How many acres to make a living

bob charles

bbam wrote: »

Here's one..
Came a farm for sale nearby, very convenient to me..
40 Acres with newish slatted unit fit for about 80 cattle..
Land is good enough and wouldn't require much work...
Spoke with the auctioneer and €270,000 would buy it...

Where would you go to make a modest living of it..??

well 270k @ 6.5% interest is 17,550 a year to cover the interest. shed is worth say 40k so that values land at 5750 an acre. If what you consider good land and what I consider good land is the same I would consider that an okay price to deal at

funny man

How long is a piece of string?

bbam

funny man wrote: »

How long is a piece of string?

Never mind the string... the damn rope is impossible :rolleyes:

Juniorhurler

bob charles wrote: »

well 270k @ 6.5% interest is 17,550 a year to cover the interest. shed is worth say 40k so that values land at 5750 an acre. If what you consider good land and what I consider good land is the same I would consider that an okay price to deal at

I know you need to factor in interest hikes but 4.5-5% is kind of about where its at now. Interest will also drop as the capital does and is therefore averaged out over the life of the loan so it won't be near that figure. Also the most you could borrow for that is 70% of 270k ie €189k which over 15 years is about €19-€20,000 per annum off the top of my head.
If you had €81,000 lying idle you could have a go at it as you'd defo keep at least 30 suckler cows on even poor land. 30 autumn calved weanlings at this years prices is probably about €27,000. If there is even low value entitlements, say €150 per hectare thats €2,500 plus another €2,400 for scws. Your looking at abou €32k income there all going well. I know it doesn't all always go well.
If you already are farming and are set up with machinery your expenses will be minimal. That parcel sounds like right value.
Land is making about €10-€12k per acre for anything around here.

Joe the Plumber

Juniorhurler wrote: »

I know you need to factor in interest hikes but 4.5-5% is kind of about where its at now. Interest will also drop as the capital does and is therefore averaged out over the life of the loan so it won't be near that figure. Also the most you could borrow for that is 70% of 270k ie €189k which over 15 years is about €19-€20,000 per annum off the top of my head.
If you had €81,000 lying idle you could have a go at it as you'd defo keep at least 30 suckler cows on even poor land. 30 autumn calved weanlings at this years prices is probably about €27,000. If there is even low value entitlements, say €150 per hectare thats €2,500 plus another €2,400 for scws. Your looking at abou €32k income there all going well. I know it doesn't all always go well.
If you already are farming and are set up with machinery your expenses will be minimal. That parcel sounds like right value.
Land is making about €10-€12k per acre for anything around here.

What about stamp duty?

A stocking loan?

Consumables - fertiliser, vets, nuts, plastic, etc, etc.

you would have to subsidise the repayments from other sources.

You'd get a serious house in dublin that would rent for 2k a month and no calving jack needed.

But sure we would'nt be happy doing that.

funny man

Juniorhurler wrote: »

I know you need to factor in interest hikes but 4.5-5% is kind of about where its at now. Interest will also drop as the capital does and is therefore averaged out over the life of the loan so it won't be near that figure. Also the most you could borrow for that is 70% of 270k ie €189k which over 15 years is about €19-€20,000 per annum off the top of my head.
If you had €81,000 lying idle you could have a go at it as you'd defo keep at least 30 suckler cows on even poor land. 30 autumn calved weanlings at this years prices is probably about €27,000. If there is even low value entitlements, say €150 per hectare thats €2,500 plus another €2,400 for scws. Your looking at abou €32k income there all going well. I know it doesn't all always go well.
If you already are farming and are set up with machinery your expenses will be minimal. That parcel sounds like right value.
Land is making about €10-€12k per acre for anything around here.

Thats the best bit of creative accounting i've ever seen:D.
Firstly your 81,000 is worth €3442.5 on deposite before tax, you should never do projections on the best price scenario, value of entitlements may be short term (5 years) and scws (next 2 weeks will decide) and on the cost side just over €500/cow and thats a spring calving one that's €15000 for all costs before tax and then repayments after that from an income of (you say 32k thats 1,122/calf allowing for 5% mortality thats an exceptional price. Maybe i'm been over critical of the figures but i'd like to see numbers crunched in a more realistic manner.

Pharaoh1

Juniorhurler wrote: »

I know you need to factor in interest hikes but 4.5-5% is kind of about where its at now. Interest will also drop as the capital does and is therefore averaged out over the life of the loan so it won't be near that figure. Also the most you could borrow for that is 70% of 270k ie €189k which over 15 years is about €19-€20,000 per annum off the top of my head.
If you had €81,000 lying idle you could have a go at it as you'd defo keep at least 30 suckler cows on even poor land. 30 autumn calved weanlings at this years prices is probably about €27,000. If there is even low value entitlements, say €150 per hectare thats €2,500 plus another €2,400 for scws. Your looking at abou €32k income there all going well. I know it doesn't all always go well.
If you already are farming and are set up with machinery your expenses will be minimal. That parcel sounds like right value.
Land is making about €10-€12k per acre for anything around here.

I don't think creative accounting goes far enough - methinks (and please don't take offence juniorhurler) that this is from the Walt Disney school of business plans. It is not an uncommon thought process for many of us though.
I was discussing the economics of cattle farming with a neighbour last week and when I revealed that the gross margin on my 30 summer grazed cattle was 400 euro per head his immediate reaction was to say that I'd be mad not to rent another 25 acres and double my numbers for next year.

Juniorhurler

Pharaoh1 wrote: »

I don't think creative accounting goes far enough - methinks (and please don't take offence juniorhurler) that this is from the Walt Disney school of business plans. It is not an uncommon thought process for many of us though.
I was discussing the economics of cattle farming with a neighbour last week and when I revealed that the gross margin on my 30 summer grazed cattle was 400 euro per head his immediate reaction was to say that I'd be mad not to rent another 25 acres and double my numbers for next year.

