1979 - Volume #3, Issue #6, Page #23[ Sample Stories From This Issue | List of All Stories In This Issue | Print this story | Read this issue]
Rent-A-Barn Plan Helps Young Dairymen Get StartedAt today's sky-high investment and interest costs, there's just no way a young dairyman can get started on his own. Right?
Wrong! Greg Johnson and a few other young tigers like him in Western Wisconsin are doing it the Rent-A-Barn way.
Greg, 19, rents a barn from a neighbor along with the silo, pipeline system, bulk tank and barn cleaner. He owns the 33 cows which completely fill the barn and buys all the grain, hay and silage. In his first full year, the herd averaged a very respectable 726 lbs. of butterfat and 19,802 lbs. of milk. During the year, Greg was able to buy most of the hay for under a $1 a bale, corn for just under $2 a bushel, straw for about 75c a bale and corn silage for right at $33 per foot.
"At those prices, can a young dairyman afford to tie up his money in land costing $1,500 or $2,000 an acre?" Greg asks.
So what's a fair price to pay for renting an unused barn and equipment?
Larry Larson, farm financial management instructor at Wisconsin Indianhead Technical Institute, New Richmond, suggests the following guidelines:
First figure out what it would cost to build and equip the barn new. Suppose the figure is $50,000. Then, you take out 10% for interest, 3% for depreciation, 11/2% for annual repairs, and 3% for taxes. Using those rates, it figures out to $8,750 (171/2% of $50,000). Add 10% to this figure for profit to the owner and you end up with a total annual cost of owning the barn of $9,625. For older barns that have already been depreciated. Larson recommends using 50% of the cost of replacing the barn as the figure you start with. Equipment outside that used in the barn can be figured the same way, although you may want to raise the amount charged for repairs. Generally these figures include the renter spreading manure back on the owner's land. Also, established farmers are often willing to help a young farmer get established and may offer considerably lower rates, Larson points out. He believes the Rent-A-Barn system could work equally well for hog, poultry, beef or sheep operations.
If you've got an unused barn in good shape that could easily be set up for dairying, you may want to check into the possibility of renting it to a young man wanting to get started in dairying. And, if you're a young man looking for a way to get started in dairying, maybe you should scout around the community for an unused barn waiting to be rented.
In either case, you can get helpful suggestions on how to set up a Rent-A-Barn agreement by contacting: FARM SHOW Followup, Larry Larson, Farm Financial Management Instructor, 11'isconsin Indianhead Technical Institute, New Richmond, Wis. 54017 (ph 715 246-6561).
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