Re: How to get rich selling watermelons -Reply
Greg & Lei Gunthorp (hey4hogs@kuntrynet.com)
Thu, 3 Sep 1998 10:30:56 -0500
Bob,
I have one problem with all this talk about not including opportunity
costs and farm labor. And I do have a degree in Agriculture Economics/Farm
Management. (Thats not worth the piece of paper on the wall, but that is a
whole different story.)
I agree with the idea that production costs need to include opportunity
costs and farm labor long term, BUT I do believe we need to differentiate
between opportunity costs and non paid farm labor from expenses that require
writing checks. Isn't cash flow still a major problem on US farms? A farm
that has it's ground paid for and no off farm labor can have a significantly
better cash flow with identical costs of production. Operations with no
debt or off farm employment are very low risk operations. There isn't any
reason that getting out of debt shouldn't be one of the goal choices for
American farms. I get kind of tired of hearing that people aren't low cost
producers because they have paid for their land and they don't hire off farm
employees. How do you think they paid for their land?!? These are the
farms around us that have century farm signs in the yard.
Our farm would be a good example. We have had all the chances to stick up
confinement hog barns. We never did and paid for our land. (We are still
low cost producers including opportunity costs and labor.) We've got to be
one of the lowest cost hog producers in the country when you look at cash
flow. That is a great advantage when hogs are $26/cwt like they are now!
Opportunity costs are great from budgeting, but our checkbook and banker
like to look at cashflow!
I think a lot of people get in trouble sticking a value on their own labor
to justify additional equipment to lower their labor needs. When I was in
college they showed us figures justifying larger equipment because of
decreased labor needs. THE big problem with this is labor costs of the farm
owner goes in your pocket as wage or salary. Labor savings go in the pocket
of the John Deere dealer. Of course if you are hiring labor this would
change that situation. But I know personally if I spent money on equipment
to lower my "labor" cost not only would my wages ("labor cost") go down but
my expenses would go up because of the payment on the new equipment. Isn't
reality the exact opposite of what I was taught at college?
Like I said before, I have a degree in Farm Management, but I still can't
get this through my head that we don't need low risk operations that cash
flow well in the lowest of prices. Can somebody "straighten" me out? Or am
I too far gone?
Best wishes,
Greg Gunthorp
Pasture hog farmer
"Still cash flowing $26/cwt hogs--I think that might be the economic portion
of sustainable agriculture?"
-----Original Message-----
From: Bob MacGregor <RDMACGREGOR@gov.pe.ca>
To: waldenfarm@sprintmail.com <waldenfarm@sprintmail.com>;
csas005@unlvm.unl.edu <csas005@unlvm.unl.edu>
Cc: sanet-mg@shasta.ces.ncsu.edu <sanet-mg@shasta.ces.ncsu.edu>
Date: Thursday, September 03, 1998 9:54 AM
Subject: Re: How to get rich selling watermelons -Reply
>Maybe part of the problem in how much profit a farm makes is definition.
>I know a lot of small farmers, particularly those who have little or no
debt,
>tend to overlook many cost items such as opportunity cost of farm
>capital, and their own family labour.
>I suspect that labour is a greater component of total farm costs on small
>farms -- perhaps particularly on organic farms -- so including return to
>operator labour in with operation profit could distort these proportions a
>lot.
>For what it is worth....
>BOB
>
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