When the balance sheet begins to look bleak, selling excess farm equipment or parting with outlying tracts of farmland are two good ways to right the ship.
Make no mistake, bankers are looking closely at balance sheets during loan renewal season, says Brett Esau, financial officer at Farm Credit Services of America in Beatrice, Nebraska.
Every piece of iron on the farm should be pulling its weight, he adds. Are farmers using every piece of equipment thats wrapped up in an operation? Because a noncurrent asset, turned into cash, makes the balance sheet look better, Esau says.
At the 2019 Commodity Classic trade show, Mark Stock, cofounder and owner of Big Iron Auction, asked farmers how many pieces of equipment they had on their farm that they hadnt used in the last two years. The majority said half a dozen. One man said at least 50 pieces, Stock says. Now, thats a pretty high number.
There is a cost associated with storing that piece of equipment or maintaining tires, hydraulic hoses, or other parts.
Selling that unused iron could free up funds to be used to pay down debt, buy newer stuff, or even take the family on a vacation, Stock says.
The worth of your used farm equipment may surprise you, says Luke Sullivan, a manager at Sullivan Auctioneers of Hamilton, Illinois. Weve seen surprisingly strong prices for used farm equipment in 2019.
Sullivan says high prices of new equipment have more farmers seeking good used machinery, and it doesnt have to be newer equipment. You may not think experienced tillage equipment, high-mileage trucks, or older tractors have much value, but they do, Sullivan says.
Theres still a market there. It may be a different group of buyers, but they are out there and looking for that type of equipment, he says.
If you decide to liquidate excess equipment, here are some steps to help ensure you get top dollar.
Let the internet help you. If you have just one item or several, internet marketing is your friend. Even if you put something up for sale on a local consignment auction, make sure it has internet bidding capability. Or, use an auction company that deals exclusively with internet auctions.
Make sure its clean and field-ready. A thorough cleaning and making obvious repairs will go a long way to maximizing the items value. Pretend youre getting ready to use it yourself, Sullivan says.
Be available. If youre selling at a live consignment auction, be on-site to answer questions. If you sell in an online-only platform, make sure prospective buyers can ask questions about the item.
Leave the paint alone. Sullivan advises to never paint an item before selling it. In many cases, it looks as if the seller is hiding something. Painting equipment often does more harm than good, he says.
Theres a buyer for everything, Sullivan adds.
Internet bidding has opened the market to a lot of different buyers, he says.
Selling a piece of farmland is a last resort for most farmers. However, if there is an odd piece of land that may be too far away to easily access or is a lower quality tract, parting ways may be the best way to generate cash even if it hurts.
Also, now is the right time to pull the trigger, says Steve Bruere, principal at Peoples Company, a real estate firm based in Clive, Iowa. He says many farmers got caught up in the land-buying frenzy of the early 2010s, when competition at farmland auctions was fierce.
They may have bought land not in their farming area or it wasnt perfect, because they didnt want to miss the upswing, Bruere says.
Although its a good theory to sell that piece of land, its a hard thing to do.
When you pull out of the bankers parking lot, it sounds good, Bruere says. But its harder to do than you think.
Yet, think long term, Esau suggests. Getting out of debt now could put you in a better financial position down the road to update equipment or to acquire land. The hard part is, farmers who sell equipment or land think they have failed. But if they sell it and clean up their balance sheet, it improves their operation, he adds.
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Cash in on unused iron and ill-fitting farmland - Successful Farming