This article was originally published in the February 2021 edition of RightRisk News.
Land costs can make up a significant portion of the cost of production for many commodities. For example, see the 26 recently published University of Nebraska- Lincoln corn budgets for 2021 at farm.unl.edu. Land costs comprised an average of 30 percent of the total costs for growing corn across these estimates. Similarly, the summer pasture costs comprised 29 percent of the total annual herd costs across five cow-calf budgets published in 2019 at the same website.
Land costs place a tremendous burden on cash flow requirements and are a significant barrier impeding new and beginning producers from getting started in the farming or ranching business (Parsons, et al., 2019). However, land is a necessary and unique asset to a farming or ranching operation. How land is acquired for use in the operation can lead to dramatic shifts in the financial direction of the operation
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