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Lubbock, Texas | unfortunately I don't see people learning from their mistakes because they repeat the same mistakes over and over
farming only allows the economies of scale to grow for so long before you can find yourself getting little economy of scale or maybe with negative economy of scale
the main 2 issues I see with operations like this is they try and be too large in too small of a geographic region
I think it makes much more sense to try and have a few thousand acres in south Texas, a few thousand in west Texas, a few thousand in Kansas, then some in the I states then into MN or MI or SD
it would be more like a custom cutter so you are moving equipment and people as the seasons move north and then back down south....of course there is the issue of learning to farm in those areas and their crops ect
but when you try and farm 30K to 40K acres in one state you end up at a point where the time to go is NOW and the time to go NOW is the time for 30K to 40K acres......so you have to gear and man up for that GO time NOW and then when that slows down you have a large amount of equipment and people sitting around waiting to GO again
the second issue I see is they mistake the seed, fertilizer, grain elevator, trucking, and fuel business as "farming"
if you are buying an elevator to get a larger margin on your farming crops that is a good idea.....but now you are not making a "farming" margin you are making a grain elevator profit.....if you are "trading your harvest 7 times" that is NOT "farming profits" that is GRAIN AND COMMODITIES PROFITS.....PERIOD
if you think hey I made X dollars trading those contracts and then I made .45 cents per bushel because I own the elevator so now I can pay more in rent per acre then YOU ARE A FOOL.....because your FARMING DID NOT MAKE THAT PROFIT.....your grain trading made that profit or your grain elevator made that profit or your wholesale fuel and fert and chemicals business made that profit.....NONE OF THAT has ANYTHING to do with how much rent you can pay per acre because NONE OF THAT IS FARMING
that is running a seed, fuel, chemicals, and fert business PERIOD
so over time because you think your "farming" is so much more "profitable" than everyone else you run your actual FARMING cost to the point of being STUPID HIGH....and then when you have a bad year, you can't "GO NOW" on 40K acres all within 200 miles of each other because of weather.....suddenly your FARMING operation SUCKS and it makes a HUGE LOSS.....and all that grain you were going to "trade 7 times" is NOT THERE......and the fertilizer ills you OWE YOURSELF are not being covered along with the fuel, chem, seed, and everything else.....and all those employees you have to "GO NOW" on 40K acres all right in the same general climate region are COSTING YOU MONEY NOW
your grain elevator is not moving as much grain because YOU are having a horrible year and your neighbors that have manageable acres that were able to "GO NOW"on most of it because they are not spread too thin chasing non-existent economies of scale are still having a poor year or an average year because the weather was still bad for them as well....so they pay slow, or default, or send less grain through your elevator, or buy less chemicals and fuel.....and your GRAIN, SEED, CHEMICAL, FUEL, and SEED BUSINESS that you called "farming" now does not have the money (imaginary margins on your "farming") to cover the stupid high prices you were paying for land and all the heavy amount of equipment you are sitting on to cover 40K acres in a 200 mile region with a very similar climate and all your labor to do that
AND those businesses that ARE NOT FARMING do not have a large reserve like most people that are actually in the grain, seed, chemical, fuel, and fert business do have because you have been using that reserve to pay stupid high rent, machinery, and labor cost and of course your actual farming has no reserves because you have cut the per acre margin to nothing based on the idea of making it up in volume and on your "other farming operations" that ARE NOT FARMING THEY ARE OTHER BUSINESSES RELATED TO FARMING
and you wake up BROKE and unable to pay yourself, your non-farming "farming businesses" and of course unable to cover your zero margin, stupid expensive, actual farming operations
the idea is sound right up to and until you start to squeeze the margins and profits on ANY of the operations that are NOT FARMING that you try and call farming (much less the actual farming) and after that where it all blows up is when you squeeze the ACTUAL FARMING OPERATIONS to negative and subsidize it with your NON-FARMING "farming" operations....then you have a horrible year in your extremely small (on a world scale) region and your neighbors/customers do as well.....and boom you are millions in the hole
no matter how big you get as a farmer....40K.....400K.....4m acres.....YOU ARE STILL A GLOBAL PRICE TAKER AND PRICE PAYER
fuel oil will only get so cheap for you as a farmer of ANY size period.....same with fuel, seed, chemicals, fert and the like.....and no matter the volume you can deliver of ANY crop.....you are a fart in the wind in the global supply.....so you WILL BE A PRICE TAKER PERIOD
and 100% of the MARGIN that you can cut out and capture from someone else by going into the fuel, seed, fert, chemical, railroad, elevator, trading, equipment business and ANYTHING else IS NOT FARMING PROFITS......YOU DID NOT BECOME A PRICE MAKER OR A PRICE SETTER....YOU ONLY CAPTURED MARGINS THAT ANY OF THOSE BUSINESSES CAPTURE WHETHER OR NOT THEY ACTUALLY FARM A SINGLE ACRE OF GROUND...and 100% of those businesses and 100% of your ACTUAL FARMING STILL NEEDS TO HAVE THE RESERVES ON HAND TO WEATHER THE STORM THAT WILL COME.....and the minute you cut out ANY Of that is the moment you put that aspect of your businessES in jeopardy and the minute you cut that margin down on ALL your businesses and your farming is the minute you will FAIL
Edited by rodrod5 11/23/2012 22:15
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a postive spin on the whole ILFF/Stamp farms controversy
