Filtra per genere
- 61 - 60: 3 Steps to Farming Success
Noa Schecter came from what used to be a farming country: Israel. Now Israel has “changed their wardrobe,” becoming more entrepreneurial than agricultural, but she remembers field trips to the farm and helping farmers during harvest.
Now she lives in Los Angeles, and she’s an educator and the author of two books: What’s On Your Mind and 51+ Networking Mistakes. She is co-founder and co-owner of The Accelerated Leadership Academy (TALA), a coaching company that creates sustainable results for individuals in the areas of health, wealth, and happiness.
She was kind enough to join me on the podcast, where she translated her “3 Steps to Success” to the world of farming.
Tue, 14 Feb 2017 - 23min - 60 - 59: 7 Questions to Ask Your Grain Marketing Advisor
Every time we talk to a farmer, we ask, “What’s the number one challenge on your farming operation.” About 99% of them say grain marketing.
Usually our next question is, “Are you working with a grain marketing advisor?” Basically, what are they doing to overcome that challenge? Through those questions, we’ve found that lot of them are afraid of the grain marketing advisors.
So I thought I’d throw together some questions you can ask to help you test an advisor’s credibility. There are so many grain marketing advisors, so this will help you determine if a particular one is the right one for you.
Tue, 07 Feb 2017 - 14min - 59 - 58: Commodity Options Fundamentals
Commodity options are some of the most important tools in hedging, especially once you get to grain above and beyond your insurance guarantee.
Most farmers understand what that means: you’re insured for a certain percentage of your crop that you’ve proven over the past 10 years for each commodity you farm. What you can’t insure, you’ll want to use options on, or something similar.
Today, we’re going to march through some of the most important, fundamental concepts related to options.
Tue, 31 Jan 2017 - 16min - 58 - 57: 3 Low-Risk Off Farm Investments
Sometimes, you shouldn’t invest in your farm.
A lot of times, when commodity prices and incomes are high in agriculture, the return on investment to put your money back into farmland and equipment just isn’t there. All those prices are exaggerated.
There are actually times when you should not invest in your operation, when you should take that excess cash and put it somewhere else, diversifying your income. That’s what we’ll be talking about today: where you should put your money so it’s growing at a better rate than it would in your farm.
Tue, 17 Jan 2017 - 08min - 57 - 56: Financial Push-Ups - 7 Exercises To Grow Wealth
Exercises have different rhythms.
Some you’re supposed to do every day, some weekly. There may even be long runs or tons of push-ups that you reserve for one day a month.
Handling your finances has different rhythms to it as well. I’ve got seven exercises that people should do on a daily, weekly, monthly, or quarterly basis to increase their wealth.
Tue, 10 Jan 2017 - 11min - 56 - Ep 55: 3 Ways to Manage Income With Real Estate
Last week, we talked about managing income. We’re revisiting that topic, but this time specifically around real estate.
Today, we’ll be focusing on the tax advantages of real estate, which I learned from Paul Moore’s book The Perfect Investment, as well as a few real estate deals of my own.
Tue, 03 Jan 2017 - 08min - 55 - Ep 54: 3 Simple Income Tax Management StrategiesTue, 27 Dec 2016 - 06min
- 54 - Ep 53: Improving Success with Escapism
Every truly successful person I've ever meet or read about has a hobby that provides him or her with escapism. The opportunity to escape somewhere at some time in our daily lives to free our mind and improve personal happiness is so important to obtaining and sustaining success.
In this episode, we discuss a few healthy ways to escape our professional life so you can ultimately be more successful.
Tue, 20 Dec 2016 - 12min - 53 - Ep 52: Real Estate Valuation Strategy for Farmland - Cap Rate
It’s always a challenge to value real estate, especially when it comes to farmland.
After reading Paul Moore's book The Perfect Investment, my perspective on valuing real estate at a professional and investment level was changed dramatically.
So many farmers only think about the dollar per acre amount and not what Paul talks about in his book: “cap rate.” Today we’re going to unpack cap rate and how that makes a difference when you’re valuing real estate. You’ll learn how you can put a number all the real estate values that you operate on your farm.
