5 Things to Ponder Before Buying Land

January 31, 2013 09:54 PM
5 Things to Ponder Before Buying Land

What are the goals for your farming operation? How will your operation evolve or grow in the future?

Bret Oelke, University of Minnesota Extension agricultural business management expert , says farmers have many reasons they want to grow their business. These could include maintain or improving production proficiency, adding family members to the business, greed, personal challenge or just because you can.

The common thought in farm country is growing an operation means adding more acres. Oelke cautions farmers to think about these points, before writing a check or getting a loan for more land.

You can grow without adding land.

"Growth is important and you should grow 3 to 5% per year or you are standing still or even maybe going backward," Oelke says. Obviously adding land is one way of growing your operation, but he says there are other good ways. He advises farmers to try to maximize yields, use all the resources at your disposal and become a better marketer, all of which can add to overall growth.

Consider making land improvements.

Land improvements, such as drainage, irrigation or tiling, to current land have huge payback. Oelke says land investments currently have a higher rate of return than land purchases at "top of the market" prices.

Know your cost of production.

To be able to make a quick decision to add new land to your portfolio, whether through renting or buying, Oelke says you must know your cost of production. "I can’t stress this enough. The lowest cost grower will always be better to pay more for cash rent."

Right size your operation.

Oelke says your goal should be to have your labor and machinery optimized to the size of your operation. He says you should ask yourself: How many acres can you farm with one planter, one combine and the supporting tillage and ancillary equipment you have? Make sure your equipment is fully maximized, but not overextended, with the acres you have.

Communication is key.

As competition becomes higher for land to rent, Oelke says communication with your current landlords is vital. "You need to have a plan to on what to do if someone offers your landlords more money than you are," he says.

Also, make sure your landlords understand your operation and aren’t starting to believe rumors or gossip. Oelke says, in many cases, land owners hear about high prices and assume that famers sell their entire crop at these high levels."

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Spell Check

1/31/2013 11:43 PM

  Good advices for buyers of land, especially the Small Scale Famrers in Africa

2/4/2013 12:40 PM

  In the early 80's we started farming. Land and rent was sky high. So were interest rates. I was told by some established farmers I should let the big boys play and be satisfied to work for them. We were patient chipping away for the next 30 years picking up cheap rent and niche markets. They had no idea how well we were doing until we started buying up the land surrounding them. Now we are the established ones and most of them had to sell out because they didn't change with the times.


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