In production agriculture, the dream for many is to spend a lifetime working the land and end up owning some of it — paid for, free and clear. You farm through your adult years, retire, sell the equipment to your kids or hold a retirement auction, and collect a strong rent check each spring. That’s the model many of our clients follow.
Of course, not everyone can own all — or even most — of the ground they farm. Take a 2,500-acre operation. Maybe you start with 500 acres inherited or purchased from family at a discount. That still leaves 2,000 acres to buy. At today’s land prices, depending on where you farm, that’s tens of millions of dollars. It’s hard enough to pay for a single quarter section, let alone 2,000 acres.
So, we rent. We farm. And we make payments on what we can buy.
What can you afford?
This brings me to a key point: For many farmers, the real question isn’t what you pay for the land but what you can afford to make payments on. Land is rarely sold, and over time, it almost always appreciates. Come retirement, chances are it’s worth far more than what you gave for it.
In the auction business, we’ve seen — and helped clean up after — some tough situations. Often, these involve large-scale operators who rented thousands of acres at top-of-county rates. I’m still surprised by how little some of these farmers actually own, given the size of their operations.
That’s not to say every failure story is the same. Some large-scale farmers who owned significant land have lost everything — and that’s even harder to watch. At the same time, plenty of renters manage big acreages with sound finances and smart decision-making.
But here’s the truth: The real wealth in farming is in land ownership. In my view, the goal should be to farm — and steadily accumulate land — even if that means operating on a smaller scale.
Take this comparison: One farmer retires after farming 10,000 acres and owns 1,000. Another retires with a 3,500-acre operation but owns 2,500. Who’s better off when the dust settles? My money’s on the guy with 2,500 acres in his name. That’s the theory, but let’s not forget all the hard work, risk and even hardship that is part of the journey. Maybe that story is the most important part when we define “rich.”
For more information on the latest land sales and equipment auctions, check out steffesgroup.com.