Should I Continue Farming?

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Should I Continue Farming?

(From Ohio Ag Manager Blog)

by: Chris Zoller, Extension Educator, ANR  Tuscarawas County

 Introduction

Given the low prices of many farm commodities and a price outlook that may not be positive in the near term, you may be considering exiting agriculture.  Making a decision to sell part or your entire farm is not easy and brings with it a great deal of emotions.  Farmers have told me they worry about being seen as a failure, the impact a sale will have on family and employees, or what they will do with their life after the sale.  These are realistic concerns.  It’s important that you don’t let emotions drive the decision-making process.  Sometimes difficult business decisions must be made to preserve what is still left and plan for the future.

Finding someone you trust, who has good listening skills, and with whom you are comfortable discussing the details of your business, finances, goals, and options can be very helpful.  That person may not have the answers to all of your questions, but if they are willing to listen, they can offer advice and suggest people who can help.

Think of the following pages as a framework from which to begin the process of selling some or your whole farm.

Evaluate

Financial situation – What is the total amount of all debt obligations, to whom do you owe money, and how much is owed to each creditor?  What is your net worth?  Knowing the answers to these basic questions is important, regardless of your business or performance, and necessary to evaluate what and how many assets will need to sell.

Goals/Needs – Do you need to sell all or part of your assets?  Can you retain assets to farm part-time?  Is there another enterprise worth investigating?  Does it make sense to relocate and start a new business?  Are you at a stage in life where it’s best to retire and enjoy time with family, travel, or enjoy a hobby?

Life after farming – What skills do you possess?  You are more than ‘just a farmer’ – you probably have skills and/or education as a mechanic, electrician, carpenter, mason, nutritionist, agronomist, etc.  You have worked with livestock and machinery.  You may have an advanced degree that you can put to use.  You certainly have a great deal of practical, hands-on experience.

Your experiences, training, education, and skills will help you focus on finding your next career.  Maybe now is a time to take classes to increase your skills to enter a new career.  Talk to neighbors, family, and friends to let them know you are looking for a job.  State and county governments, as well as private companies, can assist you with identifying skills and job openings.

Decisions:

You and your business partners have agreed that a sale of assets is the best available option, but you don’t know where to begin.  The following can help you get the process started, answer questions, and/or raise issues you might not have considered.

Begin with a current balance sheet.  A balance sheet will provide you with a snapshot of your assets and liabilities at the time the inventories were recorded and values placed on them.  The balance sheet will also show your current and non-current debt obligations.

Determine whether you will sell all of your assets or a portion.  If only a portion, which ones?  If you are going to focus on crop production, you may want to retain a tractor(s), tillage equipment, planter or drill, harvest equipment, etc.

If assets are listed as collateral for loans, start talking to lenders immediately about how to handle the sale, discharging the lien, and the use of sale proceeds.

Meet with a farm appraisal real-estate professional to determine a reasonable value for the acres and any real estate assets you plan to sell.  Evaluate the advantages and disadvantages of a private sale, going through a realtor, or having a public auction.  If you use a realtor or auctioneer, determine the cost, services provided, and what is expected of you. Talk to more than one real-estate professional, request references, and ask that terms discussed be in writing.

Will the projected sale income be enough to cover debt obligations?  If not, what is the next plan of action?  If the sale of livestock isn’t enough to pay your debts, what else needs to be included?  Maybe it’s milking equipment, stalls, feed mixer.  While it provides a one-time cash infusion, the sale of timber or minerals may provide extra income.  The sale of real estate is an option.  You may not want to sell all of your acreage, but maybe there are a few acres you could sell.

Involve an attorney.  Contact one early and make them aware of your plans.  There may be issues related to the sale you hadn’t considered (for example, say you plan to divide a parcel into building lots, there may be zoning or other regulations to follow and associated court filings).

Meet with your tax advisor/accountant.  There are going to be tax implications from the sale of assets.  How many dollars must be set aside to meet tax obligations or liabilities?  A tax professional can help you implement strategies to minimize the tax bill.  As a financial advisor once told me, the difference between tax avoidance and tax evasion is about seven years!

Help is available

Coming to and making a decision to exit farming is not easy and is filled with a great deal of emotions.  There are people and agencies/organizations that can help, including:

Summary

Arriving at the decision to sell will not be easy.  Find someone with whom you can share your feelings and don’t see yourself as a failure.  Talk to professionals, get answers to your questions, and make the best possible decisions.  There are many people who can help you through this process!

 

Reviewed by:

David Marrison, Associate Professor and Extension Educator, ANR, Ashtabula County

Peggy Hall, Legal Educator, Ohio State University Extension

Dianne Shoemaker, Extension Specialist, Dairy, Ohio State University Extension

Susan Crowell, Editor, Farm and Dairy Newspaper

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