Part V of Financial Management on Black Sheep Farm
The last of Brenda’s posts about managing finances on Black Sheep Farm, in Grey County, this one covers decision making for big capital expenses. Thank you Brenda for sharing all this useful info with us! We have been referring to Brenda’s blog posts in our Farm Viability Course, held in Guelph.
Throughout the year, there’s probably a running list of things you want to improve at the farm. At the end of the season, after your numbers are analyzed for the year, you should get that list onto paper/computer screen and take a good look. What do I want for my farm? A tractor and various tractor implements, page wire perimeter fencing with sheep proof gates for laneways, a hoop house for more reliable production of some hot crops and extended season harvests, and more fruit and nut trees and shrubs.
How do I make all this happen in the next few years? Plan, plan and plan some more. And prioritize. What are the approximate costs for these things? Are there creative ways to accomplish the various tasks? Which capital outlay will be the most profitable in the long run? What could help increase income and decrease costs so there might be more disposable income to take care of the other items on the list?
For my farm, the top of the big purchase list is the tractor. In hindsight, I probably should have bought a tractor instead of a rototiller (costing around $3,000) back in 2009. But I have an unreasonable fear of large motorized machines, am the opposite of a grease monkey, and romantically thought I might learn horse farming. I have since accepted that I am much too allergic to horses to really consider working with them in the absence of total fossil fuel collapse during my farming lifetime. If I get a diesel tractor, there’s always biodiesel! And after over six years of living in the country, I’ve finally accepted that the maintenance of a farm property overall, really does need a tractor.
At its most basic, the tractor for the farm needs to take care of field work (via disking, rototilling, and harrowing implements), snow clearing (snow blower) and compost/manure moving (bucket). How big would this tractor need to be, both in size and horsepower? How much would it be new versus used? What implements could I borrow or rent instead of buying? What kind of technical know-how do I need to learn and/or who’s a reliable tractor/implement repair person in my area? I was told by one farmer that to own a tractor, you need to be a welder. Luckily, my partner seems interested in taking on that responsibility. Let’s say what I would need would cost between $8,000 and $10,000 used, with $500 per year in maintenance/diesel costs.
Now take a look at your farm financials for the past few years and find out your yearly custom work costs. For my farm, the 6 year total since 2010 (when I first started having these costs) has been $6,326. That averages to about $1,000/year. Would a used tractor and implements even be worth buying considering it would take 8-10 years to just pay for itself given historical costs? My penny pinching self would say, “Absolutely not!” A used tractor couldn’t possibly last that long (says my non-mechanical self), so it’s absolutely not worth it considering the reliable custom work available in my area and the additional repair/fuel costs. But considering my future self, and the presence of a less machine fearing partner than me, I must reconsider. I’m getting older, which means there will be more tasks that I shouldn’t be doing manually (moving compost by shovel and wheelbarrow). The sheep flock is increasing, which means more barn cleanout, compost pile management and fencing needs. Custom rates are likely to increase from year to year. Having my own tractor gives me more flexibility on timing and also opens up the possibility of other tasks being done that I don’t even consider right now (fence post pounding, moving of heavy objects). And my field work costs have been increasing from year to year as I’ve put more fields into production or started new enterprises (like grain growing or a new hay field). Winter snow volume seems to be completely unpredictable now, which means so are the snow clearing costs. Realistically, the yearly custom work costs would probably be greater than $1,000 per year going forward, and having such a valuable tool at my daily disposal would change the way work is done.
So now I’m shopping for a used tractor with a bucket and snow blower. If you don’t have enough funds saved for the purchase, you need to consider loans (bank, family, friends, in that order of desperation), and/or creative fundraising. You could consider asking loyal CSA members to prepay for X years of CSA shares so that you’ll have your capital now, when you need it, and your farm members reap the rewards into the future. Or you could find yourself an angel investor via social media or fundraising platforms. You could also spend the next few years aggressively scaling back costs (living leanly) and increasing income (selling more CSA shares) to budget in additional savings of $2,500 to $5,000 per year to put towards the cost of the tractor. Given how immediately owning a tractor would start paying for itself, I would recommend getting a loan and buying the tractor sooner rather than later.
An example of a cost that I would rather save for over the years than borrow to buy now, would be perimeter fencing for the farm. While it would be nice to know that my sheep could not make it off the property if they got loose from their pens, it is not necessary. A good solar fencer and proper movable electric fence management are the absolute necessities to keep the sheep contained. I will install a tractor road gate in the spring though, to discourage trespassers from driving ATVs onto the property and spooking my sheep (yes, this happened in October).
Another project that should probably be prioritized would be buying and planting more fruit and nut trees/shrubs, given the years needed until they’re in real production. However, if you don’t have the capacity to take care of them in the early years really well (weed control, mulching, pruning, winter protection from rodents/deer), you’ll just be throwing your money away. I’ve figured out from experience that I can maybe deal with 4-5 new trees in one year, on top of other farm enterprises, so unless some wonderful grant shows up to pay for putting in a lot of fruit trees at once, I’m going to stick with the slow and steady approach.
As for the hoop house, I’m still undecided on this. Adding greenhouse production is adding a whole new enterprise with additional tasks to manage. And do I really want to increase the length of my growing season for income generating purposes? Is it that important to my CSA members to reliably get eggplant and peppers from my farm? As a single person farm operation, realistically, extending my farming and vegetable deliveries into the winter would be a disaster for work/life balance. This would only be feasible with plans to increase overall production, and thus income, significantly enough to pay for a lot more outside help.
There are few purchases you can’t make in the long run with a good plan. It’s the planning itself that is important, as it shows you what it will take to get there, so you can actually decide if you want to do it. By setting budgets, keeping track of your spending, and analyzing what is or isn’t profitable, you control where your money goes, instead of wondering why it’s not around.