Debt

exmoor dave · Jun 22, 2019

7610 super q said:
Yeah well....who was it that coined the phrase.... 16th century prices, 21st century costs....
Anyhoo......there's a surprising number of new tractors about.....

And it's not just tractor prices that have lost the plot. A front end loader costs £10k. £10 fecking k !!!! , Tipping trailer £10k +...for a box on fecking wheels !!!

But are we not our own worst enemy ? A front end loader that has electrics, led lights, and has to be colour coded to match the tractor. Madness.

Just thinking the same, look how much machinery there is on farm now

We're completely guilty of it here

DrWazzock · Jun 22, 2019

Yes I'll confess to overspending on machinery as well and have made some fairly unwise purchases which seemed like a good idea at the time. Lesson learned. It's easy to be deluded about the potential benefits of new machinery. Some do really deliver, but some are just a money pit. I don't entirely blame those who have been oversold unaffordable liabilities. They have been trying to do the right thing and it's a cruel world that sees such ventures fail. I have seen it with big potato growers expanding then going bust. They did the right thing according to "conventional wisdom" but had the rug pulled by years of low prices. I don't blame them entirely, I blame the system. The system doesn't reward risk takers and investors in agriculture as everything is skewed by imports which have a much lower cost base.

What's the answer? I don't know. We each have different curcumstances so no useful advice can be given except be cautious and realistic, keel things tidy and simple.

Green farmer · Jun 22, 2019

the banks will lend you an umbrella when its sunny, only to take it back when it starts raining.

livestock 1 · Jun 22, 2019

DaveGrohl said:
And these PCP deals are a big part of why the new car industry is currently scratching its head at why no one is buying new cars now. Day of reckoning has arrived for all those who signed up with the devil two or three years ago.

Maybe it’s time for me to have a new car then??

DrWazzock · Jun 22, 2019

Green farmer said:
the banks will lend you an umbrella when its sunny, only to take it back when it starts raining.

An old boss used to tell me that the best way to persuade a bank to lend you money was to make out that you don't really need it.

milkloss · Jun 22, 2019

Apart from few optimists I think the answer was a yes.

https://thefarmingforum.co.uk/index.php?threads/is-the-whole-job-just-completely-buggered.279218/

Clive · Jun 22, 2019

cattleman123 said:
Hows it all going to end...All I here about everday is the high level of debt within our industry...the feed rep...the haulier...the machinery dealer...in fact everyone in the agricultural industry talks about it,yes most is secured but it cant go on forever...hows it all going to end ...surely for some in tears

I was at a dinner with a load of ag bank managers not long ago and I was amazed how little debt there is in agriculture

Vast majority of Uk farmers have no borrowings at all and average overdraft was under 50k ......... less than most none farmers will owe on their house mortgage

Not sure it’s as bad out there as we often assume ?

Still Farming · Jun 22, 2019

Asset rich ,penny poor, usually the case.

Clive · Jun 22, 2019

And there is nothing wrong with borrowing money

If you can borrow at sub 3 or 4% and make 10% plus out of doing so while inflation sits at 2-3% then the only fools are those that don’t borrow !

Clive · Jun 22, 2019

Still Farming said:
Asset rich ,penny poor, usually the case.

And completely avoidable - if you have assets you should never be Penney poor if you know how to use those assets effectively

Still Farming · Jun 22, 2019

Clive said:
And completely avoidable - if you have assets you should never be Penney poor if you know how to use those assets effectively

Not often the case in Farming.

Clive · Jun 22, 2019

Still Farming said:
Not often the case in Farming.

As I say no need for it, any farmer in that situation needs to make significant changes to either how they trade or how they are financed

Northeastfarmer · Jun 22, 2019

Ill never forget what an old neighbouring farmer once said to my dad
He was 100% stock farmer and he’d had enough....he said he was going to sell stock and go all arable because he wanted to be ‘effluent’ like them

My dad couldn’t tell him he meant affluent for laughing

buffalo_soldier · Jun 22, 2019

I was talking to my bank chap this spring and the subject of lending algorithms came up.

The bank's it seems rank businesses on various aspects; debt, balance sheet, profits, finance, etc.
They then arrive at a rating of risk level from 1(lowest) to 10(highest).
They don't do business with ratings of 8+ and businesses scoring 3 or lower can attract preferential interest rates.
No surprise there I know.

