Is It Time To Retire From Farming?
How to Retire From Farming
Is it time to retire from farming? Is it time to have a farming exit strategy?
It’s been a heck of a run for farmers, but for those who don’t plan to be farming a decade from now, this may be a good time to develop an exit strategy.
Heresy, you say! Maybe. But before you start gathering sticks to burn me at the stake, here are some realities to consider. If you’re planning to farm another 10 years and you’re in a financial position to ride out a few rough years, this probably doesn’t apply to you. But if you plan to scale back or even retire in the next four or five years, it may be a different story.
Today we have more farmers than ever beyond retirement age, many have put off retirement because of the excellent market of the past few years and sacrificed some of the things they wanted including more time with family, fishing, travel or just some well deserved relaxation!
During the last few years, farmers have managed to do well despite a period during which we’ve been alternately hit with drought and excess water. When crops were small, we’ve been bailed out by crop insurance and record high commodity prices. Meanwhile, our land was appreciating at double digit rates, China was buying more corn than we could produce, and cash rents rose steadily.
So now, we finally have what we’ve been hoping for: Good weather and a big crop. And what do we get for it? Three dollar corn!
- Farmers face several challenges that didn’t seem like such a big deal when corn was selling for $8:
- Costs have risen sharply in recent years. Farmers are paying high prices for seed, fertilizer, pesticide and fuel. And let’s not even talk about the cost of new equipment!
- Interest rates can’t stay near zero forever, and the Federal Reserve Bank is finally winding down its “quantitative easing” policy, which has kept easy, cheap money available. Farm debt remains low, but at some point, farmers will find themselves needing to borrow for equipment. Interest on credit lines will creep up on existing debt.
- International demand has grown less dependable, as China continues to aggressively inspect shipments and refuse those that include an unapproved but widely used Syngenta modification. By at least one industry estimate cited by the Wall Street Journal, exports to China are down by 85% compared to a year ago.
- Public pressure on genetically modified products is real and is taking its toll regardless of the scientific merits of the anti-GMO arguments. General Mills has taken genetically modified products out of Cheerios, though stockholders recently rejected a measure to extend that ban to the entire product line. This kind of market factor introduces risks we never had to worry about before.
- China is aggressively buying farmland in foreign countries and building the worlds largest grain storage facilities to ensure their food supply is not interrupted.
Meanwhile, farmers are sitting on land that remains within spitting distance of all-time highs. Many farmers are enjoying huge increases in their net worth. But despite the remarkable stability of farmland values, anything that goes up can go down if the factors that drove it up change too dramatically.
That’s why this is a good time for farmers who are nearing the end of their careers to begin turning their land and equipment into cash that can secure their future. There are always better times than others to cash in, the winter of 2014 seems to be the best in our history. This doesn’t have to be an all-or-nothing proposition. Some may elect to sell some of their land and scale back their operations (and risk). Some will find it attractive to sell their land and lease it back. The options for your exit strategy are varied and plentiful.
Many will find that, after evaluating these factors, there’s no need to change anything. Others will see a need to make major changes, up to and including retirement or a career transition. The important thing is to look at the big picture and make informed choices rather than simply plodding along.
We can help you shape your exit strategy with the best options available today. We offer listings and auction products with a full range of options including live and online auctions. We are experts in the marketing of farmland, farm equipment and related farm assets. Give us a call at 855-376-3478.
Auctioneer, Land Broker, Appraiser
Jason is an Auctioneer and Land Broker in northwest Iowa at Storm Lake and Mason City. Jason and his Iowa farmland team specialize in farmland sales primarily serving the heirs to family farms. Today's report details the current land market in Iowa for land being sold at auctions.
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Tom Bradley is a Partner, Agricultural Auctioneer, and Land Broker. Additionally, he is the Lead Auctioneer at DreamDirt. He is responsible for auction operations and ensuring our live and online auction teams are performing at their best. He is also a CAI designated...
Jason is an Auctioneer and Land Broker in northwest Iowa at Storm Lake and Mason City. Jason and his Iowa farmland team specialize in farmland sales primarily serving the heirs to family farms. Today's report details the current land market in Iowa for land being...
Rachel is a licensed real estate salesperson specializing in the sale of farm, land, and rural residential real estate. Rachel is a graduate of Iowa State University with a major in Animal Science and minor in Agricultural Business. Rachel has a strong interest in...