Recently my Road Warrior travels took me to Harrah’s Casino near Omaha to address an agrilending technology conference. Since I am not a big player of the tables, my pre-talk routine involved working out in the exercise room. This time a business owner in his mid-40s from Omaha was pumping iron and using the treadmill. During our conversation, he discovered I am an agricultural economist; thus, the story begins.
Lately his wife had been pestering him to sell their farm in eastern Nebraska because land prices were high. He asked my thoughts on this situation. My first question for him was, “How does the land fit into your business, family and personal goals?”
His first response was that he enjoyed the dividend from the cash rent and the recent appreciation. He stated that there were some tax advantages to owning the farm ground. However, he was quick to admit that both he and his wife were a little uncomfortable with the debt level given the economy. A passionate response came when he said he enjoyed taking his children and wife to the farm to four-wheel, bike and get away from the metro lifestyle.
My response from an economic and financial standpoint was to sell, sell, sell. However, from a lifestyle and value systems standpoint, keep the land and reduce the debt as quick as possible.
Many of you will go through this exercise as agricultural margins become tighter and capital appreciation on land slows down or becomes negative. The best advice is to weigh your options and make a well thought out decision given the situation and your goals.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.
