The Milk Producer - May 2011 - (Page 24)

FARMFINANCE By Jim Snyder Investing with caution With so many demands on capital, creating a checklist to prioritize needs is good business sense W ith spring in the air, there seems to be no shortage of projects to do around the farm. However, there’s no better time to pause and consider your family’s and farm’s future needs. The type of investment you choose will largely depend on how quickly you need to access your funds. Therefore, investing in fixed assets, such as land and equipment, may not be the best choice. With so many demands on capital, creating a checklist to identify and prioritize future needs, and evaluate the impact of your farm business investments, is good business sense. With limited quota available for sale and commodity prices setting new records, diversifying your farm business may be an option. Given current exchange rates, now is an opportune time to invest in more efficient technology. You could also expand crop production. Grain and oilseed producers are currently enjoying the longest running super cycle in recorded history. A super cycle is the cyclical nature of commodity markets. Despite the opportunities to diversify your business, there remains one hurdle—volatility. It has become the new normal, and with it comes upside and downside risks. The best way to protect your farm against volatility is to increase liquidity. If market fluctuations continue, an investment strategy that addresses your need for increased liquidity is essential. The type of investment you choose will largely depend on how quickly you’ll need to access your funds. Investing in fixed assets, such as land and equipment, may not be the best choice. Dr. David Kohl, a Virginia Tech University professor and renowned agricultural economist, has come up with a strategy to help you increase your farm’s liquidity. 24 | May 2011 | MilkPRODUCER

Table of Contents for the Digital Edition of The Milk Producer - May 2011

The Milk Producer - May 2011
Contents
Editor's Notes
DFO Chair's Message
Provincial Perspectives
Dairy Update
Farm Finance
DFC Promotion
Research
Ruminations
Applied Science
Markets
New 'N' Noted
Back Forty

The Milk Producer - May 2011