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How to Start a Farm: Staff and Equipment

How to Start a Farm


How to Start a Farm

If you're looking to start a Farm, you've come to the right place. Since we're going to show you exactly how to do it.

We'll start with key Farm industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we'll discuss keys to not only starting a Farm, but succeeding in it!

How big is the Farm industry?

According to First Research and IBISWorld, there are more than 2 million companies in the US agriculture sector, with combined revenue of $41.8 billion. This represents fairly slow annual growth of just 0.8% over the past five years (2011-16).

US Farm Facts

What are the key segments of the Farm market?

The Farm industry can be segmented into crop farming and animal production.

  1. Crop farms typically concentrate on one or a few crops, depending on the location of the farm. Crop farms make up 50.2% of total farm revenue.
    • Major US crops consist of corn, soybeans, fruits and nuts, wheat, vegetables and melons, cotton, and potatoes.
    • However, 80% of crop farm revenue comes from grain, oilseed, or dry beans/peas.
  2. Animal production farms, the other half of the farm industry, produce live cattle and calves, poultry and eggs, dairy products, live hogs and pigs, and farmed fish.
    • Cattle and dairy farmers account for 57.6% of animal farming revenue.

Growing a Corn Crop

What external factors affect the Farm market?

A number of factors affect the performance of the Farm industry. These drivers include:

  • Agricultural price index - Commodity prices are the foundation for farm revenue fluctuations. While higher commodity prices can mean higher revenue, it can have the opposite effect if consumers are unwilling to pay the higher prices.
  • Natural disaster index - Weather conditions are the largest factor controlling crop yields. Extreme weather can be disastrous for some farmers, while providing a boost to others. For example, if pasture land is negatively affected by bad weather, corn farmers experience increased demand for their crop as an input for livestock feed.
  • Population - A growing population results in higher food demands.
  • Trade-weighted index - Exchange rates affect the prices of exported farm goods. The higher the trade-weighted index, the less competitive American farm products are in international markets.
  • World GDP - As the total value of goods and services increase globally, demand for agricultural imports increase as well.

Farm Locations

Who are the key competitors in the Farm market?

The sector is highly fragmented, meaning no single company has a significant market share. Cargill Inc., the company with the largest market share, holds just 1.6% of the market.

  • Agribusiness operations (33.7%)
  • Supermarkets, convenience stores, and grocery stores (17.7%)
  • Farms and direct farming activities (15.9%)
  • Food service industries (15.9%)
  • Other markets, including hospitals, hotels, airlines, and miscellaneous retailers and food suppliers (10.5%)
  • Export (6.3%)

What are the key financial metrics and costs in the Farm market?

The key financial metrics in the Farm market are as follows:

Profit - Profit in the Farm industry is volatile. It varies from farm to farm and year to year, based on weather patterns, yield, and commodity prices. Farm profit averages 5.8% EBIT.

Purchases - Purchases are the largest expense for the industry. On average, farms spend 63.9% of their revenue on inputs such as fertilizers, pesticides, farm supplies, agricultural machinery, feed, and animals.

Wages - Wage costs are low in the farm industry, largely due to the fact that many farms are owner- and family-operated. Wages average 9.8% of industry revenue.

Other - Other costs (14.3%) include rent, utilities, outsourced services, veterinary expenses, and warehousing.

What are the keys to launching a new farm?

  1. Location - Depending on the type of farm you want to start, be sure you locate in an area that is well-suited to what you are trying to produce. For instance, a rice farm would not be successful in a dry climate. In addition, new farms must be sure there are no limitations on land and building use for their proposed location.
  2. Planning - New farms need a business plan that accounts for infrastructure, financial needs, marketing strategy, and the farmer’s production capacity and knowledge.
  3. Education / Experience - These are essential to understanding plants, animals, and pests on a farm. Farmers must be knowledgeable about their particular crop or herd so that they can readily spot any problems.
  4. Size - Small operations are less expensive to start up, and mistakes will be less costly. A small farm can be more agile in responding to market demands.
  5. Time management - Each crop and livestock enterprise has a different timeline. Too many activities scheduled for the same day or week will mean something will be delayed. Weather must also be factored in since inclement weather will make some days unsuitable for some activities.
  6. Risk management - Farmers can manage risk with careful financial planning and/or diversifying their crops or animal production.

What are the typical startup costs for a new farm?

The one-time costs for starting a farm include:

  • Land and buildings
  • Farm equipment and machinery
  • Legal expenses

In addition to these one-time costs, a farm typically needs to purchase the following products and services on an ongoing basis:

  • Farm inputs - Fertilizer, herbicides, pesticides, seed, feed, etc.
  • Business license
  • Supplies

Farm Leasing Basics

How much do Farm operators make?

According to data from the US Bureau of Labor Statistics, the median wage for Farmers, Ranchers, and Other Agricultural Managers was $64,170.

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Additional resources in the Farm market

For additional information on the Farm market, consider these industry resources:

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