A young person wants to farm a grain operation after finishing a degree from a prominent Midwest university. However, he wants to operate the family business or start his own somewhere between 1,000 and 1,400 acres.
He has no interest in managing a big operation, 5,000-10,000 acres. What is my response?
First, this person will have to build a business model in products, operating, marketing, financial and risk management plan to generate $40,000-70,000 net annually.
Second, this net income will have to grow 5-7% to stay ahead of inflation. This could come both from farm and non-farm earnings.
Third, will this person be fully employed? If it is a straight grain operation, I doubt it. This person may need to find a non-farm job to be fully employed.
Fourth, this young person will be required to keep the debt-to-asset ratio below 50%.
Finally, if this person gets married, then a frank discussion with the spouse must occur. Location of the farm, schools, hospitals and social opportunities will be imperative to success.
Thought for the Day
Trends, technology, customer demands and government policy are the engines driving agriculture. Vision and action are the fuel.
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Editors' note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
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