Jonathan Small, an agricultural management consultant, lays out the case that the standard path into farming, buying land and machinery and owning everything, is the slowest route to the thing most young operators actually want. He breaks a farm balance sheet into its three asset classes and shows that the one returning the most is consistently allocated the least, then walks through what happens when a producer reverses it and rents ground instead of buying it. He is candid about the risk, since working capital is also the only insurance fund most farms have, and about the operator who ran the model brilliantly and still got beaten by two consecutive frost years. The payoff he points to is at the succession table, where a farm built this way is large enough to divide without forcing children into partnership.
Look at almost any farm balance sheet and the shape is the same. Somewhere between seventy and ninety percent of the capital sits in land, another ten to fifteen in equipment, and the smallest slice of all sits in working capital.
Then look at what each one returns. Land appreciates around five percent a year. Equipment loses value every year it is owned. Working capital, the smallest slice, is the one that returns fifty percent on average and sometimes several hundred on crop inputs.
Jonathan Small, an agricultural management consultant who came to Saskatchewan from Britain, spends this conversation asking what a farm looks like if you flip that. Not as a thought experiment. He has watched people do it.
What's Inside
- The arithmetic that puts the highest returning asset in the smallest position on nearly every farm balance sheet
- Why a young operator with a million dollars can farm four or five times the acres by renting, and which of the two gets to a land payment first
- The producer who went to five thousand acres in three years owning one quarter section and a sprayer, and what he offered landlords to get first call on their ground
- What happened to that same operation when the frost came, and why he walked away from farming afterward
- Why working capital is doing two jobs at once, and what happens the year a farm needs it for the second one
- How thirty years of that model changes the conversation at the succession table when there are three children and one farm
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