Loading...
The Rural Voice, 1981-05, Page 22ADVICE ON FARMING Buy /and, hang on, banker says A group of young farmers in the Blyth area held a meeting to discuss the problems of getting into farming. One of their main problems is the high cost of land. Many young people simply can't afford very much land. A banker suggested to the group that they should buy land regardless. He suggested that it was as safe (low risk) as government bonds. He noted that most of his highly successful clients were also large owners of land. The message was buy land and just "hang on." Inflation will look after you. Not everyone agrees with this theory. There are even some investors who wonder at the value of investing in government bonds. Since the early thirties this type of advice has worked with certain except- ions. Land, however, tends not to inflate at a uniform rate. Prices will jump in large amounts as a response to good grain and livestock markets. The last year 'or so, land has not been inflating too fast. High interest rates, tough beef and hog markets have reduced buying pressure on land. The guy who is just "hanging on" is getting nervous. If you're a potential farm buyer, keep in mind your requirement for operating capital. The farm isn't much good if you can't stock it, crop it and maintain your machinery as needed. Yob can usually refinance against land equity to get more working capital. Remember that this refinancing will cost you 18 to 20% interest. Is your land inflating that fast? If not, you're losing equity. Risk is related to how much money you owe. 1t your land purchase over -extends you financially and you get forced into several rounds of refinancing, you are assuming more risk. If you're buying land partly as a hedge against inflation, it should increase your security not de- crease it. In my opinion, a lot of young farmers have no choice but to limit their land buying. Their production units don't have enough profit to buy a lot of land. The cash flow requirements are just too Targe. In this area, land can be leased for 3 to 5% of its sale value. Ownership costs {itterest, principal, taxes and insurance) will require annual cash outflows of 15 to 18% (or more) of the land's value - at least for the first few years. If the heavy ownership cost leads you to refinancing against land equity, the requirements will PG. 20 THE RURAL VOICE/MAY 1981 increase due to the high cost of 2nd and 3rd mortgages. Land rental or share cropping agree- ments may be ttie only viable alternative for most young farmers. You might ask yourself. "If land is such a good, secure investment, why doesn't my bank own more farms - intentionally that is?" If you have the cash or can afford the payments, land will be hard to beat as an investment. If you don't fit that descrip- tion, you'd better look at other alternat- ives. An owned land base is essential to a viable farming operations. The young farrier may just have to develop his land base very carefully. [Perth County Farm News] In the r9^e to get on the land, don't forget tractor safety ManYfarmers are anxious to get out to work on the land and in their haste neglect tractor safety and machinery maintenance. "Tractor rollovers and tractor -related accidents account for more than one half of all accidental farm deaths," says Larry Swinn, public relations co-ordinator of the Farm Safety Association of Ontario. "Many of these accidents occur in early spring." "Too many farmers try to beat the gun by getting the tractor out on the land before the soil is dry," he says. "The end result is that they lose time pulling the tractor out of the mire." Attempts to pull the tractor out of the mud can also end in injuries and fatalities. With enough pull, an improper- ly hitched tractor can flip in less than two seconds. "There's only one way to hitch a tractor and that's from the drawbar," warns Mr. Swinn. In the spring rush, many farmers also neglect routine machinery maintenance. Failure to keep machinery in good repair can cause costly downtime during peak season and can also cause personal injury. "In the past couple of years we've become increasingly concerned about preventative maintenance," says Mr. Swinn. "An increasing number of far- mers are trying to get an extra year or two out of their old tractors and related equipment to, avoid buying new equip- ment. Older models need routine repair work or complete overhauls to operate safely." Mr. Swinn urges farmers to take the time to repair old equipment before the season begins. Order spare parts before they are needed because parts for older tractors may be difficult to find on short notice. Be sure to replace all safety shields before using the tractor. "Safe operation of tractors and farm equipment takes time, but not as much time as it takes to recover from injury or the financial Toss of downtime during the growing season." Market hogs down in US is thc turn in hog production at last coming? Recent reports from thc USDA point in that direction. The March 20th report says that hogs on the US farms arc down to 91 percent, breeding animals down to 89 percent and market hogs arc now 92 percent of the numbers counted a year ago. Farrowing intentions from December 1981 to August 1981 are also down by ten percent. The futures' market has already re- acted by increased contract %•alurc. It is still an historically high number of hogs. and with the heavier weights both in Canada and in the USA and an increase in beef numbers, price recovery will probably not be as sharp as was hoped last fall. While it won't make a dent in the pork supply. it is encouraging to know that a small shipment of pork has been made by an Ontario trading company to a Chilean importer. There are no trade restrictions on pork to Chile and the trading company hopes to make enough of an impression on the importer so that more and larger shipments will follow.