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Sid Freeman is a sixth-generation farmer who's been working the land since age 3, when his grandfather showed him how to plant seeds. We asked Sid what his 50 years of farming experience have taught him about the ways to successfully make money as a farmer. He shared his top five tips with us.
Choose a Type of Farming
Get to know and understand just exactly what type of farming operation you want to have and why you want to have it. Do you want to have a large conventional farm that produces commodity crops, utilizing GMO (genetically modified organism) technologies and marketing your crops through world markets, or do you prefer a smaller organic-produce farm catering to niche markets in the local vicinity? The answer you come up with will determine the skills, acreage, equipment and techniques you'll need to employ if you want to be successful. You can make money with either choice if you know what you're doing and you're lucky.
Obtain the Necessary Knowledge
A college agribusiness education, especially one that includes financial accounting, is a great start, but if you don't come from a farming background, you need to learn about the people with whom you'll be doing business. It's very important to know who can and can't be trusted. Network with working farmers, members of farming associations and food processors to discover the ones considered trustworthy. For example, if you don't sell your crops to an honest and fair buyer, you could end up losing money rather than making a profit. If, as a young child, you are drawn to farming, by all means join the Future Farmers of America -- this organization is possibly the best preparation for running a farm successfully. FFA students have the ability to learn and gain experience in the many different skills that are necessary to become a farmer. I also recommend an apprenticeship period of two to five years after college before you try to start your own farm.
Understand Farming Finances
You need to understand how much it costs to run a successful farm and then obtain one or more sources of funding. A college agricultural program should teach you about farming finances. As a starting farmer, you can take advantage of low-cost loans from a number of sources, including county farm bureaus and the USDA Farm Service Agency. To earn a profit farming, you need to track your costs very closely and understand the price you must obtain to cover your costs. You also have to evaluate the cost/benefit of purchasing, say, a $30,000 tractor, which might make sense for a large farm selling commodity grains but may be harder to justify if you have a small, fresh-produce farm.
Control Your Risks
Some risks are controllable. You can diversify your crop selection risk by growing a variety of foods -- if one crop fails, perhaps another one will earn more than expected. My biggest crop is onions, and I always lock in my prices with the processor in the springtime. I never agree to sell more than 75 percent of my expected crop to the processor, just in case the crop comes in low. I'll sell the other 25 percent as fresh pack at the price available at harvest. I also sell some of my crops, such as sugar beets, to the local farm co-op, of which I am a partial owner. Some risks, such as droughts and floods, are not controllable, and that's where I'll buy crop insurance for 50 to 75 percent of the value of my expected yield.
Husband the Land Wisely
As a farmer, I know exactly how many seeds I've planted on each acre of land and how much each plant costs. I minimize costs by supplying only the inputs -- water, fertilizer, pesticides --necessary to obtain a full crop, no more. I do this by taking weekly leaf or root samples of each crop, sending it off to the lab for testing and adjusting my inputs accordingly. Farming is a low-margin business. Often, we sell by the pennies-per-pound and buy by the pennies-per-ounce, and you can't succeed unless you keep your costs in check. It's very costly in the long run to overfarm your land -- within a few years a disease might wipe out your crop. Observe recommended crop rotation practices and vary your seed from year to year. It's also costly to chase the "hot crop" each year. Run-and-gun farmers might do well in the first year and then find that prices have plummeted because of overproduction. These types of farmers often don't stay in business for long.
- Sid Freeman is the owner/operator of the 400-acre Sunny View Farm in Caldwell, Idaho. He is the president of his county farm bureau and president of the Idaho FFA Alumni Association. He has two sons who plan to become farmers.
Based in Greenville SC, Eric Bank has been writing business-related articles since 1985. He holds an M.B.A. from New York University and an M.S. in finance from DePaul University. You can see samples of his work at ericbank.com.
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