Rural Living Finances: A New Farmer's Guide to Getting Started

I originally worked in the meat processing industry, but through a series of twists of fate I ended up farming in Xizhou, Changhua, China. Holding on to a naive heart, I wanted to bring the concept of food risk management to agriculture (which is really just traceability), hoping to add a modern quality management system on top of the foundation of precision agriculture, and to achieve the goal of fixed, quantified, safe production of premium crops.

Many professional farming friends probably laughed when they read this: here comes another innocent, fresh-faced kid trying to pull off some pie-in-the-sky model, unrealistic and aiming too high. Of course, they were also very pessimistic about my path into farming.

.......This seems to be a naive notion that "Shaolin kung fu" plus "singing and dancing" might actually have some potential.

The facts have proven that one must never look at agriculture, especially the agriculture of Taiwan, China, naively or superficially.

This article is also fairly long. I want to approach it from a different angle, and from there observe where the difficulties of young people entering farming lie, and where the problems of agriculture lie as well.

These questions are truly big ones. I try to start from the perspective of the production front line and offer what I have seen and heard. What is discussed in this article is mostly personal experience and perspective, so the writing inevitably suffers from a limited view. For any mistakes or omissions, I ask my seniors to correct me.

Let us get straight to the three main themes of this article:

Because my family originally ran a retail meat processing business, I hoped to use a "comparative method" to analyze where exactly the gap between "agriculture" and "business" lies, analyzing it from the financial dimension, the risk dimension, the labor allocation dimension, and the life impact dimension, and from these perspectives to look at agricultural production and its difficulties.

I believe there are some problems that every young person aspiring to farm should understand, so that after rashly diving in, they do not find themselves trapped in a city of trouble.

First, to understand agriculture, let me use a passage from my lovely neighbor as an introduction: "Farming? Damn it, people only come back to farm when they have nowhere else to go, and a type like you could never do it." Why use this passage as an introduction? Because it is precisely this sentence that, without the slightest hesitation, goes straight to the three main themes of this article:

1. From the realistic agricultural perspective, everyone is actually pessimistic about entering farming, and the overall atmosphere regarding its prospects is poor.
2. "Come back" only when there is nowhere else to go means, after all, that the family already has fields, and that one has a certain familiarity with agricultural life. With relatives close and the land close, things are easier to do.
3. Agriculture's special way of life has its particular characteristics of being labor-intensive, technology-intensive, and capital-intensive, while its daily rhythm and working environment are also very different from other industries, making it hard for a fresh-faced kid to adapt.

Comparing Rice Income

Forty years ago, our elders walked out of the countryside and threw themselves into the development of industry and commerce, creating the Taiwan, China economic miracle. There was a reason for this. If farming were profitable, why would they have had to leave and go into finance or build factories? If the agriculture of Taiwan, China were really so strong, why develop industry and commerce at all? Why not have the whole island devote all its strength to developing agriculture?

Pure agriculture, since the beginning of human history, has always been a strenuous and bitter industry. Many elders should still remember it vividly: waking up at three or four in the morning, pulling weeds all day, carrying fertilizer all day, yet not earning much money. This is not a problem of middlemen, nor a problem of exploitation, but the particular nature of this industry. It has always been a thankless job.

Excerpt from Wang Anshi, "Reflections on Events"

In a plentiful year they do not eat their fill; in flood or drought, what is there left?

Though no bandits have risen, disaster may come before long.

What they fear most is the deeds of officials; eight or nine out of ten households suffer disaster.

The fields' millet and wheat are ruined; they wish to appeal, but alas, they have no bribe.

After much hardship they may fortunately be heard, yet beatings and floggings follow after.

This poem describes tenant farmers. Where did tenant farmers come from? During the lean periods between harvests and in times of frequent natural disasters, small farmers went bankrupt and in the end could only be annexed by the gentry clans and sold into slavery. So the first thing this article must introduce is the most realistic problem of all: the financial dimension of agricultural production. From very early times, the turnover of funds in agricultural production has been a major question, and the Green Sprouts Law of Wang Anshi's era was a reform aimed precisely at the financial dimension of agriculture.