Tue, 13 Dec 2016 - 09min - 52 - Ep 51: US Special Forces Army Ranger to Rancher: Reinventing Ranching With Wagyu BeefTue, 06 Dec 2016 - 28min
- 51 - Ep 50: 7 Sources of Off Farm Income
Let’s set the stage: you’re a farmer with a can-do attitude, but unfortunately you’re on the brink of having to give up the farm. Your main operation just isn’t making what you need.
But there’s a wonderful reality working in your favor: there are people out there who aren’t like you. In fact, they will pay you to do certain work for them in more places than just the farm. This extra work just might help you keep the farm.
This episode is an interview with Matt Brechwald, co-host of the Off Farm Income Podcast, about what that extra work might look like for you. Today, we’re going to go over seven sources of off farm income.
Tue, 29 Nov 2016 - 42min - 50 - Ep 49: Financial Principles of Ancient Babylon (Part 4): Inheritance
At least on paper (though that may not translate to cash), farmers are wealthy. Many are understandably concerned about passing those assets down and not having the next generation ruin the business. Some don’t even let their kids make business decisions until they’re almost completely out of the picture, which might not be until they’re in their 80s.
There are two really good stories from The Richest Man in Babylon that deal with the concept of inheritance. I think they hold a lot of wisdom for farmers and landowners today.
Tue, 22 Nov 2016 - 11min - 49 - Ep 48: Financial Principles of Ancient Babylon (Part 3): Debt Management
One thing is clear in my conversations with farmers: the biggest challenge they face is making their debt payments.
Part three of our series on the financial principles of ancient Babylon pulls from The Richest Man in Babylon. Today’s lesson is about managing your debt and working with the holders of your debt to have a realistic plan in place.
Tue, 15 Nov 2016 - 10min - 48 - Ep 47: Financial Principles of Ancient Babylon (Part 2): The 5 Laws of Gold
One weekend, my son and I went to Minneapolis, and I had him listen to The Richest Man in Babylon. I wanted him to hear it, since it’s had such an impact on me.
Then I found that the one listen wasn’t enough for me. I listened to it again the next day after our trip, and I couldn’t help thinking about how much rich wisdom it held.
It’s especially helpful for where farming’s at right now, when things are tight and stress is high. I just had to share what I’ve learned with you.
Tue, 08 Nov 2016 - 11min - 47 - Ep 46: Financial Principles of Ancient Babylon (Part 1): The 7 Cures For A Lean Purse
The Richest Man in Babylon is one of my favorite books of all time. It’s so good, I read it twice in one weekend.
Babylon was one of the wealthiest cities of ancient times, because of the financial principles of its people. They recorded stories and fables with these lessons on clay tablets which were unearthed not too long ago. Those tablets are the foundation for the several stories that make up The Richest Man in Babylon.
One of my favorite principles from the book is the one we’ll be discussing today: seven cures for a lean purse.
Tue, 01 Nov 2016 - 10min - 46 - Ep 45: 5 of Genghis Khan's Strategies To Conquer Modern Farming
The Mongol dynasty made Alexander the Great’s look pitiful. Genghis Khan reorganized the world: he connected China to the west and developed gunpowder. For around 100 years in the 12th and 13th centuries the Mongols dominated from Italy to China, to Russia, to India, to Turkey—basically most of the known world.
Granted, Genghis Kahn was about the worst human being you can imagine. He would go into a city and kill everyone if they didn’t cooperate.
But on strategy alone, there’s a lot for farmers to learn from Genghis Khan and the Mongols.
Tue, 18 Oct 2016 - 18min - 45 - Ep 44: 7 Strategies to Farm Like Famed Investor John Templeton
John Templeton is one of the most famed investors of all time.
This is a guy who in 1939 bought $100 worth of all stocks traded under $1, and by 1943 he had four times his money. He’s up there with the greats.
His strategies, and the way he built his wealth, were so brilliant that I think there are a lot of key values and structures that we could apply to our farming operation to help us be more consistent, profitable, and smart.
In this episode, Scott shares 7 strategies you can use to farm like John Templeton.
Tue, 11 Oct 2016 - 14min - 44 - Ep 43: Top 2 Government Programs for Low Prices
On some commodities, we’ve hit some pretty interesting times. This is especially true with wheat.
Sometimes we just have to be patient for something bad to happen to put prices up. In the meantime, I want to talk about two programs that are essential to a farmer’s cash flow through a tough time like this, if they don’t have the grain sold in advance.
