Posted by Jerry/MT on December 12, 2011 at 10:47:19 from (206.183.116.145):
In Reply to: Myth Or True? posted by Rdandersom on December 12, 2011 at 07:08:55:
I don"t think it matters whether you use horses or tractors to farm. It"s managing in such away that you don"t carry a big debt load. The old timers didn"t start out with 2000 acre farms. They wisely built up their holdings when it made sense to do so and had the money to pay for it and they tried to stay away from debt.
Some modern farmers want to start big so they borrow, buy new machinery, in many cases oversized to their needs, and finance it by borrowing. Since the margins are slim, it takes many acres of production to just cover the debt payments. If the price drops or the costs rise, or both, there isn"t enough $"s to cover the debt payments and now they end up borrowing more to pay that. That"s a recipe for disaster and it"s just plain nuts. It"s just like what our national government is doing.
All these university economists say you have to get bigger but that"s because their models don"t see the downsize to "bigness". The ecomomies of scale are often overshadowed by the difficulty in profitably managing "bigness" and their models don"t allow for this. They assume a "perfect world".
Look at all these mergers of industrial companies. I challenge you to show how all these mergers have realy made these companies any better. They end up spinning off companies and divisions because they can"t really effectively manage vast numbers of people and make money. Their money is made selling off parts of the busimness not by integrating and effectively managing the whole shebang! The management difficulties overshadow any gain from the "economies of scale". Look at Russia. Their collective farms were analogus to mega farms. Their "central planning" ruined them and they couldn"t even feed their own people i some minimum fashion. Their workers wee just paid help who got paid whether they worked hard or not.
Family farms were probably the most efficent farms because everyone had a stake in the outcome and nothing was guaranteed. There was a great deal of incentive to innovate and make a profit- you wanted to eat and have a roof over your head! Even then it was a crap shoot. It never was for the faint of heart.
When farms have to hire lots of outside labor or spend tremendous dollars to mechanize on the thin margins avaiable to farming, it becomes an even bigger crapshoot to make money. i"ve done it again. I got on my soap box. Sorry guys.
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