plan, because in the end lenders do get their money back to make up for bad loans and it comes out of the pockets those who full fill their obligations.

Wow, that was so encouraging. Pie in the sky business plan? Wow.

[helmsdale]

Helmsdale, owning at least home quarter is an absolute must if you are an active farmer. The security protection and land owner rights associated with that piece of land are huge and can be conferred to your decendents.

Nobody in Canada can f with your home quarter, not the bank, not the govt, not the protestors, not the natives. And your children can get the same protections if they decide to live there as well.

Working on it...

[helmsdale]

That's rough. I'd be uncomfortable with rent only operation - I've always seen land ownership as the ultimate goal, providing stability and collateral, and a retirement plan. On retirement, what's your long-term plan?

Land ownership certainly is the long term goal... I'm about 5 years too young. There were *a few* opportunities while I was in university. School chums that bought then, have made 4-5 times return on their equity. Guys that were 4 or 5 years older than I managed to get a start at a reasonable price out of college/uni.

Only other guys my age around here that are giving it a go, got significant financial help, or at least had family willing to lay paid for equity up as collateral. I'm in neither of those positions.

Long term, I hope my landlord relationships will provide me an opportunity to purchase some land outside my parents, but who knows. Being a landlord is all the rage these days when land values have vaulted by 25-50%/yr over the last decade.

Who knows where things go from here...

[Sheepwheat]

Land ownership certainly is the long term goal... I'm about 5 years too young. There were *a few* opportunities while I was in university. School chums that bought then, have made 4-5 times return on their equity. Guys that were 4 or 5 years older than I managed to get a start at a reasonable price out of college/uni.

Only other guys my age around here that are giving it a go, got significant financial help, or at least had family willing to lay paid for equity up as collateral. I'm in neither of those positions.

Long term, I hope my landlord relationships will provide me an opportunity to purchase some land outside my parents, but who knows. Being a landlord is all the rage these days when land values have vaulted by 25-50%/yr over the last decade.

Who knows where things go from here...

Yeah I hear you. While land prices here are not nearly so stupid as elsewhere, it almost never comes up for sale. Only land I came close to having a chance to buy was a wide open tender so the world could see. Usually the only ones who have a clue there is land for sale is the landlord and the tenant, or the greedy ones who run around the country offering to buy it every few weeks. Grateful I was able to buy it, or else I wouldn’t be able to be a farmer. Hard to compete with old money. I used to be bitter and a bit resentful, but that doesn’t help. I got past that stage finally, and just have to be different which is fine cuz I was born at least a generation too late. Lol

Good luck I feel your pain and frustrations.

[brs]

Land ownership certainly is the long term goal... I'm about 5 years too young. There were *a few* opportunities while I was in university. School chums that bought then, have made 4-5 times return on their equity. Guys that were 4 or 5 years older than I managed to get a start at a reasonable price out of college/uni.

Only other guys my age around here that are giving it a go, got significant financial help, or at least had family willing to lay paid for equity up as collateral. I'm in neither of those positions.

Long term, I hope my landlord relationships will provide me an opportunity to purchase some land outside my parents, but who knows. Being a landlord is all the rage these days when land values have vaulted by 25-50%/yr over the last decade.

Who knows where things go from here...

Only part is yes equity is 4 to 5 times more now then it was 4 to 5 years ago but equity still doesnt pay the bills. On paper yeah I would have allot more borrowing power then I did 5 years ago but feel i need to take it slow. Not much fun not being able to sleep at night or always am told dont want to loose what u already have.

[makar]

When i started farming had no credit rating, bank would not loan me five cents because i paid cash, even if i had the money, some yelling later gave me the loan witch i paid the next day, they made five bucks, closed my account and havent been back since, mind you since i started farming havent seen cash since but built a mini empire. That rbc never saw a penny of. 1979 wasnt fun either.

[furrowtickler]

Only part is yes equity is 4 to 5 times more now then it was 4 to 5 years ago but equity still doesnt pay the bills. On paper yeah I would have allot more borrowing power then I did 5 years ago but feel i need to take it slow. Not much fun not being able to sleep at night or always am told dont want to loose what u already have.

Yup , still need cash flow to pay bills . That not so easy these days as net returns are diminishing with rising input and operating costs, land tax’s and now carbon tax’s .
I read something the other day that was interesting........
“if your in a room of 10 farmers you better figure out how to be a lower cost producer than at least 8 of them or you won’t make the next 8-10 years”
Not sure if that will play out but makes one think of high input farming and the very high risk ...
crop prices / net returns no where near keeping up with costs in a lot of areas.
A lot of that has been pointed out in discussions here .
Farming all rented land carries a huge risk with today’s rents , a sharp pencils quickly get erased by Mother Nature.

[woodland]

I'm going to say something unpopular, and it could just as easily apply to my own operation, and many others. On a previous thread I gave this producer credit for starting from scratch, not faulting his management, but maybe the timing and location are the problem.

Perhaps 5 years of weather disasters in a row, may indicate that the previous decent years were the exception, and these 5 years are back to normal.

I'm a couple of hours south of Evansburg, but about as close to the western edge of farmland as they are. So we probably have very similar challenges, low heat units, short growing season, excess water more often than not, grey wooded soil, varied topography, bush, wildlife, if anyone closer to the area knows otherwise, please correct me. I have driven through the area often, and looks like it would be a very challenging area, and I don't think it has been traditionally broadacre crops, likely for good reason. A quick look at google maps looks like when it is wet, it is really wet, lots of bush remaining, or freshly cleared, water runs, low areas and obstacles.

We had a number of years with extended growing seasons, which made a lot of us on the fringes think that was normal, and we get offended at the suggestion that global warming didn't permanently make us the new banana belt.

I don't know how much realistic research the banks use to judge climate/weather risks when lending money to farmers. But just maybe they look at 5 years of disasters, and the historical land use, and the actual climate trends ( not the ones Chuck imagines are occurring), and have established that this is too big of a risk, and with no land for collateral, he would be the first to feel the pinch. If anyone else who owns land wants to risk, or burn their own equity to continue to fight mother nature, the bank will gladly agree.

And that is part of the process of low prices curing low prices. One way or another, the least profitable or most risky acres will come out of production. Every acre looked profitable at the highs. And in a disasterous year like 2012, prices still made up for production problems.

I’m about 45 minutes SE of Steele (the fellow in the article) and my buddy is next door to him. The last 5 years have been not too kind for growing grain or dry hay here. Last year my buddy had a quarter (150 acres) of canola that drowned out and only filled the lead trailer of his super b. This area of muskeg and hills is best suited to cows or mixed farming at best from uncooperative weather and a very short season. There is under half of the cows compared to 15 years ago since a lot of guys got out and others would rather grain farm and take the winters off. I don’t see this trend changing anytime soon as most guys would rather quit than go back to cows.

Profitability while not great is still positive. Equipment is still getting fixed (not upgraded), land payments and rent are current, and the family can still get away once in a while. My buddy is still waiting on crop insurance to measure his bins and they told him that 75% of producers in our area are in a claim position (low yield or snowed under crop) which is higher than I expected.

Crop insurance has saved a lot of folks out here over the last few years (us included) and helped with the conversion of grass to cereals and canola due to better coverage. I just got this years pasture insurance renewal and coverage/premiums went up by 50% which I think is great. It closer resembles the value of lost grass during a dry year which is probably overdue for us.

Looking forward to spring here ............. Bring it on🍀