No offence taken (from any of the posts above).
I have bought land on three different occasions. I have never bought it without having to subsidise payments from elsewhere, be it the day job or earnings from other land.

I sold 46 weanlings this year, well some of them were 13 months old (due to being locked up with TB) They left €49000 behind them minus costs.
My current sfp is a lot larger than I mentioned, €550 per ha roughly, and I managed to cover all of my costs from this and the scws.
Cows never get meal.
Weanlings get creep for 6 weeks.

I do agree that my costings above were very very basic but tbh even if your costs ran at 50% you could pay for most of that land out of itself. If you want to expand you will have to take the hit and supplement the payments from elsewhere imo.

Juniorhurler

funny man wrote: »

Thats the best bit of creative accounting i've ever seen:D.
Firstly your 81,000 is worth €3442.5 on deposite before tax, you should never do projections on the best price scenario, value of entitlements may be short term (5 years) and scws (next 2 weeks will decide) and on the cost side just over €500/cow and thats a spring calving one that's €15000 for all costs before tax and then repayments after that from an income of (you say 32k thats 1,122/calf allowing for 5% mortality thats an exceptional price. Maybe i'm been over critical of the figures but i'd like to see numbers crunched in a more realistic manner.

Half of that interest goes on tax.
I thought that the entitlements were all going to go to an average value towards 2019?
This should be €270 ha which would be an increase on my above post.
Yes my calculations were very basic but as I have already replied I know this and don't mind supplementing payments for land once its at an acceptable level.

bob charles

One of the small farms I rent is a 40ac farm (70% under maize and wheat) with slatted shed for 60 cattle, its a basic shed but a shed none the less, for 2.5% of the farms value

sinewc

Pharaoh1 wrote: »

Unfortunately the size of your SFP (and DAS, REPS etc..) is far more important than the number of acres at the moment although it may not always be so. The guy with 100 acres and a 30k SFP is in a better position than his neighbour with 200 acres and 0k SFP.

Well managed dairy is profitable at current prices and tillage on owned land will probably make a small margin.
Teagasc figures show that with a few exceptions beef is essentially an unprofitable business.
Anyone who read the article on the Kepack fattening enterprise in the Journal a couple of weeks ago will realise this. A bit shocking really when you understand the advantages of scale and (apparent) efficiency that this business would have.
Beef farmers can always trumpet a pretend profit by ignoring a number of costs that should be included in the calculation. I've done it myself on occasion to make myself feel better.

hi,
i am a beef farmer and i fail to see where i have left out any costs that should be included. I am not in the business as a pastime. What are these costs you refer to?
si

funny man

Juniorhurler wrote: »

Half of that interest goes on tax.
I thought that the entitlements were all going to go to an average value towards 2019?
This should be €270 ha which would be an increase on my above post.
Yes my calculations were very basic but as I have already replied I know this and don't mind supplementing payments for land once its at an acceptable level.

Deposit interest 27%
income tax 20%

at the moment my take on the proposals was status-quo till 2014-2015, then an area payment based on 2014 and after 2019 the figure of €70/hectare was mentioned that would be €28/acre. It wasn't that your calculations were basic it was the way you justified the purchase by gross margin and the only cost you mentioned was

If you already are farming and are set up with machinery your expenses will be minimal

.

the point i was making is it costs money to keep a suckler cow, €500 was the figure that i heard maybe you can disprove this figure and do it for less that would give you an advantage. With other variables like interest rate rises, beef prices, rising input costs and uncertainty on direct payments it would make this more of a gamble than an investment.

I do agree that my costings above were very very basic but tbh even if your costs ran at 50% you could pay for most of that land out of itself. If you want to expand you will have to take the hit and supplement the payments from elsewhere imo.

I'm afraid not because if the farm makes a profit you have to pay income tax on that profit at 20%/41% thats after interest and before capital, so take 28 wealings @€;800 (more realistic long term) €22,400 take off 15,000 costs leaves €7,400 plus €2500 sfp leaves €10,000 less €2000 income tax gives you €8000 for capital repayments on a 15 year loan €270,000 €18k/annum approx

Pharaoh1

sinewc wrote: »

hi,
i am a beef farmer and i fail to see where i have left out any costs that should be included. I am not in the business as a pastime. What are these costs you refer to?
si

All I can say is that in my experience some farmers are inclined to think of profit as their margin less the typical variable costs such as feed, fertiliser, veterinary, fuel etc..
IMO the likes of the Journal reinforce this type of thinking constantly quoting terms like gross margin and in the case of winter finishers something they call "margin over feed"
Obviously costs such as loan interest, fencing and building repairs, machinery repairs, accountancy fees, all types of insurance(public liability and employers liability), depreciation, motoring costs including apportioned maintenance, tax and insurance charges, electricity, telephone, hedgecutting and all farm related purchases should be included in the profi figure calculations.
In my case I reseed about 10% of my land each year and I regard this as a maintenance cost for the land as opposed to an investment.

I'm not saying it is impossible to make a profit by including all of the related costs and more luck to those that can.
But I would say that some of the farmers who have told me that they made "great money" on cattle farming over the past few years would'nt be telling the revenue the same story once their accountant has finished with them.
Finally I am amused when I am in a queue in the local merchants of the number of farmers who throw a couple of bags of ration or a bucket lick in the boot of the car, pay in cash and don't even bother with a receipt. Even my silage contractor tells me he still gets a fair amount of unreceipted cash from mostly older smallish farmers.
Maybe these guys are selling stuff for cash and want to keep their turnover down but most of them are just kidding themselves as to the true level of their outgoings.