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Land: How to move beyond emotion

Look at what the numbers are telling you before making land decisions.

I believe one of the best things about owning and operating a farm is that you own your own business. And when you own your business, you always get to make choices about what you’ll do – and what you won’t do.

To make good decisions for your farm business, you need to have the right information about your farm. I’m thinking of the numbers and other data you’re looking at as you make choices about your operation. Getting the right information is key as you run your business, especially when you’re making major decisions.

Land decisions

One of the biggest pieces of cost of production for a grain farm is your cost of land. Land is a very emotional topic for those of us who farm. We love the land. We work hard to steward it wisely – whether it’s owned land, cash rented, or share crop.

Often, we’ve worked hard to secure a piece of land through cash rent. But when margins are tight, we may have to make decisions about whether or not to keep farming a piece of ground. To even think about giving up that land can be very emotional.

The bigger picture

In dairy operations, records are kept on each animal – how much each cow is producing over time and how it compares to the rest of the herd. If a cow’s production begins to decline or isn’t on par with the herd, the manager can take a closer look at whether the cow is worth keeping in the herd.

Likewise, it may be helpful for grain farmers to take a look at their ground in this way. When you provide your direct costs (seed, chemical, fertilizer) and production separated out by field, an ag finance advisor can create a field by field analysis for you and help sort through what it means for your operation.

Knowing exactly what each of your fields has historically produced, what it’s producing now, and how it compares with your other fields can help. Then you can consider your farm’s breakevens and the cost of farming that ground in light of that information.

Emotion and logic

Some ground may have been bid up in the recent past, and may not be penciling anymore at today’s crop prices. But unless you have actual data at your fingertips to know whether or not a certain level of cash rent is causing you to lose money on that ground, decisions often get made based on emotion.

A farmer may wonder whether a piece of ground is penciling, but without looking at a field by field analysis, there’s no way to really know. They might even just continue farming it at a loss, because they don’t want to give it up or are afraid the neighbor will get it.

Getting a field by field analysis done can help you make decisions that are based more on logic than emotion. The right data helps you make sound choices for your overall operation – decisions to help preserve your working capital and make your farm stronger as you move into the future.

Our ag finance advisors help farmer clients by putting together these types of financial analyses, and more. You can get in touch with an advisor here.

Read the new issue of the Smart Series publication, bringing business ideas for today’s farm leader. This issue features a pre-harvest legacy checklist, how to build your farm’s team, and ideas on planning for your farm’s future. Get your free online issue here.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

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