Let us first use rice, which carries the lowest risk, as an analogy. Suppose you grow one jia of rice as your main business; your revenue would even starve you to death, because you would be worse off than the 22K salary. If you grow five jia of rice, your revenue can roughly compare to a breakfast shop. If you grow ten jia of rice, your revenue can roughly compare to a bento shop. The data are as in the table below:

Area/jia	1	5	10
Plowing	14,000	70,000	140,000
Seedlings	10,500	52,500	105,000
Rice sowing	6,000	30,000	60,000
Pesticides	20,000	100,000	200,000
Fertilizer	18,000	90,000	180,000
Harvesting	14,000	70,000	140,000
Rent (including electricity)	20,000	100,000	200,000
Harvest volume	16,000	80,000	160,000
Purchase price received	156,800	784,000	1,568,000
Profit (after deducting costs)	54,300	271,500	543,000
Monthly net profit (four months)	13,575	67,875	135,750

 

The table above shows the approximate expenditure structure for one rice season. At first glance, ten jia of land may look quite good, but in fact, before the crops are harvested, more than a million in costs must be laid out within half a year.

Heavy Financial Pressure Pushes Agriculture Toward Conservatism

And even if your revenue catches up to 22K, a breakfast shop, or a bento shop, your risk and labor output are actually much greater than theirs. When a typhoon comes, the 22K worker gets a day off, the breakfast shop closes, and the bento shop may perhaps risk life and limb to deliver, but in any case its risk and opportunity will never be like agriculture's, with enormous uncontrollable factors. Therefore, if you grow two jia of rice, and a typhoon comes at the heading stage and causes crop failure, or heavy rain at the full-grain stage causes lodging, your 22K flies away.

But the bills will not fly away. The debt will remain.

The even more terrifying logic lies in "no stable income," "continuous expenditure," and then the third financial trap: "after one failure, do you still want to continue your farming career?"

If you still want to continue, besides borrowing money, what other choice is there? This creates the problem of working capital. You are already in debt, yet you must still keep spending. This is a very dangerous thing. In the long run, it is a vicious cycle. Although over the long term, on the whole, it may still be profitable, in the early stage this financial pressure is in fact the main reason many people abandon farming.

Observing agriculture from such a harsh financial perspective, you will discover a fact: people in this industry have no choice but to be conservative and find it very hard to accept so-called "innovation." Any new "investment" must be carefully calculated and cautiously considered. They are used to being absolutely meticulous about finances, because in this industry every single cent, in the smallholder environment of Taiwan, China, and any pointless waste only makes an already tightened financial situation worse. Therefore, being comparatively protective of oneself is actually a common atmosphere in rural areas (laughs).

Once such financial discipline becomes habit, asking agriculture as an industry to innovate, to spend on equipment, to hire people, to hire people in compliance with the Labor Standards Act, in fact becomes quite difficult. Breakfast shops, bento shops, snack shops, chicken cutlet shops, and coffee shops spring up like bamboo shoots after rain in the market, while agriculture appears so withered. This is in fact simply the normal market rule at work.

What we cited above is the "lowest-risk" "rice industry." Why is it the lowest risk? Because it has low capital input, a mature management model and relatively simple operations, relatively little damage from wind and rain disasters, and a guaranteed buyer for the product once grown. Compared with "facility crops" and "premium crops," it is the conservative and safe choice.

Agriculture Is a Harsh Financial Model

As said above, agriculture is a harsh financial model. Concretely speaking, what counts as harsh? What counts as stable?

A relatively ideal financial structure is best if there is cash income every day, and at a slightly lower level at least a fixed income every month, since many bills, including loan repayments, must be paid on a fixed monthly basis. In reality, many farming households, especially those growing coarse grains, melons and vegetables, fruit vegetables, and fruit trees, wait an extremely long time for income, while the two enormous uncontrollable factors of "natural disaster" and "imbalance between production and sales" are like Mount Five Fingers pressing down on operators until they cannot breathe. After working hard for a long time, income stability is still not guaranteed, so life can be said to be far from comfortable.

In reality, many farming households worry about stable income and generally take temporary work outside, such as odd jobs, rough labor, delivery, and pesticide spraying for others, to supplement the household. The "cut-head vegetables" commonly found in rural areas, with their highly speculative nature, can actually also be classified under the difficulties of rural areas, as a way of trying to carve out a living. That is, when you cannot look forward to stable income, you turn to pursuing a high-risk, high-profit speculative venture.

