A musing …

On Whirlpool (one of the many forums I pop in and out of) someone asked the question about cattle farming, and the conversation evolved. I wrote this reply (below) and I liked it enough that I wanted to keep it for myself for later reference.

I think the illusion of it being “easy money” or that it can be “a part time venture” comes from certain practices. Traditionally, these have been primarily from hobby farms, but recently, the practice of outsourced agriculture (in grazing the examples are managed agistment or steer backgrounding) where the effort of the “farmer” can be recorded in mere hours per week provide an illusion of the real work.

There are many good examples of farms where the owners are doing just that. I know of one such place where the owner is clearing $40,000 per annum from a 50Ha property in Romsey on a combined man hour investment of 14 hours a week.

However, the reality is that the model that farm works on cannot be expanded. It cannot sustain a growth pattern. Thus the enterprise is locked into that size. If the property wasn’t owned, and one had to purchase that property today to repeat the exact same processes and achieve the same profits, it just couldn’t be viable.

Here’s how the maths would go — we can assume a purchase at around $950,000 (e.g. farmbuy listing) which requires a yearly repayments of $79,945 (assuming a rural loan at 8% for $900k), which means you now need to either come up with a secondary layered enterprise to sit on the same property that clears another $40k per annum or take an off-property job just to meet the mortgage payments.

For any small landhold property (i.e. less than 150Ha) to make enough money to pay a mortgage and earn a wage requires that the property have multiple complimentary and unique enterprise layers or become an intensive operation. In both of these scenarios, the work requires a lot more than a handful of man hours – and either the owner does them, or the time is purchased from a third party.

As I said before, the only reason you enter an Agricultural enterprise in Australia today is because you’re passionate about it, not necessarily because it’s lucrative.

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