Tue, 04 Oct 2016 - 08min - 43 - Ep 42: 5 Tips to Decide Whether or Not to Store Grain
We’re getting close to harvest time. By the time this goes live, we might even be in it.
It’s important to think about where commodity prices are right now and what to do with grain that you haven’t sold.
So I want to put together a few things for farmers to think about when it comes to storing grain.
Tue, 27 Sep 2016 - 09min - 42 - Ep 41: Do You Run Your Farm Like John DeLorean or General Motors?
John DeLorean was a designer at GM who wanted to produce futuristic cars. He was convinced that the culture of order and structure at GM was holding back creative geniuses like himself.
Since he was a very good salesman, he felt confident in his ability to forge his own path in business. So he walked away from his job at GM in order to produce his brand of futuristic cars.
He failed miserably.
When I talk to farmers, a lot of the same issues from the John DeLorean story arise. They fail to manage themselves and are often making gut decisions rather than logical and planned decisions.
Trust me: there’s a better plan to follow.
Tue, 20 Sep 2016 - 12min - 41 - Ep 40: Why Most Farmers Fear Grain Marketing
In my mind I have a job, separate from my farming operation.
It goes something like this: learn as much as I can, try to relate it to farming, and write or share content that relates to farmers.
That’s what I did with the most recent Tony Robbins documentary. I’m a big Tony Robbins fan; he’s helped over 50 million people, and he’s a pretty amazing guy. When I watched the documentary, I learned something that I think is relevant to farmers and grain marketing today—fear is our biggest problem.
In this episode, I discuss how you can do more than eliminate your fear of grain marketing—you can actually turn it into a beautiful experience.
Tue, 13 Sep 2016 - 14min - 40 - Ep 39: Is Ag Retail the Enemy?
Is ag retail the enemy?
The really depends on what you mean.
I had the pleasure of recently interviewing Andy Wuebben, partner at Vertical Exchange, in this episode. Andy helped answer that all-important question.
Tue, 06 Sep 2016 - 14min - 39 - Ep 38: 5 Key Steps To Run Your Farm Like A Fortune 500 Company
Something like 90% of businesses fail within the first two years. The main reasons? Structure, strategy, and accountability.
When you’ve got millions of shareholders you have to report to (like Apple, for example), Wall Street analysts break down your company and try to out-predict you, and you’re on a whole other level of business. Most small businesses don’t have that same pressure to perform, though, which can be both good and bad.
With my background on Wall Street, helping businesses raise money from investors, I’ve learned a lot of strategies that Fortune 500 companies use. Today, we’re going to apply those to the common farm.
Tue, 30 Aug 2016 - 17min - 38 - Ep 37: 7 Reasons You Should Kiss Your American Soil - Ukraine Farming
A few months ago Scott spent five days in Ukraine—a spur-of-the-moment trip.
He visited a company called Agro-Soyuz in eastern Ukraine, not too far off from where the war’s going on with Russia.
He learned a lot about their company. But he also learned a bunch of things that made him want to come back and kiss his American soil.
Tue, 23 Aug 2016 - 19min - 37 - Ep 36: 3 Tips To Successfully Hire Farm Workers
It's tough to find good help, isn’t it?
Scott’s made a lot of mistakes hiring farm workers, from hiring really close friends to not properly interviewing people, to not setting expectations.
But successful hiring is extremely important, especially in something like farming, where a small group of people are doing complicated, stressful work in an outdoor setting.
In this episode, Scott discusses three things that help with hiring the right people on the farm.
Tue, 16 Aug 2016 - 19min - 36 - Ep 35: Examining the Complex Issues for Farmers in California Today
Scott does his farming over here in the Dakotas, and sometimes this podcast is guilty of focusing only on the type of farming that happens out that way. But of course, there’s a whole country (and world) of farming out there.
So today we’re going to be focusing on some of the hot farming topics in the state of California. This episode is an interview with Vaughn Brenda and Jeffrey Chapman from Valley Farms Supply and Fence Post Ag.
Tue, 09 Aug 2016 - 26min - 35 - Ep 34: 4 Key Skills to Farm Like a Navy Seal
In most categories of life, there’s that one elite group.
