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Big decision: Expanding the farm

The decision to expand the farm has now been made, contracts have been signed, and money has changed hands.

At the end of 2022, it became evident that the farm adjacent to ours was going through a change.  For the first time, our neighbour didn't rent any fields from us.  Our neighbour is in his early 70s and has been farming on his great-grandfather's farm since the age of 12, as soon as he could reach their tractors' brake pedals.  

Last summer he planned hosting his granddaughters for six weeks but it was all too much and the girls ended up spending five weeks with us, while their parents were away because of their job ( both are doctors).  In fact, our neighbour has three daughters, and their husbands are all London-based professionals. Mr. Clark and his wife would be in our house several hours a day to spend time with their granddaughters. It's not that they didn't love them it's that 24/7 was all a little too much, Mrs Smith is not doing very well and it quickly became apparent.

Mr. Clarke is an important source of information on our land and about everyone in the county.  Twice he mentioned the idea of selling the working part of his farm (everything apart from the farmhouse).  As his immediate neighbour, we are the obvious buyer of his cattle farm. 

My wife and I sat down for a discussion because our plans had always been to expand the farm from its current 600 acres to something more reasonable, especially as the demand for cheese (goats) and butter (cows) exceeds our supply several times over.  We estimated that for our needs, and to transform the farm into a commercial operation, as opposed to what it is now a medium-sized family farm, we need to triple the size of our operations.  Economies of scale are critical to successful farming, in addition, our business model has changed, whereas initially, we focused on the restaurant and hotel trade, the covid outbreak provided us with an unexpected revenue stream; direct-to-consumer trade now accounts for nearly a third of revenues, and about the same in terms of profit.  

To reach this objective we need to more than double the size of our pasture, and quadruple our corn fields, we underestimated the amount of hay and corn our cattle needs.  In fact, it's Mr. Clarke who pointed out that this year's harvest was one of the best, so in a bad year, we could expect production to be 20% to 30% lower.  

Mr, Clark's farm is nearly perfect with more than  600 acres of land.  The price is a little higher than what we paid for our farmland but is about right and his fields are in excellent condition (ours had been abandoned for a few years).  It is also contiguous to our property only divided by a county road.  Obviously, following our extraordinary windfall two years ago we had made reserves to expand the farm.   

As hands-on managers, we could operate the farm as is for the next 15 to 20 years (assuming no further health scares).  However, we are well aware that none of our children have much interest in farming, so our choice is either a small hobby farm or a proper commercial farm.  Following our conversation with Mr. Clark, and a full analysis of his land.  We made an offer.  it was a brutal negotiation process, it started a Thursday evening at the local pub around 6 pm, and it was concluded at 6.05 pm on a handshake.  The witnesses were the entire local farming community, and one of the farmers present even mentioned that his youngest son had only recently finished his master's in farm management (how very convenient...).

With the expanded acreage we can justify hiring a property manager with a team of forman.  In other words, our management cost of overheads which currently includes our foreman, my wife and I (the only one getting a salary is the foreman), will rise from about ₤ 50,000 to nearly ₤ 200,000.  We need economies of scale to justify these necessary expenses.  Our annual payroll is about ₤ 3.5 million, and our total farm capitalization is near ₤20 million.  It provides an order of proportion as to the scale of our operations, and yes we do have a human resource person (my wife) and we do have a CEO/CFO/dogs body (me) that oversees everything.  However, the additional land will allow our farm to almost quadruple its output, because my neighbour's land is very productive.

Over time this should greatly reduce the burden on my wife and me, especially now that the grandchildren's "road train" has begun in earnest.  Giving us more free time.  But that's all in the future.  now we have to add infrastructure and equipment.  

It will be fun.

Note:  The sale is still pending because the land needed to be surveyed.  The last time this property was surveyed was in 1948 when it was acquired  (from my wife' great-grandfather).  Land surveyor is a very specific profession and there is apparently a shortage.  We signed the sale agreement in early August but we are still waiting for the survey to be completed and filed with the local county.









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