Recently I was a lecturer at the Northeast School of Agricultural Lending at Cornell University in Ithaca, NY. A study by Eddy LaDue, Brent Gloy, and Kevin Youngblood at Cornell provides some interesting industry results on management practices and their correlations to financial results, i.e. rate of return on assets.
Producers that obtained more than one price quote when buying inputs, like fertilizer, had a rate of return of 4.5%, compared to those who seldom or never used this practice with a 2.6% rate of return.
If they went to the technical specialist versus the local dealer for input purchase information, the return was 5% compared to 2.8% for producers that used the local dealer.
Producers that compared rates and services lenders offered to those who sometimes or never did found returns to be 4.3% to 1.9%.
If they utilized discounted cash flow analysis for lease versus buy decisions, the return was 5.6% compared to 3.5% to those that didn’t.
Those that used supplier or dealer financing always or frequently had a rate of return of 1.4% compared to those that didn’t with 4.4%.
Yes, planning and negotiating appears to be paying off!
One of the side roads I took was to visit one of the old farms that I operated in the Cornell area 15 years ago. The farm was 100 acres and had an older dairy barn. Today there are seven $300,000 to $500,000 homes on the property and the old barn and silos are falling down.
Our home in that area just sold for three times the amount we paid for it 15 years ago when it was new.
There were seven operating dairy farms within the three-mile area when we lived there. Now it’s down to one.
Such is progress.
This week I’m in Omaha, NE, teaching a banking school. My fields at home are finally drying out enough to get the first cutting of hay up, so I’ll be glad to get back to Virginia to help out.