Well thought-out questions: answers maybe
A recent email I received presents a couple of interesting questions and comments that are worth repeating:
Dear Mr. Oncken: Each week I look forward to your column in the “Wisconsin State Farmer.” I was raised on a dairy farm in Outagamie County, and although I did not become a farmer myself, I can relate to the many subjects you write about, as I have a continuing interest in farming and in rural life.
Usually I attend and enjoy Wisconsin Farm Technology Days when the event takes place within 150 miles or so from my home, and this year was no exception. The Ebert Farm is huge, to say the least, and it was enjoyable to see the farming operation first hand, although I must confess that I always look forward to the heritage farm equipment display. The Eagle feed cutter and Algoma chopper were among the machines that brought back memories. That probably tells you when I grew up! Does it make sense to go to FTD and then look at the past?
A family farm?
The Ebert Farm, although huge, is a “family farm.” However, going home east on state highway 54, I noticed a billboard on the left with the message, “Family Farms, not Farm Factories,” which prompted me to think of the Ebert Farm as a “farm factory” as well as a family farm.
I am not necessarily against large farms, as they may be the best way to succeed in the economic conditions of this time, and I know you, as well as other writers have stated that most corporate farms are family farms. In general, I think most non-farmers do not like the concept of “corporate farms.”
What I am driving at is that on the way home I began to think, “Even though these large farms are ‘family farms’, are they really?"
I know very little how these large farms are financed, but it seems to me that a family would not likely have the resources to finance such a large operation and would have to rely heavily on outside financing, presumably a bank. Let’s say, for example, if the farmer provides 20 percent of the financing, the bank would have to provide the remaining 80 percent. Obviously, my numbers are quite arbitrary. Maybe it’s a 40 - 60 arrangement.
Who owns it?
My point is that if a bank or other corporation provides the majority of the financing, isn’t it really a “corporate farm,” even though the farm family is technically the “owner”? I would think that whoever provides the most financing would also make decisions as to how the farm is to be run. If that is true, then isn’t the farm family merely carrying out the wishes of the entity providing the financing, and isn’t then, the farm family just managing the farm for the corporation? Is the farm really a “family farm”?
These are just some thoughts I had on the way home from FTD. No doubt you have more insight on this than I do.
Thanks Ralph and here are a few thoughts on the family farm issue. A family farm has many definitions. The current USDA definition of a family farm, “since 2005, is one in which the majority of the business is owned by the operator and individuals related to the operator by blood, marriage, or adoption...”
My guess is that most every full time farmer does regularly borrow money, thus has an ag lender - bank or farm credit - that provides operating funds on a revolving basis. That lender also will provide the family farmer with capital for major improvements such as a new milking parlor, remodeling a building or a new tractor.
How much money and on what terms depends on many factors and agricultural lenders often go by what is known as the Five C’s of Credit: Character, Capacity, Collateral, Conditions and Capital.
Not farm managers
No - ag lenders do not ever “manage the farm,” ag bankers tell me. “lender liability would be a major issue and we don’t have the time or expertise to be farm managers.“
True, most ag lenders have loan officers that work with borrowers in a advisory capacity and may serve on the farm management advisory team usually made up of family members and farm consultants that may include the veterinarian, nutritionist, crop consultant, attorney, A.I. rep, Extension agent and others.
Ag lenders sometimes will extend payment periods and terms during times of low farm prices in order to help the farmer “weather the storm” and remain viable. The dramatically low milk prices of 2000 - 2002 and 2009 saw many dairy farmers give up equity to remain in business.
I know of two cases where lenders had to actually manage farms very briefly: in both cases, the owners abandoned the operation and left the cows uncared for and the lenders had to find a way to feed and milk the animals - which they did.
Then there are farms that enter receivership and perhaps bankruptcy when the lender takes over the property temporarily until a manager is installed.
We often think about the money needed to build those huge mega farms and wonder how they exist but consider also that the small beginning farmer probably has little equity (ownership) in the farm and may carry a proportionally higher high debt load than his 1,000 cow neighbor. Yet both families have full management responsibility and are family farms.
Debt and farming go together
Yes, a farm can carry a big debt load and remain a family farm. Go back a couple of generations and you’ll see that many of our own family farms began with but a dream, ambition, hard work, a trusting banker and a bit of luck. Many of those former dairy barns now sit idle and empty as the family generations ran out and moved on, others are now multi-generation mega farms like Eberts and so many others. It’s still all about the family.
A second email: talk of FTDays.
In one of your recent columns you mentioned the future of FTD. I have some of the same thoughts. Since there are fewer and fewer farmers, will there continue to be enough farmer customers to attend?
It also seems to me that a farmers having interest in a new milking parlor or other large piece of equipment would be able to view such equipment personally through the respective dealer without attending FTD. It would be interesting to know how many combines or large forage harvesters, for example. were sold as a result of a customer attending FTD.
You are right. FTD is huge! Since my neighbor who attended with me had a pedometer, we determined we had walked about seven miles at FTD. Needless to say we were tired at the end of the day.
For non-farmers, Wis. Farm Technology Days is a good opportunity for people such as me who have an interest in farming, as well as ex-farmers, and even city people to connect or maintain a connection with farming. Other than through FTD or Breakfast on the Farm, how can most non-farmers actually visit a farm?
Best wishes, and I will continue to look forward to your columns in the “Wisconsin State Farmer”...Ralph Melchert. Seymour, WI
Thanks Mr. Melchert for an interesting and insightful letter. Keep reading.
John Oncken is owner of Oncken Communications. He can be reached at 608-222-0624, or email him at email@example.com.