Equity is an Illusion. Cash is King.
- Grant Wiese
- Feb 9
- 4 min read
SW Financial Literacy
Equity is an Illusion. Cash is King
I was listening to the Farm4Profit podcast last week because the title caught my attention: “Farmers Are CEOs — Most Just Don’t Run Their Farm Like One Yet.”
I must say, I agreed with about 90% of what was shared in that episode. I would strongly encourage you to listen, take notes, and think through how the ideas apply to your own operation. There were a lot of good nuggets.
But the 10% I did not agree with… terrified me.
First, Where I Agree
There were several important truths discussed that every farmer needs to hear:
Equity can drown you. Too much iron, too much investment, and too much capital tied up in depreciating assets can quietly suffocate cash flow.
Look at different harvesting and combine strategies. Owning everything is not always the most profitable path. Custom hiring or alternative machinery strategies may leave more money in your pocket at the end of the year.
You eventually need a land base. Building ownership over time still matters. Long-term stability requires some level of control.
There are profitable farmers in every county. They are in the same markets, facing the same prices, and dealing with the same weather. The difference is not luck. The difference is management.
Pass off roles to the next generation when they are better equipped. If someone younger has stronger marketing skills or financial awareness, let them lead. Ego has no place in profitability.
Update cash flow throughout the year. If fertilizer, yields, or expenses drift off course, challenge your agronomist and your team. Find out why. CEOs do not wait until year-end to discover problems.
Surround yourself with experts. No successful CEO operates alone. Neither should a farmer.
And one of the most important reminders:
It is good to have big-picture goals, but success requires getting granular and focusing on the day-to-day financials.
On all of this, I am in full agreement. There was great insight and everyone would benefit from exploring each of these topics in further detail.
Where I Strongly Disagree
The disagreement centered on one idea:
“Equity is king.”
The claim was that working capital is inexact because timing shifts year to year, while equity is the true scorecard that is the #1 thing people should pay attention to.
This is where I fundamentally disagree. So much so I physically shouted out, "No, No, NO!" when I heard it.
Working Capital IS Exact
Working capital is not a guess. It is not a feeling. It is not a story we tell ourselves.
Working capital is accounting. It is bank statements. It is market values. It is a snapshot in time that can be measured consistently if taken on the same day every year.
Working capital is clear, trackable, and real.
Equity Is Not Exact
Yes, long-term debt is exact. But the value of land is unknown until it sells, and most farmland is not for sale.
The same is true for equipment. Market estimates are not reality. They are opinions.
That makes equity an inexact measurement of financial health based on the reality of how a balance sheet is structured.
Why Working Capital Matters More
Most importantly, working capital keeps food on the table.
Working capital shows how your operation is actually performing. I regularly meet with farmers who hand me a balance sheet showing significant working capital losses, yet they tell me they “made money.” Why?
Because they revalued machinery higher. Because land values increased. Because equity went up on paper.
But here is the truth:
You only get to keep the equipment if you have working capital.
Once working capital is gone, the farm stops. The equipment gets sold to pay operating debt. And the illusion of profitability disappears overnight.
Yes, equity can bail you out for a time. But it also hides real management and profitability problems that are quietly getting worse.
Who Equity Is Really For
Equity is primarily for banks and lenders. They need collateral to extend credit. That is their protection.
But you should not want the bank holding every ounce of what you own. Because when that happens, you risk losing:
The farm
The assets
Even the house
That is not security. That is exposure.
The Dangerous Comfort of Flat Equity
Tracking equity feels good. Watching land values rise feels like progress. And yes, good cash flow management and strong working capital can eventually build equity. But that process can take a long time.
Right now, I am seeing operations with zero meaningful equity change over the past five years. On paper, everything looks stable.So the assumption is:
“We must be fine. We’re holding it together.”
But here is the reality I am seeing in 2025:
Some of those farms just finished their final year of farming.
They dug such a deep working capital and debt hole that they had no choice but to quit, or risk losing their home. And this is the most sobering part:
They still had four million dollars of equity.
But that equity did nothing to save them. Because equity cannot buy seed. Equity cannot make operating payments. Equity cannot fix broken profitability.
Only working capital can do that. Cash is king.
The Real CEO Scorecard
Yes, farmers are CEOs. But CEOs must track the right scoreboard. Equity is a long-term outcome that is important. Working capital is a daily survival metric.
Ignore equity entirely? Never. But worship it? Even more dangerous. Because the farms that survive the next decade will not be the ones with the most paper wealth.
They will be the ones with:
Strong working capital
Honest profitability
Clear financial discipline
And the courage to face reality early
That is the difference between looking successful and staying in business.
And in this environment, staying in business is what matters most.
Need help with your operation's financials?
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Have a great week!
Grant
