There is little to choose between which choice is the most important. What do you want to farm or where are you going to farm?
One of the greatest truths is the following: “A farm makes a farmer and not a farmer a farm.”
Some of us are extremely blessed and were born on a “good” farm.
There are certain farms that have been owned by the same family for several generations, others come on the market every few years.
It’s all about the principle that you don’t slaughter your best milk cow. Good farms produce for their owners and bad farms eliminate their owners.
Where did that leave me in my decision? I wanted to enter the sheep industry with just 100ha.
And remember, I want to be able to scale to 55,000 ewes. So whatever I decide must be able to accommodate my goal.
Once again, I just had to do a study. This time it was sums.
I pulled Excel closer and started doing a financial comparison between:
BUY LAND, RENT LAND OR STAY FARING ON THE 100HA LAND
f you buy land, you can do it either with your own money or with the bank’s money. If you use your own money for land, you forfeit other investment opportunities and that forfeiture is called “opportunity cost”. IE even your own money costs money. If you use the bank’s money, you pay interest. We are now in a high interest rate cycle so I did my sums at a rate of 13.25% per year. Remember, each guy’s sum is going to be different. So there is no right or wrong amount.
Feel free to click on this link and see how I did my comparative sums
From the sum in respect of buying land, there is no way my return on sheep can be profitable. I’m also not going to be able to scale, because there’s no land available. And the only farmland that one can buy with confidence is from a deceased estate with no heirs. Nobody sells a good farm.
The rental sum looks much better financially, but it comes with many challenges. In my opinion, the only good rental land is land that is available for rent adjacent to your existing farm. Any land far from you carries too many risks.
The option that made sense to me was the intensive option, but, and it’s a BIG BUT, because it has some cardinal hurdles that must be overcome in order to be successful. I list them:
- Feed costs
- Weaning percentage
- Outlet prices
The long and the short is that in our planning there could be no room for middlemen in the value chain. Our plan for 55,000 ewes can only be realized if we can feed more cheaply, get high production per ewe and utilize the entire value chain ourselves.
Next week I will start discussing the first of the 3 hurdles I listed above.
Regards,
Pieter
ENG 
AFR