Make big bucks AND feed the world?

Walter Jeffries wrote:

Fred Morgan wrote:I understand where you are coming from, but when you borrow you now are working for someone else - you have to be really careful with this. Often all you can hope to earn off land is in the neighborhood of 5%, but if you have a mortgage on it, now that is going to the bank....And of course, if let's say you have a mortgage of 15 years, you are betting on 15 years of good harvest. Many, MANY farmers have lost their lands betting on the weather, bugs, etc. Perhaps I should put in my signature that we own 900 acres of plantations (timber mainly), I do know math - heck about all I do is math.

5%? Crazy. I do a lot better than that. I too have (well over) 900 acres of mainly timber plus our ~70 acres of pastures. I do know the math, very well since I've been doing this for decades. If you're only getting 5% returns then it's pretty poor land or you're doing it wrong.

This is not an attack on you, Fred. But I've heard people say that sort of thing before and it is plain wrong. I earn my living sustainably farming and sustainably logging. People say it can't be done but I do it and I know of other people who also do it. It's what pays our mortgage, both principle and interest, and more. I didn't inherit our land, I bought it. We have no off farm income. I made my down payment with money I earned other ways before but the farm and forest pay.

No problem, it is what most people earn, you can earn a lot more (and I do) in forestry, after years of no money at all - like about 10 for us.

Actually, timber on average yields 4 to 5 times as much as cattle on the same lands. We earn considerably more than that since we have a vertical monopoly. (we have everything from trees to end clients for wood products)

But, here is a question, if you had to go buy your land today, at today's prices, would you still be making such a high percentage? I was addressing mainly a person who was going out to buy land today, not a person who has had their land for a while, especially before farm lands started to shoot up. Also, a person has to be very careful borrowing with the hopes of doing better than average. You can't use what you bought your land for, but what you would sell it for when considering how much you are making per acre, percentage wise, since the money you have in your land is "lost" opportunity, from a financial point of view. For example, we paid on average for our lands a bit more than 1,000 per acre, but with all the improvement, they are now probably worth around 5,000 per acre since I tend to buy neglected farms and I have the equipment to make roads, build houses, etc.

I use the 5% number when negotiating lands with cattle farmers, since it is about all they can hope for. Actually, I use that to tell them the price they are asking is outrageous, because unless they are making 5% (many aren't), then they might as well just put the money in the bank (we get higher interest rates here) and stop milking cows in the morning unless they like it. Most 70 year old dairy farmers stopped "liking it" many, many years ago.

Conventional farmers (not talking permaculture) often make very little per acre. It is interesting that people don't get how much more you could make if you don't waste your wastes. Generally speaking, the rental of land is between 3 to 4% of the land value per year.

Just like a well run business tends to make 10% a year. Sure there are companies that rake it in, but rarely does that last unless you have a monopoly.

- Maybe if you let the land sit, hired people to work it, etc then you would only make 5%. Probably less. Not our style.
It is a style, a life style.

Okay Walter, you just agreed with me in a way. You are pretty much giving away your time - and not counting any labor though I suspect your hours per week are well into 60, or more. That is a life style thing. If I were to not pay my workers a fair wage, I would be making much more - and I consider when I work for the company, that I must be paid - or I am merely a slave. Okay for subsistence but I get bothered about once a month by people wanting to pay me lots of money to program, from my home so why work for nothing? I think what you are doing is great but I am talking accounting, not lifestyle. I could be making even more if I would accept working back in high-tech - but that is not a life I wish to continue.

We are doing plantation forestry - more like continuous coverage forestry,we plant, prune, selective thin, make doors, flooring, etc. Currently we only have 14 full-time workers, but soon it will be back up to about 50. At one time when we were in full-scale planting, we had about 100.

I work mainly in the office - what I enjoy is messing around in my permaculture garden and then reviewing the work and trees. I do very little work other than office work and talking with large clients. I might work 20 hours a week, often much less. I spend a lot of my time researching the economy. We really do have a business, not just self employed, and it can be deadly to work for the business as the owner, instead of on the business. I only work on a task that others could do to understand the task and often, to make it more efficient. Most of my time is figuring out where to steer us next.

