I currently teach high school science and my wife and I are considering buying a farm from my in-laws. They raise hogs for Cargill and are about to lose the contract on their farm (about 280 sows) due to substandard production. I worked on the farm for a year, on a "bartering" basis - I worked and they payed for part of the house I built, before starting to teach this past fall, so I know what the requirements are for running the farm. I began looking for a teaching job because my wife and I couldn't live on her salary alone. I was also displeased with not being able to make more of the decisions about the monetary aspect of farm management, even though I was doing most of the work that made money. However, I did not leave on unfriendly terms by any means. Now we are looking at going into debt, probably somewhere in the neighborhood of $175k to buy the barns and 65-70 acres and enough equipment to spread manure. The farm should pay for itself in 10 years, maybe sooner if I can increase production and start selling some cattle, vegetables, etc. as well. My goal is to work at home on the farm anyway. I am torn between doing this now or continuing to teach, try to save money, and work into full-time farming slowly. My in-laws are both in poor health (this is the reason for the low production and contract problems)and have no way to pay for the place, unless they sell some other property. Our property joins the land the hog farm sits on, so we could conceivably end up with a nice place after the farm is paid for. What do you think? This would be a huge debt load and a lot of responsibility. However, my wife and I are running the place for the most part as is and holding down jobs off the farm. It might actually give us more time to enjoy life if I didn't have to go to work and then come home to work.

-- nmays (mays@raptor.afsc.k12.ar.us), April 17, 2000

Answers

Response to dive in head first?

That sounds like a tough nut to crack considering the price of hogs last summer.

-- Hendo (OR) (redgate@echoweb.net), April 17, 2000.

Response to dive in head first?

You have to make your own decisions -- and accept the consequences (that's what we all learn as we grow up, anyway). Personally, I wouldn't go into that much debt, expecially with the economy so unsteady right now. And it sounds like "factory farming"? Would probably be wiser to go slow, on a pay-as-you-go basis, rather than getting into bondage to the bank. That's why so many farmers get into trouble, and can't make a go of it. And was just reading something (can't remember where) about the relative nutritional values of food raised the old-fashioned way vs factory farmed -- I was surprised at how much difference there was in tested nutrients, because the "establishment" tries to tell us that there isn't any difference (i.e. between pale, runny store-bought eggs and bright yellow-orange farm-fresh -- never did believe THAT one!!). So I would have a hard time reconciling selling production-lot pork. Sorry. But you really do have to weigh everything and come up with your own answers.

-- Kathleen Sanderson (stonycft@worldpath.net), April 17, 2000.

Response to dive in head first?

If you are already running the farm, I don't see why you can't do this. The main thing of course is to pay off the debt as soon as possible. Make sure that you have a market for your other items before you get into selling them. This can really kill you. Make sure you know all about the financial situation, how much, how often, what the average income is, and make sure that you can pay even if you have a bad year or three. All common sense, but I would probably do everything I could to keep the land in the family, simply because family is so very important for me. annette

-- annette (j_a_henry@yahoo.com), April 17, 2000.

Response to dive in head first?

Just a few thoughts...175K is alot of hogs, even if you diversify with cattle and veggies, etc...that's a bunch of money and hog farmers got lousy returns last year...so, tell you something you don't already know...These are your in-laws, right? So, why do you have to purchase the property from them in a lump sum? I like the way the Amish do it..in stages..It's alot cheaper to simply build on an addition for the older folks and lease-purchase the farm from them.You run the farm and all the profits, while they get an income and stay around the younger folks who look after them.Obviously that only works if they already have paid off most of the farm.If not, and you are looking at going into that much debt on your own, I'd say grit your teeth and walk away from it.As one who has just now at 52 am debt-free, I wouldn't recommend a big debt like that for anybody.You sure sound like a go-getter..whatever you do ,much luck to you !

-- Lesley Chasko (martchas@gateway.net), April 17, 2000.

Response to dive in head first?

One of my uncles finally decided this year to make sausage out of his brood sows and sell his boars, and get out of the hog business. He raised em the old fashioned way, grazing on pasture, with grain supplements. In 98 and early 99, he was selling market hogs for 9 cents a pound!!! His farm was paid for already, or he would have lost it. According to him, it cost at least 30c/lb in feed and associated costs, not including labor. Well, if he hadn't had cows to fall back on, he'd a gone under. They ate lots of pork last year. Paid no taxes. Ha! you have to make money before you can pay taxes.

Personally, I would have a hard time borrowing 170k and trying to pay it off in 10 years. Servicing the debt alone would be tough. That is, if Cargill pays 'market' prices for their hogs. There's not enough profit to even pay minimum wage. I like Lesley's idea of making arrangements with the inlaws, paying a percentage each year, and taking care of them. That's the only way most folks can make a living on a farm. Inherit. Otherwise, the debt service takes all the income.

You have some hard choices ahead. I inherited my land, after working seasonal work in Alaska for 'cash income' and working the rest of the year for my folks. I did whatever they needed done. I quit my job to take care of one of them. They're both gone now, and the bulk of the arable land went to me. There's no way I could have bought this much land and covered the debt load by farming and ranching. good luck...

-- phil briggs (phillipbriggs@thenett.com), April 17, 2000.

Response to dive in head first?

Boy, this is a tough one! What I do is make a list of Pros and Cons. Weigh the importance of each item and then prioritize the lists. Then pray, pray, pray. If it is the right thing then everything will fall into place perfectly. Also, I've heard a man say that he makes all his really important decisions walking through a grave yard. It puts things into perspective.