In business, there’s the Fortune 500. In the military, there are the Navy Seals.
Scott just read a book called Unbeatable Mind by Mark Divine, who was not only a Navy Seal, but graduated as the top Navy Seal—which is insane. In the book, he teaches how to become what you want to be in life. All entrepreneurs—farmers included—should have an understanding of the mental state and conditioning he teaches in the book.
Specifically, there are four skills Scott learned that will help you farm like a Navy Seal.
Tue, 02 Aug 2016 - 11min - 34 - Ep 33: 6 Paths to Strategic Farm Growth in 2016
If you’re in farming for the money . . . it’s gonna be a tough life for ya.
However, there is a lot of money to be made when you’re really good at it. The worst markets provide the best opportunities.
In this episode Scott shares six ways you can strategically grow your farm—even during the hard times.
Tue, 26 Jul 2016 - 14min - 33 - Ep 32: Top 3 Grain Marketing MistakesTue, 19 Jul 2016 - 10min
- 32 - Ep 31: 5 Ways to Preserve Working CapitalTue, 12 Jul 2016 - 10min
- 31 - EP 30: 3 Ways to Print Money With Grain Bins
Farmers have mixed perspectives on grain bins.
So many bins have actually cost farmers money, allowing them to make bad decisions in their marketing.
But those big tin cans should actually be huge profit centers for the farmer, if used properly. In this episode, Scott tells you exactly how to use grain bins to gain the maximum profit.
Fri, 08 Jul 2016 - 11min - 30 - EP 29: 5 Ways to Print Money With Excess Machinery
Sometimes, even good seasons hide pitfalls.
During the boom times of $8 corn and $16 soybeans three or four years ago, many farmers offset tax burdens by purchasing machinery and using the section 179 accelerated depreciation. A few of us were a bit too aggressive in doing this and ended up with a little more machinery than we should have...
In this episode, we’ll talk about how to monetize the used machines you have sitting around and have excess money instead of excess equipment.
Mon, 04 Jul 2016 - 10min - 29 - EP 28: Goal Tree Strategy for a Successful Farm Business
Last week we went over how to set smart goals. This week we will build what I like to call goal trees in order to build and maintain momentum in achieving our "Health, Wealth, Love, and Happiness" goals.
The success rate with goal trees is very high; adding a coach into the mix who keeps you accountable makes it even higher.
In this episode, we’ll take a look at what the goal tree strategy looks like.
Wed, 29 Jun 2016 - 10min - 28 - EP 27: 5 Strategies to Set Goals for 2016
Setting goals is crucial to keeping motivated and focused—focused on what needs to be done on a daily basis in order to be successful in your farming business.
But aren’t goals only for the beginning of the year? No way.
In this episode, Scott explains why you should set goals right now: goals that are really, really SMART.
Tue, 28 Jun 2016 - 13min - 27 - EP 26: 7 Things I Learned From Warren Buffett That Can Be Applied to Farming
This year I attended the Berkshire Hathaway Annual Meeting, which means I heard six hours of Q & A with Warren Buffett. As a farmer, I was listening from a very interesting perspective, to see if I could transfer the wisdom I heard from Buffett, in particular, to a farming operation.
I got more than I bargained for. When he talks, I listen. I recommend that you do the same.
Here are seven things I learned from Buffett that can be applied to farming.
Tue, 07 Jun 2016 - 16min - 26 - EP 25: Building a Grain Marketing Plan (Part 4): Price Targets
Here it is: the grand finale of our series on building a grain marketing plan!
This last topic is the most challenging and technical part of the grain marketing plan: producing price targets. That is, trying to figure out what’s a good price and when you should sell.
The futures market is tricky; there are a lot of moving parts. If I could predict the futures market, I’d be living on a private island. Too bad...
However, there’s plenty you can understand about the futures. Let’s get into it.
Tue, 24 May 2016 - 18min - 25 - EP 24: Building a Grain Marketing Plan (Part 3): Tools
James and Scott have been talking about building a grain marketing plan these last few weeks. So far, they’ve covered the need to quantify your grain and to handle logistics.
Today, they’re going to talk about all the tools at the disposal of the grain marketer, starting with the most familiar and moving to the less familiar.