We make enough that I don't know how much we actually make since I reinvest it. We live on about 16,000 dollars a year, but we live in Costa Rica, which means that probably is more like 50,000. Our home was built for 60,000 by our people, but realize too, I own a furniture factory and every bit of wood in it was processed from a tree. Not a huge home (why have such a large one) but it is about 2,000 square feet, including my wife's art studio. My space is 6 feet by 4 feet standing desk. lol We could live on much less, since that includes one very nice vacation a year - at least. And our lands are just starting to be productive this year. Oh, the 16K doesn't include full-time cook and grounds keeper (who milks our goats) - they are paid for by the company. (allowed under Costa Rican tax law) All vehicles we own are maintained by the corporation (since they are mainly used for business) and the company has a full-time mechanic.

If I figure our land would be conservatively worth even 3,000 dollars per acre, and we have 900 acres, that means 5% of it be 135,000 dollars, USD AFTER paying myself, workers, taxes, everything. You are saying you are living on only 15,000, and yet have even more land - what would your land go for now? You can't use your purchase price, if the land has appreciated since we are talking about people starting out, not those who bought their land years ago.

Not attacking, at least I hope I am not but it is important that people realize how the numbers work, so that if they do have a loan, they don't lose what they put into their lands and paid into their mortgage. People should be very VERY careful about using credit, since this is how most small farmers lost their lands. You are correct though, large properties are cheaper per acre, so there is a balance - and off the grid is much, much cheaper than where there are services.

The original premise was big bucks, and that means you have to count labor since you are going to be hard put to do all the work yourself.

Personally, I find it hard to imagine that demonstrating the ability to make a subsistence living off permaculture is going to help change the world. Farmers are only going to change to permaculture if they see an opportunity to make money. They won't care about the "ethics" of permaculture, they will care about farming in a way that involves either a) less work and/or b) less money input - while earning the same amount of money. Perhaps permaculture is an overly broad term, when I think permaculture I think only about the farming aspect (I don't know, nor do I care to know the ethics), but others think mostly about the sustainability aspect and others about the building aspect, all of these are important, but I don't think that in order to practice permaculture you must do all three.

I say, if a large corporation finds a way to take permaculture and make tons of money off of it. More power to them. In fact, I would say that if I do well in permaculture (don't have land yet, planning to buy it within the next 2 years) and get an opportunity to grow into a huge coorporation I would do so without pause. A huge permaculture coorporation would demonstrate to the world that a) permaculture works, b) permaculture makes money. That coorporation would do a ton to spread the word about permaculture and to convert farmers into permaculture, and they wouldn't even have to put effort into it, it would occur just because they exist and are successful. I'm interested in permaculture, but once I get a full-farm system going, I'd want to make a minimum of $15 an hour (and preferably more like $50/hour or more). And that would just be for me, I'd expect farm hands (if I had any) to make (or earn me) a minimum of $8 an hour.

Even if you oppose the above concept of permaculture. I think at minimum a permaculture farm should look to earn enough to retire by the age of 55 (or so) and to have the money to deal with any serious injuries. Especially if you run a very labor intensive system. I've been to "permaculture" farms that if you took the farmers total hours worked and their total income, they are probably making well under $3 an hour (and the farms hands (WWOOFer's) were making $0 an hour (and earning the farm ~$1/hour) while contributing over 40 hours a week). And I found it hard to see the head of the farm going more than 5-10 more years before the labor took to big of a toll on their body and they would have to go on disability because they would now have no income and no ability to work the farm and produce that income.

If you make money off the rich, you can give away/sell the surplus cheap to the poor. If you only give away/sell the surplus cheap to the poor, than your farm probably won't last that long (unless your doing it as a hobby rather than for a living).

