Wednesday, November 21, 2007

Money Matters

Starting in my 30's I began to seriously research what I would farm, how I would accomplish my dream, and what was necessary to make farming a possiblity for my family. As I worked my way to management in the computer industry, I learned how to calculate costs and return on investments over time. I applied these things to the dream.

A epiphany came when I was researching requirements for selling dairy products. I was helping out at my cousin's goat farm in Michigan and asking questions of her suppliers and friends. I learned that a combination homogenization/pasteurization machine often sold to small villages in Africa would cost around $10,000. The friend recommended that I consider purchasing that machine if I intended to make a go of it in the dairy goat business.

I only wanted 5 goats for milking. A handful for meat and the rest would be sold. Here's how the calculation goes. If I milked a gallon from each goat each day that would be five gallons a day or 35 gallons a week. Some milk would be reserved for family use making about 30 gallons available for sale each week. If I sold the milk for $3 a gallon - the retail price then for goats milk, I could potentially make $90 per week on milk.

$90 is gross income. I factored in my costs. My feed would cost approximately $32.50 per week. This is the only cost I considered. At the time, I didn't count mileage or water or anything else. The net weekly income would be $67.50.

The next question is how much would I net a year from selling milk and how much would I save my using my own milk products. 5 gallons a week would provide for cheese, butter, cream, yogurt and drinking milk for the family. At the time of the calculations, I estimated I would save about $7 per week by using my own stuff. Added to income, it makes $73.50 per week. Just multiply by 52 to the annual net income - right? Wrong. Female dairy goats need to be bred every year to keep up the milk supply. They dry up for about 2 months before giving birth. That's at least 2 months of no milk pre-birth and 1 month pst- birth. No milk for 3 months or approximately 12 weeks. Take twelve weeks off the year.

Now at last I can get an answer. Will I be able to make a dent in the cost of the equipment in a year? $73.50 X 40 weeks = $2940. No - not at all.
I do not want to take out a loan for $10,000. I am extremely debt adverse and that was before I heard of Dave Ramsey. I wanted to earn the money up front. It would take about three years at full production to earn enough money to pay for the machine in cash. That was not appealing to me and I began to research other options.
I will write more on considering the money needed and its relationship to sustainable farming in the following weeks. Stay tuned.
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