Tue, 17 May 2016 - 15min - 24 - EP 23: Building a Grain Marketing Plan (Part 2): LogisticsTue, 10 May 2016 - 06min
- 23 - EP 22: Building a Grain Marketing Plan (Part 1): Quantify
Dwight Eisenhower used to say, "In preparing for battle, I have always found that plans are useless but planning is indispensable."
It’s an interesting quotation. He didn’t know where the Germans were going to be at, but he had a plan and modified that plan as information was revealed to him once the battle unfolded.
The same is true of a grain marketing plan. We may have price targets at certain points, but then we may get an extreme rally.
This month, we’re going to focus on the four main parts of building a grain marketing plan. Step one to successfully building a grain marketing plan is to quantify exactly how much grain you need to market.
Tue, 03 May 2016 - 11min - 22 - EP 21: 5 Strategies for Conquering the Grain Markets
Swinging for the fences in the grain markets and striking out can result in bankruptcy. We have all heard of the neighbor who lost the farm in the futures market. Can you make enough on that one swing to make up for the other nine? Probably not.
So your strategy for conquering the grain markets should be going for base hits. The best baseball players are those who get the bat on the ball every single time and get on base. That’s how you score runs.
Take a look at these five strategies to conquer the grain markets more consistently.
Tue, 26 Apr 2016 - 10min - 21 - EP 20: Managing Fuel and Fertilizer Price Risk for the Next 5 Years
Farmers have various prices that greatly fluctuate on their farming operation. Most of them can be hedged using various strategies and programs.
You may not realize it, but fuel and fertilizers are part of that group: they can be hedged to take away the risk of their constantly fluctuating prices.
Here’s how.
Tue, 19 Apr 2016 - 08min - 20 - EP 19: 3 Ways to Combine Your Grain Marketing Plan With Your Cash Flow NeedsTue, 12 Apr 2016 - 09min
- 19 - EP 18: 3 Ways to Determine the ROI on Starter Fertilizer
Spring is now yawning and waking up from its slumber, and most farmers are just about to start planting corn. Figuring out the return on investment for every input on your farm is crucial to making sure you’re the lowest-cost producer.
And since farming is somewhat of a competition, the lowest-cost producer wins.
Ready for some math? Today, we’ll focus on determining the ROI for one specific input: liquid starter fertilizer.
Does it make sense for your farm? Let’s see.
Sat, 09 Apr 2016 - 11min - 18 - EP 17: Overwhelmed with Debt: 6 Must-Do Steps to Ease the Burden
During the boom years of farming, many operations bought lots of equipment and built shops. Now, in these tough times, plenty of farmers are being choked by debt.
Luckily, there are tricks to get out from under it. Join Scott as he discusses the best strategies to ease the burden of debt.
Resources from the episode:
MachineryLink Tractor House eBayTue, 05 Apr 2016 - 09min - 17 - EP 16: 10 Strategies to Manage and Motivate Farm Employees
The default training system of many farmers is to throw an employee in a tractor and tell them to go. But that doesn’t make the employee successful, confident, or motivated.
Believe it or not, it’s easy to motivate people—if you have the right plan. Use these 10 strategies to keep work morale and ethic high on your farm.
Fri, 01 Apr 2016 - 26min - 16 - EP 15: 6 Ways To Show Dad You Have What It Takes To FarmMon, 28 Mar 2016 - 20min
- 15 - EP 14 - 5 Strategies to Swallow the Losses of 2014 & 2015Wed, 02 Mar 2016 - 10min
- 14 - EP 13- The #1 Farm Management Challenge
How do farmers manage and organize all of their data into an actionable format?
That’s the million dollar question. What the heck do we do with all this data we collect?
Today, we unpack just how the right type of farm management solution can use this data to help you track profitability ensure you get a proper return on your investment.
Tue, 16 Feb 2016 - 16min - 13 - EP 12- 4 Ways to Make Win-Win Deals in Farming
Competition is a beautiful thing. At least, it is in the marketplace. Competition is what allows farmers to shop around and find the best deals.
Since farmers are buyers of a lot of expensive inputs, shopping around is crucial. Listen as Scott unpacks how to make win-win deals and set yourself up for continued success.
Wed, 20 Jan 2016 - 12min - 12 - EP 11- 5 Tips for Cash Crop Selection
We’re at a low point in the cycle of agriculture.
