Episode 68: Characteristics of a Successful Farmer
Aaron Stoller has been intricately intertwined in the world of agriculture from the very beginning. Growing up on a family farm in Paulding, Ohio, his farming roots run deep. Working side by side with his family on a farrow to finish hog operation and grain farm, Aaron learned all the joys and frustrations that came with running a farm. Little did he know that these experiences would shape his future career as an ag lender.
After completing a summer internship in Upstate New York where he was introduced to the diverse world of agricultural lending, from vineyards and apple orchards to greenhouse nurseries and dairy farms, Aaron’s passion for agriculture was ignited.
Now, with over 20 years of experience in agriculture lending, Aaron has a deep understanding of what it takes to succeed in the industry and the unique set of traits farmers must possess to thrive.
In this blog post, we dive into the five essential attributes that define a successful farmer. These traits, as identified by Aaron, are focused on the financial aspects of running a successful farming operation. From having a strong business acumen to prioritizing furthering education, these attributes play a crucial role in becoming a successful farmer.
1. Have Strong Business Acumen
In the world of farming, having a strong business acumen is the number one trait of successful farmers. As Aaron puts it, “Successful farmers have strong head knowledge.” He emphasizes that successful farmers spend a significant amount of their time focusing on three primary areas: “How to lower costs, how to grow at optimum capacity, and how to position themselves for the future.”
Aaron points out a critical aspect that sets successful producers apart from others: “We all grow the same product.” For instance, “A bushel of yellow two corn that I grew on my family farm really isn’t a whole lot different than a bushel growing on your farm.” The challenge lies in controlling the cost of production, as it can vary from farm to farm. Aaron emphasizes that “The lowest-cost producer wins. Always has, always will.”
When it comes to cost control, Aaron highlights the significance of equipment. Successful farmers have a clear understanding that “equipment is not an investment. It’s a cost of doing business.” Farmers may find it challenging to let go of the mindset that new equipment is an investment, but he advises farmers to focus on the bigger picture and consider the true costs of equipment ownership.
2. Understand the Value of Working Capital
Understanding the value of working capital is another crucial trait of successful farmers. Aaron explains that successful farmers know the importance of building and deploying working capital. He compares working capital to jello, saying “There’s always room for more.”
Quoting Dr. David Kohl, Aaron states, “Cash is no longer king. It's the queen on the chessboard.” Working capital is a powerful tool that can both block and attack. It can block by subsidizing poor business decisions, and it can attack by seizing opportunities with great timing. As a result, building working capital over time allows farmers to avoid being caught off guard when unforeseen problems arise, and additionally, ensures farmers don’t miss out on opportunities.
3. Know the Difference Between Good Debt and Bad Debt
Knowing the difference between good debt and bad debt, as well as striking the right balance between too much and too little debt, is another critical trait of successful farmers. According to Aaron, there are two reasons to borrow money: to build assets or to fund losses.
When borrowing money to build assets, successful farmers ask themselves whether they are investing in assets that generate income, reduce expenses, or appreciate value over time. These investment assets are considered good debt. On the other hand, borrowing to finance cost-of-doing-business assets, requires caution. Taking on excessive debt for cost-of-doing-business assets may risk turning a farm into a high-cost producer. Aaron urges farmers to have a clear purpose for borrowing, either to build assets strategically or to fund losses.
Aaron also challenges the concept of being debt-free by sharing an anecdote about a dairy farmer. Aaron says this farmer understood the value of leveraging a certain level of debt necessary for growth. He aimed to keep his equity between 50% and 80%, believing that having less than 50% equity was risky and that having more than 80% hindered his ability to responsibly grow the operation. Aaron encourages farmers to maintain a balanced approach to debt to drive growth.
4. Become Industry Experts
Aaron states that successful producers have a deep passion for their industry and demonstrate an understanding of it, including knowing the key players, trends, and developments. They are highly vocal about the industry and take on leadership roles. Aaron stresses that by actively leading and sharing their expertise, successful farmers contribute to the agriculture industry’s overall growth and advancement.
5. Prioritize Training and Continuing Education
Prioritizing training and continuing education is the fifth and final trait of successful farmers. These farmers continually invest in themselves and their operations by seeking ways to improve and refine their skills. They recognize the value of staying current with industry trends and developments.
Aaron highlights the value of peer groups in agriculture. These groups provide a supportive environment where farmers can interact with others facing similar challenges and opportunities.
Benchmarking also plays a crucial role in the success of farmers. By comparing their performance to industry standards and peers, farmers can gain valuable insights into areas that require improvement and strategies for sustained success.
Conclusion
Becoming a successful farmer requires more than just hard work and dedication; it demands a keen understanding of business dynamics, a strategic approach to debt, and a commitment to continuous learning. By embracing these five essential traits, farmers can cultivate a path toward long-term success and make a positive impact on the future of agriculture.
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