The lease-purchase idea of the Amish sounds like a good idea if it would work out. Do your in-laws need the money now, up-front to save the farm?

Keep us posted. We want to know what happens.

-- Vaughn (vdcjm5@juno.com), April 17, 2000.

Response to dive in head first?

My first thought is, hang onto your job! There is nothing like a pay check zeroing in when you have to meet payments on a debt or a mortgage. Also, with your job you doubtless have some nice benefits such as health insurance and a retirement plan, plus as a teacher you have some nice vacation times. Also, science teachers are rare! Please do not discount the service you are contributing to students -- the future leaders of our country.

My second thought is, if the parents are having debt problems and have to sell, a good thing to look into would be the possibility of a GIFT to you and your wife of part of the land, which could be of benefit in reducing the tax liabilities they have, plus no doubt they would want their child to have the land after they died. Now I am not saying all the land -- but part of it.

Then you would have collateral to take out a loan on the rest of the land, or you could, as suggested, make a lease-purchase. This way the parents could have the interest instead of the bank.

There are some very adroit financial strategies in this sort of thing which are not commonly known, since they are employed by entrepreneurs who don't give up their secrets easily, but would be well worth learning about!

Also as suggested, hog-farming has had some real problems lately -- of which you are no doubt more than away -- so you will surely want to consider diversification. Perhaps you could put up a turkey or a broiler house and sell poultry on contract? Start a community garden (good way to use up all that old manute!) or a composting operation in cooperation with a nearby city leaf and bagged grass operation?

You want to save the old folks from going down the tubes and you want to have your own land and home -- that's understandable! But even though you have observed the mistakes they made, the economy is constantly changing as are other conditions, so my first instinct is to advise you to keep the birs in the hands -- your paying jobs! -- and then to explore the creative profit-making possibilities here -- for you and the in-laws -- so you all have a win-win solution!

And contratulations on your great opportunity! Not many people are as blessed as you!

-- Elizabeth Petofi (VA) (tengri@cstone.net), April 18, 2000.

Response to dive in head first?

I need to clarify the nature of this business a bit more. First, since this is contract production, growers are paid a flat rate for each hog shipped, $10.50 each. For instance, a while back when hog prices went to 9 cents per pound, my folks still got their $10.50 for each hog they shipped. Cargill took the loss and this was proabably a tax write off for them - they make plenty on their other businesses; feed, seed, fertilizer, steel, etc. Secondly, I have talked to our banker since first posting and found out that they don't finance farms as old as ours anymore, so my wife and I borrowing 175K to buy the farm is out of the question. The only thing we could do is an owner-finance, since Cargill doesn't allow leasing. In this case, the note would still be in my in-laws name and would be paid of in Aug. 2006. Our family would I guess have to draw up a legal agreement which would outline the terms of the purchase, and at the end of 6 years (rather than 10) we would have purchased the farm for the amount the in-laws still owe on it (much less than the 175K I mentioned earlier). My decision, assuming Cargill would grant a contract to me, is do I want to raise hogs for the next 6 years. I don't really like farming this way. It is technically a "factory" farm, I suppose, even though it is pretty small - 280 sows - when compared to some of the mega-farms in Missouri, Iowa, etc. I would have to quit teaching because there is so much to do in the breeding barn and in the farrowing house, and to keep a contract we have to produce 19 pigs/sow/yr. Much of the work is mundane and tedious and would require a strict routine and rigorous management on my part, but if I could stick with it we could have a nice place paid for in about 6 years time, and over the 6 year period I can be working toward a diversified farming career selling cattle, maybe pastured poultry, perhaps some vegetables. I could make a terrific greenhouse out of one of the hog barns. There would also be plenty of room for hay and equipment storage, and I could build a good woodworking shop for projects for wintertime income. I know this decision is entirely up to my wife and I, but I appreciate being able to air my questions and concerns among folks that think similarly to me. Thank you for each response so far, and please lift the decision I have to make to the Lord in your prayers. May God bless each of you.

-- nmays (mays@raptor.afsc.k12.ar.us), April 19, 2000.

Response to dive in head first?

Would you still be able to pay for the farm if you got rid of the hogs completely and kept your current jobs? If so, you could start doing all those other things you mentioned without having the hogs to worry about. Or maybe keep a few breeders and start raising pastured pork? Could sell that by word of mouth and local ads and get a lot more per pound than the wholesale price, if you've got enough land to do it. Your expenses would go way down, too, as pigs do better on pasture. Have you seen mags like the stockman grassfarmer, and other websites on raising grassfed meat (and eggs)? There is a lot of good advice there, and a lot of people making a go of it in spite of charging premium prices!!

-- Kathleen Sanderson (stonycft@worldpath.net), April 19, 2000.

Response to dive in head first?

Kathleen, SGF is a great magazine. It is certainly chock full of good ideas. My concern in going this route is ensuring that I have enough $ to make the $20000/yr payment the note is set up on right now. According to the banker we can't redo the note without making some radical changes, i.e. refinance for say 20 years. If the farm stays in business, it will probably have to stay the way it is at least for couple of years. Maybe by that time I can have a market for some other "specialty" products. Thanks for helping brainstorm.

-- nmays (mays@raptor.afsc.k12.ar.us), April 19, 2000.