How to Start Agricultural Farming Business

Agricultural farming is one of the few industries in the U.S. with a consistent history of trade export surpluses. Just in the first three quarters of 2010, the U.S. Department of Agriculture estimates that farm cash receipts have reached $301.8 billion. Considering that 54.4 percent of the farm businesses in the U.S. are less than 100 acres, these statistics indicate a distinct opportunity for growth for those interested in a farm start-up business. In fact, a 2008 USDA long-term projected growth report estimates continued farm export growth by 26.25 until 2017.

Step 1

Select a farming specialty and develop a business plan. Farming falls into three categories: crop, wind and animal farming. Crop farming consists of growing plants, such as trees for lumber, corn and soybeans. Government grants have created a new revenue source for farmers called wind farming where farms harness wind energy using giant wind turbines. Animal farming is the raising of animals to produce such products as milk, cheese and beef. Factors affecting the choice of farming specialty include the farm’s location and the farmer’s level of business and agricultural experience.

Step 2

Write a business plan for the farm. A business plan will help define the farm's business, startup expenses, lines of distribution, operating expenses and future profitability. Farmers also need a business plan to apply for farm loans and government grants. Farmers can contact their state's department of agriculture for business assistance. These state departments provide state agricultural business statistics, information on crops, product distribution and warehousing system information, export assistance and assistance to receive federal, state and county grants.

Step 3

Acquire financing for living expenses, the farm and equipment. Agricultural business requires a strong farming business plan. It is essential to include living expenses as part of the business plan because income is delayed until the begins to farm produce. Farms have many options in getting federal and state agricultural grants. Existing farms can receive cash grants, such as crop and dairy subsidies. The USDA offers loans for first-time farmers. Minorities, veterans, the disabled and women seeking to start a farm business have even more opportunities to obtain financing since these groups are often under-represented in the agricultural industry. Small business farmers can find information on getting small business bank loans and government grants by visiting Grants.gov and Business.gov.

Step 4

Hire an accountant. Controlling and monitoring farm operating expenses is crucial to profitability. An accountant with farm operation experience can help small business farm owners establish accounting systems to oversee and control costs, identify deductions to lower taxes and assist in finding agricultural vendors. The American Accounting Association offers information on how to hire an account and business referrals throughout the country. American Accounting Association 5717 Bessie Drive Sarasota, FL 34233-2399 Phone: (941) 921-7747 Fax: (941) 923-4093 Email:info@aaahq.org

Step 5

Research and follow all federal, state and local business and agricultural laws, zoning and regulations pertaining to the farm. Farming is a business so all business regulatory laws apply. This means the business must state the business structure sole proprietor, partnership or limited liability company. All farms must register as a business, however, employment laws vary from state to state depending on the amount of agriculture a state produces. Two factors that directly affect a farming business are city zoning law and the Environmental Protection Agency (EPA). Farms must follow EPA regulations on such things as water run-off, wet land designations, protected habitats and chemical applications. The EPA supported National Agriculture Compliance Assistance Center helps farmers with environmental protection issues and EPA regulations. The government recommends that farmers contact the center for detailed information tailored to their specific farming business. Farms that do not comply with EPA regulations face fines and closures. The National Agriculture Compliance Assistance Center 901 North 5th Street Kansas City, KS 66101 Toll-free phone: 1-888-663-2155 E-mail: agcenter@epa.gov Fax: 913-551-7270

Step 6

Find appropriate farm property. Retain a real estate agent who specializes in farmland sales and consider purchasing an existing farm business. Farming requires land, equipment, farm buildings and supplies. An experienced farmland realtor understands these requirements and can direct new farm start-ups to land that will best support their farming business. Always consider existing farm businesses to save money because they often include the farm equipment as a part of their price. Always hire an attorney to review all business contracts. Before signing any contract, check local and state zoning laws to address any compliance problems and make sure the property's mineral rights are included in the sale. Many Texas farmers have regretted not owning mineral rights after discovering oil on their land.

Step 7

Establish farming operations, purchase equipment and begin farming. Once the sale is completed, farm business owners must have all licenses and permits approved before starting any building construction and land preparation for farming. Farms without permits and licenses in place before farming may find it difficult to bring their products to market because the government closely monitors the food supply through the USDA.

Things Needed

• Business Plan
• Financing
• Attorney who is a specialist in agricultural law
• Accountant
• Farmland
• Farm equipment based upon the type of farm
  

References (5)

• IRS: Agriculture Tax Center
• Nebraska Agriculture Economics Department: Is Farmland a Good Investment?; Glenn A. Helmers; 2001
• U.S. Farm Services Agency: Price Support Services
• Amber Waves: Farm, Rural, and Natural Resources Indicators; Amber Waves, September 2010
• IRS: Publication 225; 2009 Farmer's Tax Guide

Resources (5)

• Economic Research Service: State Facts
• Environmental Protection Agency: Agriculture Business Assistance Topics
• Nastional Sustainable Agriculture Information Service: Finding Lawn to Farm
• National Institute of Food and Agriculture: Family and Small Farms
• US Department of Agriculture: USDA Long-term Projections