Pivots or Real Estate
Where should you invest?
Of all the places you can invest your earnings to grow your business, pivots and land are probably quite comparable.
Both options offer:
Long term investments with sound value holding capacity.
Growth opportunities for your production and cash flow.
Control to variables in your business.
The ability to be passed on to the next generation.
Flexibility to changes in your operation and enterprises.
Upgrades in several ways.
Very few other assets can come close in comparison to the potential impact on your farming operation for decades to come. Yes, there are a few differences. Land is more permanent, but pivots can be moved if urban pressure becomes an unbearable factor. Land generally will appreciate. High quality pivots that are well designed will also appreciate, often adding value to the property where they sit more than the total project cost, immediately. Land doesn’t require service calls, but some upkeep is required to maintain high levels of productivity. Land does have some advantages here, but other farm investments like equipment, livestock, buildings, and storage structures do not. They all require regular maintenance. Land does have a couple limitations. Where it is located and is it for sale. While existing owners are not always trying to sell, they may be persuaded if you are willing to pay enough. If the property is not in a proximal location, then it becomes less attractive due to travel costs.
During my forty plus years working in the agriculture industry as a farmer, lender, insurer or salesman, a few trends have often regularly repeated themselves. While not absolute patterns, definitely worth highlighting. Successful farmers that are above average managers will grow their operations. Once they become proficient in their enterprise or enterprises of choice they grow. If you can make a reasonable profit on a given number of units, produce more units and make more profit. This model is also evident in many non-farm industries.
Farmers that grow crops and begin to irrigate, buy more irrigation. Plants need water and between drainage and irrigation, water is a controllable input. One better off not left to chance. The hardest sell of a pivot is to those that never tried to irrigate with one. After the first one, they call us.
Families or at least managing partners span multiple generations to ensure this growing entity will continue to train their replacements. This keeps the management team looking ahead to the future, so it will be a successful business for decades to come. Always looking to make the best investment for long term success.
When looking to acquire land, price is seldom the main criterion. Field size or potential field size, soil type, drainage, topography, and location are all important factors. These may vary some by the type of crop you plan to grow, but all are considered. If it needs an abundance of improvements but fits several criteria, it may still be attractive but at a different offered price. So yes, price does matter, but is generally not the primary factor. The longer you hold and use an asset the less price becomes a factor due to the number of seasons and potential impact it will have on your operation. Time and time again, farmers will pay more for the farm next door because they are familiar with it and it requires minimal travel to operate.
Center pivot irrigation has some similar attributes. It is a long-term asset that can improve production for several decades. In this case brand does make a difference. The longest lasting machines are worth more. If the best made pivots cost 15% more and they last 40% longer, what would you choose?
There are several other factors to consider. Your dealer is likely most significant. As with anything mechanical, especially if it moves, parts will wear, and breakdowns will occur. Have you evaluated your dealer? Who do the most successful farmers in your area utilize for their irrigation? Finally, I challenge you to determine who has the strongest experience and certifications in the design area. A well-designed layout with the most appropriate options for your situation can have a significant impact not only with the system you purchase today, but future potential systems that may be sharing infrastructure.
MICHIGAN VALLEY IRRIGATION HAS THE ONLY TWO CID’S IN MICHIGAN.
Investing in center pivot irrigation can be a game changer for your farm. Many good managers claim they can regularly increase yields by 50 to 100% with a well-designed, long-lasting system. Wouldn’t 25% make a difference in your operation? If you think about investing in irrigation like you would investing in more real estate, you’ll probably be better off over the lang haul. The short answer to my original question: center pivots or real estate, is probably both, if you are farming for future generations. Take some time and get it right!
ABOUT THE AUTHOR
Pete is the marketing manager for Michigan Valley Irrigation, having joined the company in 2016. He was raised on a dairy farm in western New York and graduated from Cornell University with a B.S. in agricultural economics. His entire working career of over 37 years has been involved in agriculture. A farmer helping farmers. When away from Michigan Valley he operates, Joyful Noise Farm, a small livestock and produce farm and spends time with his family.
