Setting Realistic Goals

It’s nice to talk about “old-fashioned” farming, ploughing with draft horses, and all the rest.  However, it takes some knowledge of farm history to understand the different expectations that “old-fashioned” farmers need to have.

Let’s take corn production as our example.

In America, until around 1930, farmers produced about 12 bushels of wheat and 30 bushels of corn per acre of land.  If a bushel of wheat has a value today of $6.60 per bushel and of about $5.00 per bushel, meaning that farmers produce $230 of wheat and corn per acre of land each year.  In the chart below, notice that the yield of corn was stable before the tractors arrived.


Just to have some fun with numbers, if we took $230 and multiplied it by 30 years, 1 acre of land would be worth $6900.  I purchased 25 acres for $100,000 which means $4,000 per acre, which is obviously a potentially profitable investment in the future, once production begins (scheduled for 2015). Some will fuss that a mortgage brings interest with it, but it’s better to consider the costs of buying land as a separate matter of business from the farm.  Interest is tax deductible and is a temporary cost  that I like to think of as the “opportunity fee”.  If I can pay off that interest to obtain the land, my children will inherit 25 acres of land, which will be a gift of $207,000 over the next 30 years…and I’ll be dead.

Anyway, fast forward to 2013, and we find that modern commercial farmers are producing 40 bushels of wheat and 150 bushels of corn per acre!  That’s over $1000 per year per acre.  That, of course, assumes all of the modern farming machinery, pesticides, fertilizers, etc.

Most small-scale farms should expect yields closer to those of 1930 and budgeting should be based on those numbers.  Expenses will be much cheaper than modern production expenses, so the lesser yields will likely cancel out.

This entry was posted in Farm Economics. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s