A year ago, I believed “kicking the can down the road” was a viable option for many cash-strapped farm operations. As we realize the significance and duration of the headwinds facing agriculture, I’ve changed my thinking.
Now I’m encouraging those same farmers to consider what many deem unthinkable: selling a portion land.
Why? I don’t foresee a sharp improvement or further downturn ahead. That means those making a little money will likely continue to do so. For those struggling financially, there’s not much hope for a significant market upturn or change in circumstances. Without a big change to point to, kicking the can is simply delaying the inevitable.
But most of you still have an ace in your pocket: your farmland. The cash you can generate from selling a little ground could be a game changer. First, it will supply working capital to strengthen your operation. Second, it will better position you to capitalize on the opportunities that come during tough times.
Keep An Open Mind
Before you outright reject the idea of selling land, keep these factors in mind:
1. Land prices have held up fairly well, thanks to strong demand for good farmland. If you wait until you’re financially desperate, you’ll be forced to sell under duress. That will likely result in an unfavorable price or terms. Selling now amid a stronger market, when you have time to sell it in an orderly fashion, gives you an advantage.
2. The strong demand for farmland has attracted a number of buyers offering unique terms for good deals. In the past six months, we’ve heard several examples of institutional buyers offering a right of first refusal, motivated by the strong demand and competition for farmland. At the same time, lower interest rates make it a little easier for buyers to pay a higher price.
3. We’ve seen nontraditional platforms emerge allowing properties to be sold in small pieces and creating a new set of buyers who previously couldn’t afford to invest in farmland. This alternative structure isn’t suitable for all details but it’s a sign of the unrelenting demand for farmland.
If you haven’t already sold unnecessary or luxury items to generate cash, you must do it now. And if you haven’t considered it already, give thought to the long-term benefits you could reap from selling a portion of your land. There are lots of strategies to retain an interest in the land, farm the land and buy back the land in the future.
In this new-normal world of routinely tight margins, selling ground can be a tremendous step toward strengthening your farm’s foundation and future.