Commodity prices are low, and margins are razor thin. So we need to strategically plan each field like our whole farm depends on it.
You will probably be able to make decent money on a couple of corn and soybean fields, but for those other fields, you might have to consider different crops to make money.
Tue, 19 Jan 2016 - 11min - 11 - EP 10- 4 Steps to Price Cash Rent for Farmland
There are two main strategies farmers use to grow their operation. One is buying farmland; the other is renting it.
Farmers don’t want to lose their operation because the cash rent’s too high and they’re not making money. That is, they don’t want the ship they’ve chosen to ride to sink in the middle of the sea. If you can relate to that feeling, take it easy.
Today James and Scott give you four steps that will help you manage your cash rent and set you up to improve its profitability.
Tue, 29 Dec 2015 - 13min - 10 - EP 9- 6 Methods for Farm Tax Management
Farmers hate having tax liability and will usually go to great lengths to avoid it. Sometimes though, in their attempts to offset income, farmers complicate the situation by using ill advised practices.
In today's episode James and Scott discuss how to effectively and responsibly deal with tax liabilities in a responsible and fiscally sound way.
Wed, 23 Dec 2015 - 20min - 9 - EP 8- 5 Things You should know about Hedging Grain with Futures Contracts
When you think of farming, a Wall Street speculator isn't the first thing you think of. Grain and futures contracts, while they are tough to sometimes comprehend, can be extremely fruitful when utilized well. While today's topic might be heady, Scott and James unpack exactly what you as a farmer should understand grain and futures contracts.
Thu, 19 Nov 2015 - 19min - 8 - EP 7- 7 Strategies to Hedge Stored GrainThu, 12 Nov 2015 - 15min
- 7 - EP 6- 5 Pieces of Data You Should Be Tracking
Farmers are some of the hardest working people on the planet. Sometimes though, farmers need a little extra encouragement to work "on" rather than "in" their business. Today we discuss the essential metrics and data points you should be tracking as a farmer to drive your farm forward towards health and stability.
Wed, 28 Oct 2015 - 16min - 6 - Ep 5- 6 Ways to Uncover Hidden Profit on Your Farming Operation
As a farmer, you know the importance of being diligent in the small details. These are sometimes the difference between thousands of dollars in revenue and just breaking even. Today, James and Scott discuss strategies for getting the most profit out of your farming operation and where exactly you can look for those small tweaks that make a huge difference.
Wed, 28 Oct 2015 - 18min - 5 - EP 4- The Art of Negotiating Land Rent
If you’ve ever been married—or in any relationship, with anyone, ever—you know the importance of negotiation. Good negotiation skills are crucial for a farmer to master. Many times, your operation will depend on how well you can negotiate. In this episode Scott unpacks the most important things a farmer needs to remember when negotiating land rent.
Tue, 13 Oct 2015 - 17min - 4 - EP 3- Top 3 Government Loan Programs for Farmers
Are you looking for a boost of cash, but feel stuck with the available options from your bank? Today Scott and James unpack Farm Service Agency (FSA) loans and how they can help farmers finance purchases and bridge their gaps between selling commodities. We'll cover what we think are the Top 3 Government Loan Programs for Farmers.
Sat, 03 Oct 2015 - 21min - 3 - EP 2- Top 5 Reasons Cash is King
Cash is King, whether your running a lemonade stand or a 100,000-acre farm. James and Scott discuss the top five reasons why cash flow is so important. Everything from financing power to psychological benefits are covered as you discover how and why you can stand confidently with cash while other panic without it.
Sat, 19 Sep 2015 - 17min - 2 - EP 1- Buying Farmland- A Farmers 3 Part Strategy
Farmers are always interested in what’s going on in farmland sales, for good reason. It’s a competitive realm: you’re not only competing with the people who farm around you, you’re competing with investors. There are doctors in my area who don’t farm, but they sure are interested in renting it out.
Since it’s an eternally hot topic, I wanted to go over a three-part strategy to buying farmland that I believe can be very useful for anyone looking to make the best land purchase possible.
Your farm strategy is your business strategy. Farmers usually form their strategy alone—but that’s never the path of the wise.
All good businesses have a board of directors. You need to get at least four people involved anytime you’re thinking about a big equipment or a land purchase:
Your banker or bankers, (hopefully, you have more than one.)
