Is It Time to Sell, or Do I Hang On?

What to think through after a hard harvest, from a farmer who is living it too.

Like a lot of you, I've been in the field every day this fall, and I've seen what this harvest looks like up close.

Some of the corn I've seen and heard about is running 20 to 50 bushels per acre. In a normal year we'd expect 160 to 180. Prices started to climb and then fell apart, so a lot of guys didn't get anything sold at a good price. Put a short crop and a bad price together and you start asking some hard questions.

How do I get through this year? What do I do with the farm? Do I keep going, rent it out, or sell?

I farm, so I know how heavy those questions are. I've had them myself. I also sell farmland, and that might make you think you already know what I'm going to tell you. You don't. My advice to most families is that selling the land is the last resort, not the first.

Now that my harvest is officially over for the year, I'll give you a real-life takeaway. The manager at the bean plant told me he has been there 48 years. He said this year's crop was worse than 1988 and every other year he has worked there.

First question: can we keep this farm going?

If you want to keep farming, that's where we start. Before anybody talks about selling, sit down and look at where all your cards lay: the land, the equipment, the leases, the loans, and the contracts you have out.

A lot of the trouble I see comes from the iron, not the land. A tractor that cost $600,000 or a combine that cost $1 million can be worth about half that within three years. Take a hit like that on every piece in the yard and it doesn't take long before you're one payment away from real trouble.

There are usually more options than people think. Some of the questions worth working through:

• Is there equipment you could sell or trade down without hurting the operation?
• Are your leases and payments set up for a normal year or a good year?
• How much grain is contracted, and what does that mean at today's price?

I still run my 2015 Case IH 8230 combine. It's probably worth $70,000 to $80,000, but it gets the job done every year. The dealership says it is in great shape. I also know, in the back of my head, that I need to update it if I ever have a year with money to spare.

If you want out, it isn't all or nothing

Some families decide it's time. Maybe nobody is coming back to take over. Maybe this year was the last straw. That's a real decision, and it deserves a plan, not a fire sale.

Getting out doesn't have to happen all at once. A lot of guys sell most of the equipment first. Some keep a section or two to farm themselves and rent or sharecrop the rest to a neighbor. How you structure it changes what you keep after taxes, so bring your accountant into the conversation before you decide anything.

The questions I ask first are not about the land. How do you envision your life starting tomorrow and into the future? Where do you want to live? How do you want to spend your time, whether you are still working or retired?

Have the conversation before the bank starts it

The worst time to make these decisions is when somebody else is making them for you. A hard year turns into a forced sale when nobody has planned ahead, and when you sell at the bottom of a bad cycle, somebody else is buying at a great price.

That's why I start with financial planning and life planning. What do you want the next ten years to look like? What is the money for? Once we know that, the decisions about equipment, leases, and land get a lot clearer.

If you know you are in a tough spot, call me before you have to explain it to the bank. Let's go through your options so you can present your case to the banker in the best light possible.

Start the 10-minute conversation

You don't have to have it all figured out to call me. Most of these start as a 10-minute conversation: here's where you sit, and here's what's keeping you up at night. Sometimes that's all it takes. Sometimes it turns into a longer plan. Either way, you'll know where you stand.

Call me at 701-238-4900, or book a Land Review on the website.

Brett Meyers
Farmer, farmland broker, financial planner, and Registered Life Planner
Ag Experts Land & Auction, West Fargo and Galesburg, ND