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East Arkansas | Here it is white shadow:
This was a great response in a long thread that may have gotten lost....
Ndsu84: Wow...great topic, I love it.
When I was young, I was very proud of my ROE. But in the end it was because I didn't have squat. I was able to farm a very large number of high value acres, with very little of my own money.
Now that I'm older, with large equity, it's far more difficult.
One solution was to grow the farm size. It's not realistic to grow it by 500 times and retain the same returns.
The best solution I can come up with is limit the amount of your own dollars you allow tied up in your farm. If the farm returns $500,000 of growth on $5 million of equity, how much more return will you get from increasing that to $6 million. Many will say the change will be minimal without growth. Then you need to limit the dollars on the farm and grow your "overall portfolio" by sending the extra money somewhere else.
Most of us aren't strong enough experts in other areas to get big returns without unacceptable risk. Plus we all want to own the quarter next to us regardless how pathetic it looks on paper today. Or we start to justify adding more shiny equipment because we "need it".
A lot of financial success in farming is from intense management and our own hard labor when we're young. Once we turn 50 we no longer have that advantage.
Some of the most successful operations, the owner understands this very well and turns the farm over to the next generation as soon as possible. The farms with the 80 year old clinging to authority over the farm, while the next generations work for grandpa are likely suffering financially far worse than they know.
Edited by ricefarmer14 12/1/2015 00:30
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Ndsu84 great reply on ROE-- by request