Anyway, that seems kind of disjointed. But the point I'm trying to make is this. Permaculture shouldn't involve replacing money input with labor, it should involve attempting to reduce both. A farmer should set a minimum value on their own labor time. I'd guess that for permaculture to ever be accepted as a farming system by conventional farmers, that value would have to be at least $15/hour. If you want to value your own labor at less than that, more power to you. But I don't think doing so will do more than to make outsiders look at permaculture as some kind of crazy labor intensive farming system that they don't really think it's worth participating in.

Only by demonstrating that you can make money ($15/hour or more) off permaculture, will you convert farmers to permaculture. And converting other farmers to permaculture will do far more to help the world than will making an off-grid subsistence living. Maybe I'm just justifying making big money with permaculture though. I don't actually particularly care about helping/feeding the world one way or the other. I like permaculture (forest gardening) because it makes sense to me and seems like it should work (and allow you to make money off of it).

Phillip, I just reread what you wrote, substituting the word 'organic' for 'permaculture' and am struck by the fact that it points out some of my concerns with big ag usda market driven organics....especially ethics seperated from practice.

Philip Green wrote:Personally, I find it hard to imagine that demonstrating the ability to make a subsistence living off permaculture is going to help change the world. Farmers are only going to change to permaculture if they see an opportunity to make money. They won't care about the "ethics" of permaculture

Thanks for the vote of confidence. I disagree with you. I am a farmer. I make all of my living farming. I pay the mortgage and all our other expenses farming. I do care about 'the ethics of permaculture'. I also know a lot of other people who do too, some of whom also make their living farming.

The bigger question is why more consumers don't care. They are the ones who can drive things forward by voting with their wallets.

Frankly, food is too cheap. People spend far less of their income on food than in the past. Cheap food has been created by subsidization of Big Ag, petroleum and other subsidies. People pay for it at the checkout counter or they pay for it in their tax bill.

The subsidies aren't necessary. I get no subsidy to farm yet I'm able to make a living at it and do it in a sustainable permaculture manner. If I can do it then others can and the subsidies can be eliminated.

Walter Jeffries wrote:

Philip Green wrote:Personally, I find it hard to imagine that demonstrating the ability to make a subsistence living off permaculture is going to help change the world. Farmers are only going to change to permaculture if they see an opportunity to make money. They won't care about the "ethics" of permaculture

Thanks for the vote of confidence. I disagree with you. I am a farmer. I make all of my living farming. I pay the mortgage and all our other expenses farming. I do care about 'the ethics of permaculture'. I also know a lot of other people who do too, some of whom also make their living farming.

The bigger question is why more consumers don't care. They are the ones who can drive things forward by voting with their wallets.

Frankly, food is too cheap. People spend far less of their income on food than in the past. Cheap food has been created by subsidization of Big Ag, petroleum and other subsidies. People pay for it at the checkout counter or they pay for it in their tax bill.

The subsidies aren't necessary. I get no subsidy to farm yet I'm able to make a living at it and do it in a sustainable permaculture manner. If I can do it then others can and the subsidies can be eliminated.

Out of curiosity, did you start out as a conventional farmer? Or were you permaculture from the beginning?

I do think I'm correct though (maybe I could word it better), or maybe we just agree to disagree. Basically what I'm saying is that if you meet a conventional farmer and want to convince them that they should start permaculture. The starting point isn't the ethics (which I just looked up). If you start talking about caring for nature, caring for people, and sharing surpluses you'll be seen as a crazy hippy (I'd guess).

If you practice permaculture gardening methods, you will be following most of the ethics whether you know it or not. A lot (maybe all) of conventional farmers do care for their friends, family and community and they do share surplus (and seconds) that they can't sell. They might not care about helping make the Earth a better place (by whatever method you prefer), but just by doing the above things they probably are doing so.

But I think the starting "selling" point would be how you can make money with less work. How they could grow multiple crops in the same ground, how they can use less irrigation, fertilizer, chemicals and energy. Not because it's bad or evil or whatever, but because permaculture works better and you can make more money without using them.

