January 5, 2022
I am 63 years old. I milk 65 cows, raise 40 heifers and 35 steers, and farm 200 acres in south-central Wisconsin. My wife works full time at a farm equipment dealership in town. We are planning to retire in two or three years. It’s getting harder for me to do all of the work on the farm. I’m wondering if I would be money ahead to sell my equipment this spring and hire my fieldwork done these last two or three years? Or would it be smarter to hire someone part time to help me with chores and fieldwork? Our neighbor’s son milks Sunday nights for me so I can get one milking off per week. He has a full-time job in town. What are your thoughts?
Tom Kestell: I understand what many of us experience as we grow older — the spirit is willing, but the body begins to find it harder to answer the bell for each new round we face. There comes a time to evaluate your farming enterprise. What takes the most effort and time? What creates the most income, and what part of your operation do you most enjoy? With your plan to retire in two or three years, maybe it is time to stop raising additional dairy heifers. Maybe it is time to breed all your cows to beef and transition into raising more beef. You could sell your equipment and rely on custom operators to run your land, but make sure you have a reliable operator who will service your needs in a timely fashion.
It would be nice to have someone to help you on a regular basis so you could enjoy your final years farming with less mental and physical stress. Maybe it is time to think outside the box a bit. If your situation allows you to do so, you could even find a successor to take over your farm and spend your next few years mentoring a young man or woman or couple to work with you and eventually take over ownership as you transition in retirement. If you approach this with sincere and honorable intentions, there are young people out there looking for a situation such as yours.
There are always endless possibilities, so look at all your options and not just the first one that pops into your head. This situation can be a win-win for both you and a young person wanting to get started.
Sam Miller: Planning for transition takes time, so it is a great idea for you to get started. There are pros and cons to either option you suggest, but first, what is your plan for retirement? If you plan to sell as a going concern dairy operation, your solution would be different than if you plan to sell the herd and equipment and rent the land. Start by having a frank conversation with your wife about what retirement looks like, and use this as a guide to map out your transition.
If you plan to sell the herd and equipment in a couple of years, it might make sense to sell the equipment now, given relatively high values on equipment. Of course, you will need to line up custom fieldwork before selling your equipment, but even if this is a higher-variable cost than what it would have been a few years ago, you should realize a good return on the sale of your equipment line. If your plan is to retire and sell as a going concern, finding a successor or potential buyer should be your top priority now.
The Wisconsin Farm Center at the Department of Agriculture, Trade and Consumer Protection has staff to assist in farm transition planning. Please reach out for assistance. Good luck with transition planning.
Katie Wantoch: It’s great you are planning for your upcoming retirement. Others will tell you that there is life after farming and during retirement. However, you don’t mention your plans for retirement, which might help to answer your questions. One size does not fit all in retirement planning. Will you be taking on new hobbies, traveling, spending more time with family? Retirement doesn’t mean that you have to stop farming or working. You may just need to slow down a little and find work that is easier for you to do, such as raising steers and not milking cows, or selling the livestock and crop farming. You might consider an off-farm job, volunteer work, mentoring other farmers or starting a new enterprise. Talk it over with your wife to see what her plans are for retirement. Are you on the same page for your future? Depending on your goals and your financial situation, you can decide to sell or lease assets as part of your retirement strategy.
Alternatives to renting land
My son and I milk 250 cows and farm 275 acres in east-central Wisconsin. We added a few cows this year, and we were hoping to rent 75 to 100 acres of land, but there is so much competition in our area, it is impossible to find land to rent. We have talked to a neighbor who feeds out beef cattle and raises a lot of corn silage and haylage, which he sells to area farmers, and it seems like what he is asking for silage and haylage per ton is more reasonable than renting more land. We don’t have to buy more or bigger equipment, we don’t have to hire more help, and the feed is very high quality. Fortunately, we have extra feed from last year, but now we have to decide what to do. I haven’t read much about buying forages. Please advise.
Tom Kestell: Congratulations on looking at your situation from more than one angle. It seems to be human nature that people who milk cows and enjoy it want to milk more cows, and people who crop land and enjoy it are always looking to do more of it. This is why land rents keep going up and milk prices remain low. Farmers are competitive creatures and will remain so in the future. With that bit of editorializing behind us, let’s answer your question.
I think in your situation, it is a wise decision to buy corn silage or haylage from your neighbor. I would order it ahead of time and maybe you can even have input into the type of silage you buy, such as BMR or other specialty corn silage varieties. Also, you seem to be producing up to the limit of manure produced and acres to apply it to. With skyrocketing fertilizer prices, maybe you can work out a swap of manure for some of the forage you purchase from your neighbor. Like any arrangement in farming, this can be a win-win for both of you.
There are many handy charts for the pricing of both corn silage and haylage that can be acquired from your Extension ag agent or private companies. Using these charts, everyone can feel comfortable that both the seller and buyer are treated fairly. The two most important factors not to overlook on these charts is quality of the feed and moisture of the feed. Long-range happy arrangements are the best for all involved.
Sam Miller: Your question indicates you have already done some calculation with regard to the cost-benefit analysis of renting vs. buying the additional feed. The heart of your question is how much carryover feed should be on hand. Many farmers in east-central Wisconsin benefited by good growing conditions and were able to build carryover inventory this past fall. In most cases, they welcomed the added inventory as a buffer against a poorer growing season in future years. Most of our clients plan to grow the same amount of corn silage and hay acres as would be normal in 2022. If they have another above-average crop, many indicate harvesting some acres as grain to be sold.
Since you continue to farm your own acres, you could also adopt this strategy — buy the corn silage and haylage from your neighbor and, if you have excess next fall, sell grain for cash. This solution keeps your costs variable and options open vs. the added cost of land rent, machinery and equipment upgrades or repairs, and the labor to operate the extra acres.
Lastly, be certain to commit the purchase terms in writing to reduce any misunderstandings with your neighbor. These terms should include cost per ton and have quality minimums. Your Extension ag agent can assist with forage purchase contracts.
Katie Wantoch: I can understand the frustration you and your son might be experiencing about renting more farmland. It sounds like you are impacted by the basic economic equation of supply (farmland is limited) and demand (which sounds high in your area). These factors aren’t necessarily in your favor, so kudos to you for considering other alternatives to your situation. You should complete an enterprise budget to help you compare the pros and cons for your business. Consider each option and compare the additional costs of purchasing forages from your neighbor to renting more farmland, which may include additional equipment and increased input costs, such as seed, fertilizer, chemical, etc. A detailed budget might indicate that it will be cheaper to purchase forage from your neighbor.
Be sure to have a written agreement detailing the amount and price per ton of forage, payment terms, desired forage quality, etc. Agreeing to these items at the beginning makes sure that your neighbor knows how much he needs to produce and at what quality it should be. You will know how much to pay for the forage and when payment should be made. If these conditions are not met, the agreement should detail what either party can do to solve the issue. A complete analysis will help you and your son determine which option will be most profitable for your operation.
Agrivision panel: Tom Kestell, dairy farmer, Sheboygan County, Wis; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, Extension agricultural agent specializing in economic development, Dunn County, Wis. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].
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