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Strategic fit key to farm expansion

An ag economist recommends focusing on a strategic fit as operators positioned to expand look for opportunities during the economic downturn in farming.

Mike Boehlje with the Center for Commercial Agriculture at Purdue University says the decision to grow should be based on more than having the ability to do so.

“What’s the opportunity I have to grow and what’s the market potential for whatever product or service I’m thinking of offering, if it is a new product or service?  What’s the market potential for it?  Does it fit into my business?”

He tells Brownfield once the right fit is identified, it’s time to assess the resources available.

“Do we have the money ourselves by accumulating some funds so we can invest in this new venture?  Alternatively, if we don’t have the money, do we have a strong relationship with an equity provider that we could leverage?  Or a lender who may be willing to loan us the money at a reasonable rate to do so?”

 

Boehlje says when expanding the farm, access to human resources can be as important as working capital because of additional responsibilities.

He adds concentrating on one activity can aid in cost reduction through a more intensely managed operation.

 

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