East of Broken Bow | ricefarmer14 - 12/21/2024 17:40
I’m not saying I Havnt had good years I’m just saying this year isn’t a good one. Been at this on my own for 20 plus years. The good years were when I had much less equity and could get a return on equity of 15% plus. Don’t owe as much anymore and the return to equity was less than 5%.
My point is farmers with 10-20 million in equity should have positive returns in equity. Businesses outside Ag would be changing a lot faster than we are if the returns were this low.
This is rough even on established farm businesses, a local banker was telling me the numbers from this past year are as bad as he’s ever seen.
What are you counting towards your return on your money? If it is just the profits, you are probably right, but if you count a total gain in net worth, I would say the returns are much better than most people think. I bought land about 20 years ago, my first land purchase. It is now worth about 4-5X what I paid for it, and it also gained a cash profit all but one or maybe 2 years, and some years it made great profits. My total gain in net worth from that land has beat any mutual funds I have had (granted, I bought it at kind of a low). In addition to that, the land will provide rent income when I retire. I'm not so sure the total lifetime return on land is really that much less than other investments. A large part of why most farms don't see a large return on investment is because the farmers will tend to upgrade machinery, or buy a new $80K 3/4 ton pickup that they can write off as an 'expense' which on the bottom line makes the farm look less profitable, but in reality allows the farmer to buy an $80K pickup that the average worker would have to buy with after tax money. Yes, there are many farmers who aren't making much, but in general I would say buying farmland is as good a long-term investment as anything. |
Farming, government payments and return on equity
