A farm financial advisor says producers considering a land purchase should start by taking a hard look at their balance sheet.
Grant Wiese with Farm640 says producers should have a sufficient working capital position before making a purchase.
“I like to aim for maybe 30% of your gross farm income,” he said. “So, having that rainy day fund built up within your operation to make sure we’re not putting ourselves in risk.”
He tells Brownfield reviewing how net worth has changed over the past several years is another key part of the equation.
“You want to put several years of balance sheets together, stack them up, and see if your operation truly has been making money over the past three years, if you’re maybe just treading water, or going backwards,” Wiese said. “Because if we’re treading water, that means the operation simply hasn’t been making money.”
Wiese says in that situation adding farmland and taking on more debt would put too much pressure on cash flow.
