Want To Get In On The Farm Boom? It'll Cost You $7 Million
It's harvest season and Kent Picht, a long-time farmer in Iowa Falls, Iowa, has just spent the day cutting and hauling in corn from his 800-acre farm. He's tired, but he's psyched. Last year he earned more than ever, and this season's harvest isn't far behind. The weather's been great, yields are up, production costs are reasonable, and grain prices are high.
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"Things are pretty rosy," he says.
Defying today's economic odds, the U.S. agriculture sector is thriving. A few months back Joe Glauber, the USDA's chief economist, said farm incomes have increased over the past eight years to the highest rate since the 1970s, even adjusting for inflation. Family farms in the commercial category (with annual sales of more than $250,000) are doing particularly well. Among those operations, median incomes were up by double digits in 2010 to $78,000 from about $70,000 the previous year.
So why isn't everybody rushing to Iowa to set up a farm and get in on the boom?
"Well, it's not that simple," says Jeremy Weber at the USDA Economic Research Service.
To succeed in farming, you have to go in big. No half measures here. Small ag operators are losing money — as they typically do, even during economic expansions. The halcyon days are reserved for large farmers in the commercial category, like Picht.
To go big, you'll need ample cropland to produce enough volume to cover your fixed costs. At current land prices, to get 800 acres you'll need $6.4 million.
Then there are the up-front costs of a tractor (about $100,000), a combine harvester (about $150,000) and other equipment, and of course the annual costs for seed ($60,000), fertilizer ($120,000), herbicides ($24,000), as well as crop insurance, maintenance, fuel, and property taxes. For a farm the size of Picht's and using current prices, yearly production costs—excluding land, equipment, and the farmer's labor time—total about $320,000.
But beyond all the spending, an aspiring farmer needs know-how, which isn't easily acquired. Picht has been tending his fields for almost thirty years and comes from a long line of farmers. He has a thousand skills that are learned only over time, only on the farm. He knows what the weather means, how much to plant, how fast to harvest, and how to eradicate pesticide-resistant root worms. He has the skills and concentration to fix his combine when it dies in the field and he has to get the load in before the rain clouds start dumping.
"It's not straightforward how to be profitable," Weber says. "People don't realize how much human capital goes into farming."
Even if the out-of-work city-slicker-cum-farmer secures a massive credit line, the knowledge gap is probably just too great. We aren't likely to see a back-to-the-land movement from the urban unemployed any time soon.
Ultimately, nothing is recession proof. Kent Picht has seen bumper crops these past few years, but if the weather turns or commodity prices sink, the bounty would stop. Massive flooding in western Iowa this year destroyed crops, leaving those farmers hamstrung. By contrast, producers with a healthy corn haul like Picht will earn about $5.50 per bushel. But, Picht says, "If everything took a crap and corn went back to $3 a bushel, then I'd be in big trouble."
Heather Rogers is an intern at Planet Money
Source: NPR
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