Positive Peer Pressure

February 19, 2009 09:02 AM

Speaking at the annual TEPAP (The Executive Program for Agricultural Producers) conference in Austin, Texas, Danny Klinefelter, Texas A&M economist, pointed out several instances where peer groups and business networks can benefit farmers.


  • Land investment companies. The idea is for a farmer to team up with local investors who would like to own farmland. For the investors, it is a way to diversify retirement funds and avoid overdependence on 401K or IRA investments, a situation many near-retirees regret today. Typically set up as an LLC or S corporation, it may call for an upfront investment with yearly additions. The farmer is guaranteed rental of the property for a given time—perhaps 10 years—and gains the ability to grow his land base without assuming the risk of land ownership and tying up working capital in land purchases. Rents may be adjusted annually based on land value indexes.

  • Health insurance. With rising health care costs a concern, a group of growers in the Texas Panhandle have joined together to form their own insurance group. "They have an underwriter for any really big insurance needs, but for basic health care, they have funded this group and they are insuring themselves," Klinefelter explained.

  • Cost accounting groups. "In a town in Indiana, there are several farms that use management accounting, and they have the same systems in place. In their town, there is a CPA who wants to stay in the profession, but she wants to live in the small town and not have to commute an hour to Indianapolis, and also not work full-time. The farms have hired her for 30 hours/week at a $75,000 annual salary," Klinefelter said. The farmers also have hired a full-time assistant for the CPA who does data entry. "This is a way to acquire a dedicated professional accounting staff that a single farm would find costly," he explained.

  • Peer advisory groups. Nearly all businesses have a board of directors, and a thriving farm business should be no different, Klinefelter said. Forming a peer advisory group of like-minded farmers will allow you to share ideas and learn from each other. This group can act as your board of directors, and in the same meeting, you will act as if you're on their board of directors. You just have to be sure everyone will be honest with each other and they won't gossip. The true value of these groups is that they will hold you accountable for getting things done. "Most major goals are never accomplished because we tend to do everything else first," Klinefelter said.

You can e-mail Greg Vincent at gvincent@farmjournal.com.

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