And I completely agree with you on subsidies. If subsidies and many other regulations (and federal crop insurance) were eliminated, it would encourage permaculture both by increasing the cost of food (at least the visible cost of food) and discouraging monocrops (if you have a giant wheat field and no federal crop insurance, you might decide to diversify just in case.

Wow great thread. I really appreciate the perspectives from Fred and Walter on what it takes to farm full time this way.

Phillip, I can understand what your saying about coming off as a crazy hippy. But if the organic movement has taught us anything it is the danger of decoupling the methods from the ethics. I believe that without the ethics guiding us, the quest for efficiency will lead us right back into destructive farming practices and permaculture will be just another meaningless piece of jargon.

I'm not sure why the ethics would get in the way of conducting the business or demonstrating good practices, or make one look like a hippie. One doesn't need to have a big banner stating the ethics, one doesn't ever need to mention them, even if they inform every single action one takes, in my opinion. If one is caring for the Earth, caring for people and returning the surplus, that can all be demonstrated by one's actions, it doesn't need to be verbalized unless someone asks, in my opinion.

Tyler, you make a great point, and I should admit that I have been called a crazy hippie... more than once.

To get back to the topic, I do think that there is a limit to the amount of wealth that can be created sustainably, and it's not in the billions or trillions. Giant agricultural companies must operate from a level of abstraction that is far removed from the fields, and lost efficiency or waste is an inevitable result of such management. So I guess my answer depends on your definition of big bucks. Personally I'd be thrilled just to make an honest living outside the rat race.

It would be great if we could eliminate all farming subsidies and see how the numbers stack up on a level playing field.

How can anybody argue with Phillip's point: That when making choices, we (if we're honestly responsible) must choose those paths, actions, methods, whatever most likely to acccrue benefits. Sometimes that choice is not available, but mostly it is. So there had better some clear benefits.

When making business decisions to try something new (or any other type of decision that involves serious costs and real risk of serious loss) then ROI (return on investment) must be high - very high. Why? Because "something new" always involves risk and always _always_ involves unforeseen costs and complications - besides the risk of serious loss. So the ROI has to be large or any responsible business person with a presently adequet business must pass and let somebody more desperate or otherwise motivated take that risk. It may be hard for many of us to remember but there are things for which there is no safety net - where the end can be the END. For small and medium sized business there is no safety net. Their owners have every reason to behave conservatively. They look narrowly at cost/benefit and if they need a magnifying glass to see the benefit... Well, that's that.

Not all benefits are immediate economic benefits. Eg. if a conventional farm family saw real chance that a couple acres of permaculture plantings could back-stop their retirement and provide a safety net for the family if not the business, then they might well consider that a benefit worth some thousands investment up front. That security is a benefit even if there is no great added profit. Or not. My point here is that there are actual (or at least perceived) benefits that can't be seen on an ledger sheet.

But those "other" benefits don't apply across the board. The ledger sheet cuts through all difference in language, race, religion, sex, all of it. At least in the USA and most of the "developed" world. So permaculture is to develope legs in this world it needs a real and significant ROI; it can't be simply an expression of personal taste for people advantaged with education or opportunity or time on their hands.

Rufus

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I'm always interested in what Walter and Fred have to say, since I also aspire to getting a very large chunk of land. I think, one day I will cash out of the very expensive market here and go somewhere where the land is very cheap. Of course it would be nice if it were somewhere nice and safe, but I would be willing to risk life and limb for an incredibly large project.

Fred. Do you ever hire farmers after you buy them out ? Or, do they happily take their money and move to town ? Are most of them old ?

Is there an expectation amongst locals, that these farms will be passed down to children ?

Are some of the farms likely to be foreclosed if you don't buy them ?

Do you find that there is resentment amongst locals who see a gringo who is far wealthier than they are, building a plantation ?

Is your frugal lifestyle partially in response to the need to not look like a king to workers who may never succeed financially ?

