Surviving the Downturn: Exit strategies
Sept. 21, 2026
By Mary Hightower
University of Arkansas Division of Agriculture
Fast Facts
- Farmers have multiple options for leaving agriculture
- Exiting farming might be the best solution
(688 words)
LEXINGTON, Ky. — Exiting farming should not be viewed as failure.
It's a stark statement from a pair of researchers, but one relevant in a time when farmers are under tremendous pressure to succeed in a very hostile economic environment. So hostile, that some are considering leaving the business. The decision to leave farming and move into another sphere is a topic taken up by Jonathan Shepherd and Kenny Burdine in the publication Surviving the Farm Economy Downturn.
Shepherd is an agricultural extension specialist, and Burdine is an extension professor of livestock economics, both within the University of Kentucky's Martin-Gatton College of Agriculture, Food and Environment.
Farming is more than just an occupation — it's a way of life — and this often changes how difficult decisions are viewed by farmers, Shepherd said. Most farms are family farms that have been passed down from generation to generation and/or built slowly over time through a lot of work.
Because of the close connections to the land, people and other infrastructure, farm operators typically don't want to cease operations, but there are situations when this is the best option.
Shepherd said there can be negative associations with selling the farm or moving outside of agriculture, but this is unfair.
If a farm is struggling, they should evaluate all their options, including exit from the industry. In some cases, this option is never considered or is seen only as a last resort, Shepherd said. This can lead to short-run decisions that have major negative implications in the long-run and result in things only getting worse.
Surviving the Farm Economy Downturn is a report from the Southern Extension Risk Management Education Center, based at the University of Arkansas Division of Agriculture, and the Agricultural and Food Policy Center, based at Texas A&M AgriLife. It features the work of 37 experts from across the U.S. offering analyses and recommendations for agriculture's period since the 1980s.
The first step
If a farmer operator believes the financial situation is dire, it is probably best to seek advice from a third party, Shepherd said. It can sometimes be hard to see the gravity of a difficult situation from the inside, so an outside perspective can be helpful.
That fresh eye could come in the form of lenders, accountants, lawyers, extension professionals, mentors and friends.
Planning an exit from a business, especially an agricultural operation, requires more than deciding when to stop working.
Ideally, the business owner needs to maintain control over the exit process to ensure it aligns with long term financial security, is robust in strategic tax planning, and meets family or successor goals, said Shepherd.
Shepherd and Burdine urge farmers to take stock of your current situation and your retirement plans and ask yourself, ‘how much equity am I going to burn through until this agriculture cycle is complete?'
One of the most significant components of any exit strategy is understanding the tax consequences of asset sales and retirement income.
If you are close to your retirement age goal, you could negatively impact your equity by continuing production for a couple more years while waiting for things to improve, said Shepherd.
This could leave you in a position where you are forced to continue to operate beyond your retirement goal in an effort to recoup what was lost in the low profitability times.
Back-of-the-envelope mathematical approaches to calculating potential tax liabilities associated with business asset liquidation rarely approximate the real liability potential, the report notes.
Equipment, real estate, breeding livestock, inventory, and other assets each carry different tax treatments. Capital gains taxes, depreciation recapture, and the potential for ordinary income characterization of those sales can dramatically affect the tax liability realized.
Strategies
There are several exit routes. Some farmers might choose to gradually downsize or lease lands. Other options include moving the operation to the next generation or exiting all at once by selling as quickly as possible.
Moving the operation to the next generation can be tricky and is seldom successful when executed quickly, Shepherd and Burdine said.
Managing expectations to acknowledge that this is a time-intensive process will help mitigate frustrations at the outset, Shepherd said. Both the transitioning generation and successor generation need to have open and honest conversations about income and cash flow.
Putting time and effort into getting things right in the beginning is essential to ensure that relationships are preserved and conflict avoided, Shepherd said.
Surviving the Farm Economy Downturn was made possible by support from the Southern Extension Risk Management Education Center, under project award Nos. 2021-70027-34722 and 2025-70027-45397, from the U.S. Department of Agriculture's National Institute of Food and Agriculture.
The Southern Risk Management Education Center is based at the University of Arkansas Division of Agriculture. The Agricultural and Food Policy Center is housed at Texas A&M University.
The report from the Southern Risk Management Education Center and the Agricultural and Food Policy Center, features the work of 37 experts from the two centers, plus Auburn University, Mississippi State University, Texas A&M AgriLife, University of Arkansas Division of Agriculture, University of Florida, University of Georgia, University of Kentucky, University of Maryland, and the University of Tennessee Institute of Agriculture.
The document is divided in six primary sections: Setting the Stage, Crop Market Outlooks, Livestock, Ag Lending/Credit/Crop Insurance, Strategies, and Resiliency. Each section contains from two to eight highly detailed articles.
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit uaex.uada.edu. Follow us on Facebook and Instagram. To learn more about the Division of Agriculture, visit uada.edu. To learn more about ag and food research in Arkansas, visit the Arkansas Agricultural Experiment Station at aaes.uada.edu.
About the Division of Agriculture
The University of Arkansas Division of Agriculture's mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation's historic land-grant education system.
The Division of Agriculture is one of 22 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on three campuses.
Pursuant to 7 CFR § 15.3, the University of Arkansas Division of Agriculture offers all its Extension and Research programs and services (including employment) without regard to race, color, sex, national origin, religion, age, disability, marital or veteran status, genetic information, sexual preference, pregnancy or any other legally protected status, and is an equal opportunity institution.
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Media Contact:
Nick Kordsmeier
nkordsme@uada.edu