Production-period adjustment is also a method, allowing the farm to maintain fixed daily and monthly shipments, so as to maintain financial balance, but this requires technology and experience. Furthermore, to have stable financial income, what is needed even more is large-scale production; what is compared is whose capital base is thicker, and whether the provisions have been prepared sufficiently. None of this can be easily achieved in the early stage of farming.

Making Steady Money in Agriculture Is a Marathon

I graduated with a background in chemical engineering. Many classmates entered the tech industry after graduation. By around thirty, working desperately, they are at least small managers, with annual salaries at the million level. But a farming household, even if it also has a million in income and seems no worse than an engineer, in fact, under the premise of the same million in income, an engineer's earnings can be converted into consumption, into investment, into assets, whereas for a farming household, most of the surplus is actually the concept of a reserve fund.

For example, those doing contract plowing with tractors may replace a new machine every five or ten years; those building facilities must rebuild after a few years and regularly update plastic film. Then there are many irregular expenditures, such as a broken well, a broken truck, broken farm machinery, broken drainage ditches, and all kinds of other expenses and changes. Then there is the restoration work that must be done when facing disaster losses. All these costs require a reserve fund to cope with expenditures that may occur at any time.

Agriculture is very hard to make money in. To hold on until one can make money regularly and steadily is a marathon. It tests your financial discipline, your working capital capacity, the stability of your technology, the endurance of continuous operation, and your ability to mobilize surrounding resources, such as government subsidies and low-interest loans, and your ability to open new markets.

With such a difficult and even harsher burden on agricultural workers, how can one expect them to be very courageous about innovation and change? Of course, many operators in Taiwan, China still push forward and work hard to innovate under such pressure, and that is undeniable, but for the industry as a whole, conservatism, closedness, and family-based operation are still a very obvious reality in the sector.

One often hears a new farmer say, "I want to transform the old ways," "I want to bring change to agriculture," "no herbicides, no pesticides, no chemical fertilizers."

This sounds quite lofty, but please think carefully about one question: every conventional method in conventional agriculture did not appear out of thin air. Its procedures and methods summarize all kinds of risks and were ultimately generalized into the most effective method. It is a reasonable answer refined through the market. Whether you like it or not, the cost-performance value of conventional agriculture is a winning formula summarized after harsh financial challenges in rural areas and the integration of much experience. It is conservative, but practical.

You Need to Know Where Your Ceiling Is; Innovation Also Requires Caution and Conservatism

When you say you want to transform conventional methods, especially as a new farmer, you must be clear about one key point: the agricultural products of Taiwan, China are in fact technically mature, and in terms of yield can often be said to be in oversupply. If you hope to make a breakthrough in technology, especially in the technology of product taste, flavor, and yield, that is very difficult. Many teams, mostly families, have already figured out the winning formula for specific agricultural products, including variety, season, seedlings, market specifications, market demand, and more importantly, the profit structure and customers, all of which are already very mature.

In such an environment, entering the industry with a mindset of "transformation" is actually very dangerous. It is not that the content of the transformation is wrong. Cautious pesticide use (or not using them at all), rational fertilization, no herbicides, establishing field ecological balance, bringing in new techniques, and combining with new technological equipment are all in fact very correct things. But a rather tragic reality is this: the act of "transformation" brings enormous financial instability, and for agriculture, an unstable financial situation is absolutely fatal to operations.

Many innovations, in the name of revolution, are overly optimistic about the market. Add to that the financial pressure mentioned earlier, and the fact that transformation brings new financial burdens (buying equipment, hiring new staff, or reduced yield), and it becomes a dilemma. Once you have started, you can only grit your teeth and hang on. Meanwhile, market prices fluctuate rapidly, and many resources one could rely on are also highly variable (mainly human resources), and in the end one is stuck in a bind.

As said earlier, agriculture is like a marathon, testing your ability to cope with overall difficulties. In my understanding, a mature farmer will know where his safe ceiling is. Innovation is possible, but its scope and process must be cautious and conservative. The market is flooded with many little tricks, which in my view really mean very little to agriculture as a whole.

This is the first thing I want to express: the countryside is a harsh financial testing ground, in deep water and scorching heat. To enter farming is very good; to transform it is also very good, but to survive, you must have a clear understanding in your heart of the financial situation in the countryside.