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What Does It Cost To Start A New Farm?

The cost of land–among many other factors–makes the idea of independent farms setting up shop almost impossible.

What Does It Cost To Start A New Farm?
“Where’s a young guy or gal going to get $5 million or $3 million to be a farmer?” [Photo: Noah Buscher/Unsplash]

The average age of an American farmer is now 58.3–a number that’s been increasing for three decades. About 40% of farmers are 65 and over. And fewer younger people are entering the profession than ever before. The last census from the U.S. Department of Agriculture shows the number of “new farmers” (defined as being on the job less than 10 years) fell by about 20% between 2007 and 2012.

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While many young people are attracted to working the land and giving up dizzy-making urban lives, they’re also likely put off by prohibitively high startup costs. That’s according to Shawn Williamson, an accountant in St. Louis, Missouri, who recently carried out an in-depth analysis of what it would cost to set up a farm from nothing. The answer: an amount of money that makes the idea of creating a more robust independent farming economy seem impossible.

[Image: courtesy the author]
Williamson himself owns several farm properties (which he rents out). Recently he was thought-experimenting with some friends about what it would cost to set up an agricultural operation from scratch. That is, a farm that actually produces a decent income–say enough for a family of four to live comfortably (at least $50,000 a year).

It was a lot more than Williamson and his buddies thought, chiefly because of high land costs. According to Williamson, you need $5,157,500 to set up a new decent-sized grain farm in Iowa; $2,695,000 for a new dairy farm in Nebraska; and $4,477,500 for a wheat growing operation in Kansas.

[Image: courtesy the author]
Williamson estimated and collated the figures in two articles for the site Successful Farming. He worries that the costs for young people coming into the industry are too high, and that farming isn’t replenishing its stock of practitioners, so America can produce the affordable food it needs.

“Where’s a young guy or gal going to get $5 million or $3 million to be a farmer?,” he says in an interview. “Even if they do it gradually, how are they going to pull that off over 10 or 20 years? It’s a coming, quiet, slow moving emergency, I think. When you have the average farmer in his upper fifties and not many people coming behind, all of sudden there aren’t any farmers anymore.”

[Image: courtesy the author]
Williamson thinks it would actually be impossible for someone to borrow $5 million, just like that, to start a farm. “They would almost never do it that way because they couldn’t. No bank would say, ‘Oh, you have a million dollars, I’ll loan you four more, on a wing and a prayer,” he says.

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Luckily, not many farms are started with an outright purchase of land and equipment and everything else. Williamson estimates 70% to 80% of farm-starts are family affairs–for instance, where Dad gives his sons some land to work with and his equipment on-loan. The other type of new farms, he says, are more recreational. For example, when biology, math or ag teachers acquire land over several years, eventually turning to full-time farming in semi-retirement. Again, this is backed up by census statistics. Of 2.1 million farm households in the U.S., 1.5 million earn less than 25% of their income from farming.

Land prices are a big reason farming is becoming more expensive. Farms in, say, Central Illinois, a prime area, have been changing hands at $17,000 an acre, four times their value in 1979. “A lot of prime farm land has gone from $5,000 to $10,000 an acre, or four to eight, in the last few years,” Williamson says. The prices are attracting Wall Street, which sees that it can make more money in the Midwest than in the stock market.

Young farmers who’ve tried the life caution others from entering the profession. Most small farmers operate at a loss. But, if there’s going to be a shortage of farmers, perhaps the economics will switch around in the future. “There’s probably a lot of opportunity for smart ambitious young people in the coming decades because of a lack of competition,” Williamson says.

About the author

Ben Schiller is a New York staff writer for Fast Company. Previously, he edited a European management magazine and was a reporter in San Francisco, Prague, and Brussels.

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