What was interesting was that agriculture as a sector was the most consistent, with most farms being on the 4/5 area. Therefore being a relatively safe place for lending.
Other sectors would spread the full scale.

buffalo_soldier · Jun 22, 2019

Northeastfarmer said:
Ill never forget what an old neighbouring farmer once said to my dad
He was 100% stock farmer and he’d had enough....he said he was going to sell stock and go all arable because he wanted to be ‘effluent’ like them
My dad couldn’t tell him he meant affluent for laughing

One of my possibles is to retire to arable farming.
I will go from 16 months of work a year down to 2

.

Green farmer · Jun 22, 2019

All depends on what part of your life your at or what your motivated by. I wanted to take over the world when I was younger, now couldn’t be bothered and what to concentrate on my wife and kids instead. I know dairy farmers locally, that farm 10 times more land then myself, but work 10 times harder. Same lads leave home before their kids get up and arrive home late at night. Their turning over a lot of money, but are they any better off then me ? Who knows. I’m making a modest income, but get to spend as much time with family as I like and get to see every minute of my kids playing every sport under the sun.

milkloss · Jun 22, 2019

Clive said:
And there is nothing wrong with borrowing money

If you can borrow at sub 3 or 4% and make 10% plus out of doing so while inflation sits at 2-3% then the only fools are those that don’t borrow !

10% eh? Would be interested to see what rates of return you think there is in the various farming enterprises. Not a challenge, I feel there’s quite a gap within farming.

livestock 1 · Jun 22, 2019

buffalo_soldier said:
I was talking to my bank chap this spring and the subject of lending algorithms came up.

The bank's it seems rank businesses on various aspects; debt, balance sheet, profits, finance, etc.
They then arrive at a rating of risk level from 1(lowest) to 10(highest).
They don't do business with ratings of 8+ and businesses scoring 3 or lower can attract preferential interest rates.
No surprise there I know.

What was interesting was that agriculture as a sector was the most consistent, with most farms being on the 4/5 area. Therefore being a relatively safe place for lending.
Other sectors would spread the full scale.

That’s true farmers have a good reputation of coughing up. Even if they default there’s a good chance that there’s liquid assets to pay up or a charge on land. I once needed a business loan a few years back for a separate business interest but was advised that I would have to expect to pay near on 2% over what I could borrow it on agricultural lendings. Also they wanted a valuation before starting which was around 3/4K at the time so I told them to do one and used some money from elsewhere. It’s risk they have the figures

livestock 1 · Jun 22, 2019

Green farmer said:
All depends on what part of your life your at or what your motivated by. I wanted to take over the world when I was younger, now couldn’t be bothered and what to concentrate on my wife and kids instead. I know dairy farmers locally, that farm 10 times more land then myself, but work 10 times harder. Same lads leave home before their kids get up and arrive home late at night. Their turning over a lot of money, but are they any better off then me ? Who knows. I’m making a modest income, but get to spend as much time with family as I like and get to see every minute of my kids playing every sport under the sun.

I like this it’s very true. I was always under the impression that a bigger business would take pressure off cash flow and one of my goals was to have a steady income stream rather than a lumpy one. Bigger is not easier it gets more difficult that’s for sure. Same problems bigger numbers.

applejack · Jun 22, 2019

Green farmer said:
All depends on what part of your life your at or what your motivated by. I wanted to take over the world when I was younger, now couldn’t be bothered and what to concentrate on my wife and kids instead. I know dairy farmers locally, that farm 10 times more land then myself, but work 10 times harder. Same lads leave home before their kids get up and arrive home late at night. Their turning over a lot of money, but are they any better off then me ? Who knows. I’m making a modest income, but get to spend as much time with family as I like and get to see every minute of my kids playing every sport under

Green farmer said:

All depends on what part of your life your at or what your motivated by. I wanted to take over the world when I was younger, now couldn’t be bothered and what to concentrate on my wife and kids instead. I know dairy farmers locally, that farm 10 times more land then myself, but work 10 times harder. Same lads leave home before their kids get up and arrive home late at night. Their turning over a lot of money, but are they any better off then me ? Who knows. I’m making a modest income, but get to spend as much time with family as I like and get to see every minute of my kids playing every sport under the sun.

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It's a question of priorities and what matters to you in life, you @Green farmer I would suggest have got it spot on.

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