Your accountant, (the person most familiar with your finances)
Your tax advisor,
Your estate planner, (It’s not always the best idea to purchase the farm yourself; you may want your son or daughter to purchase it with you.)
Some of these may overlap; your tax advisor may be your accountant, and so on. The point remains: it’s always best to consult the people in all four of these roles before major purchases. They’ll keep you from going broke.
But there is an even more important part of a farm strategy: knowing the purpose of the purchase. How does that piece of land fit into your operation?
Let’s say, for example, that the quarter of land is contiguous with your own is for sale. You could probably pay a little more for it than most people because of how conveniently it will fit into your operation. It could be a matter of just knocking a fence down, leaving you with a full mile run for field operations. The longer you can drive without turning around, the more you can get done.
Farm strategy is about evaluating how the land you’re considering is going to add value and synergy to your operation. If there isn’t a clear reason you should buy it, you shouldn’t. In fact, you should have multiple good reasons before you purchase.
And again, your four advisors should all give their approval before you pull the trigger. This is classic “checks and balances.” You’re the President of your operation—but those advisors are your Congress or board of directors.
You need to figure out what your income is going to be—which is tricky.
A lot of farmers bought land back around 2012 thinking they’d make $800 an acre in income and pay off the land in 12.5 years, no problem. But that’s not the case anymore.
Realistically, you need your income statement to project a land’s income over the last 10 years—the good, the bad, and the cringe-worthy.
You should also take into account what land is renting for, but realize that even rental prices can be misleading.
Likely, if you’re a good farmer who’s financially forced to rent, you’re not alone. Many others will be renting too, driving down the price of rent. The price you thought you’d get renting your land may not be very good.
So when doing an income projection, you can’t just base your forecast off the “golden years.” Remember that farming is cyclical: golden years are surrounded by a lot of mediocre and hair-graying years.
Your advisors will help you with this, too. Your tax person in particular will know your farm’s income for the last 10 years. Lean on that estimate.
What should I pay for a piece of land? What can I afford to pay?
These questions are really at the center of buying farmland, aren’t they? Yet, there’s no simple formula for answering them. So what should you do?
For starters, talk to your advisors; it should be clear by now that they are essential to every part of your buying strategy.
Beyond that, you need to look at your cash flow and balance sheet. The balance sheet will tell you how much cash you have and if you can pay for a given property.
Keep in mind that paying in cash is never a good idea for farmland; cash is worth more than the land, and it always will be. Cash is always king.
If you buy land for a million dollars in cash, you just lost a quarter of a million dollars. Yes, that land will appreciate, but it’s only valued at 70% of the market value, as far as your net worth goes.
You take a big hit when you buy an illiquid asset; liquidity gives assets huge value. Cash probably has 1.5 times its borrowing value. One million dollars in cash translates to a one and a half million dollar loan.
But if you have one million dollars in farmland, the bank might lend you $600,000-700,000. That’s it.
Pricing and financing strategy go hand in hand.
Interest rates are an important part of the price of land. If you’re buying a lot of land and you don’t have a fixed interest rate, a rising interest rate can balloon your payments in the future.
Looking at your financing strategy, let’s say your interest rate is at 4.25% for 20 years. You purchase land for $1,000,000.
Payment will be around $75,000. You have to plan to pay that every year when you’re forecasting. You have to show that your profit will far exceed that payment in order to buy that piece of land. That’s how you figure out what you can afford to pay.
Again, don’t use your cash; you’re going to need it if interest rates go up and you have to pay off loans overnight. The cash is a safety net for the unexpected.
Every farmer’s situation is personal. Some work with multiple operators, and others run the whole enterprise alone. Some are exclusively renting, while others own a fair amount of land. There are dozens of variables involved.
But if you follow our advice and consider these three main factors—farm strategy, income projections, and financing strategy—you can go into an auction sale with your top price in mind and your confidence running high.
Add the blessing of your four advisors, and you’ll be about as safe as a farmer can be buying farmland. Notice the word advisors popping up and in blue a lot??? That was intentional...
Do you already own land that won’t seem to yield a profit? Learn how to make every field profitable here.
Please leave a comment of some helpful things you have experienced in purchasing land.
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