Some answers: I have yet to have a single farmer who wanted to stay, since I have to have caretakers, I would love for them to stay and just keep an eye on things, but so far, all have sold because they are up in years, and want to retire near town, usually they already have a house in town too, since most of what I buy is off the grid and the farmer, if he did well, moved to town so that his kids would be closer to school.

Traditionally, the parents split the farm, and sell half so they can retire - and the kids have first right of refusal. It is not expected that the parents will just give the whole farm, since then they would generally have nothing to live on, and guess who would end up supporting them (the kids!)

Yes, sometimes a farm might be foreclosed if we don't buy it, we got one this way from a land speculator (Tico).

No resentment that we have seen, people are glad for the jobs and the improvement to the environment.

Our frugal lifestyle is due to a conviction to use very few resources. At frugal, we are still pretty well off compared to most. No one thinks we are poor, not with all the land, equipment, business, etc.

Let me know if you are interested in coming to my neck of the jungle, I could help you find a large track of land, if it is near us. I know everything for sell - and why it is for sale. Very safe out here, not true for all parts of Costa Rica.

And who knows what trouble you and I would get into... lol

Fred Morgan wrote:

Tyler Ludens wrote:

Fred Morgan wrote: Often all you can hope to earn off land is in the neighborhood of 5%

Do you mean 5% of the value of the land annually?

Yes, it is a good working number because it is easy to do. Not saying you can't do more if you work hard at it.

Wow, I can't believe it has been a year since this tread got started. Time flies...

In the neck of the woods I plan on to "buy the farm", empty land runs about $1300 to $2600 an acre right now at 50 acres plus. I am at a point now where I can cash out and pay cash for up to 100 acres. So any debt level I will need could be insignificant.

In that area, carrying capacity is really good, about one cow per acre and a half with conventional grazing. Deep Sandy loam, average 48" of rain. Their drought was 26".

My understanding is that I should be able to raise from birth to slaughter, one steer for about every 4 acres, even if I graze like the "normal ranchers" do..

Now that's not permaculture, but it is a starting point.

I believe that 400 lbs of retail package is about normal for said steer, and that an organically raised beef fetches about $6/lb if you buy the whole cow, minus the $1 for processing.
So, $2000 gross profit on the sale of a cow by the side.

Divide by 4 acres/beef, $500 an acre per year. On land that is $2000, that is a 25%, and now you have to look for minimizing your inputs. If that steer costs you $1600 to grow, market & sell, you are in trouble.

I think, after a couple of years of good grazing practices, that I might be able to double or triple or quadruple the production over conventional grazing.
When that happens, I can envision something to the tune of $1000 to $2000 per acre in beef production. You can't get that by selling wholesale, but you put 100 acres into it, it is a heck of a living. Plus you eat steak every night.

I will agree with Walter on this one. If you go into business buyings land with a 5% ROI goal, you will be selling out to the person that makes 25% eventually.

If you are doing conventional Ag, I think that 5% might be a good rate.

Even a conventional farmer has plenty of income. It is the inputs he uses that crush his profit.
A conventional Farmer might get $1000 income from an acre of corn. But they spend $900 an acre on raising that crop and harvesting it. If that farmer can decrease his input costs, all of a sudden, he starts making money.
There is money to be made. In the United States, we spend about 12% on Ag. That comes to $2 Trillion spent on food. The farmer gets a pittance of that in their pocket. All I would suggest that we shift the money spent from
agribusiness and retail to farmers. That is enough money to make $900,000 income for each of the 2,200,000 farmers in the US. The money is there, for the poor and the elite to eat well, but we all need to buy food directly from the farm.

The biggest selling points to me is that the income is clearly there, if you can produce enough food and put it into a market that can pay for it.
The PROFIT comes from reducing your inputs as much as possible. And this is where permaculture shines.

I heard there has been some talk within the USDA and FTC about actually trying to fully define "sustainable" for food and other products. It's a word being used a lot in marketing but without definition it can become an empty marketing term. Perhaps incorporating many permaculture principles and practices into this definition could be helpful in making permaculture more attractive to all growers. Certifications like that can come with a whole lot of paperwork, time and extra expense though.