You Do Not Need to Own Land to Farm
Aug 27, 2010
Moe Russell, of Russell Consulting Group wrote a very good article in the Corn and Soybeans Digest clear back in 2007 on the fact that you do not need to own land to be a farmer. I personally think in today's environment, most farmers who already own a bunch of land with no debt are most likely not maximizing their return as a farmer. They are probably doing a good job of maximizing the return to them as land owners since they are farming it themselves.
However, as both a landlord and a farmer, you need to review each year what your return has been as both. Make sure in your management reports that you have allocated cash rent to yourself as landlord that is reflective of what cash rents are bringing in your area. Make sure that you do not use the highest or lowest, but somewhere in a median range. Once you allocate this cash rent to your farming operation, how profitable was your farm for the year and what is the trend. I believe, in many cases, the farmer will find out that it is earning a good cash rent return, but as a farmer, it is generating a loss or very little profit.
If this situation continues for too long, the farmer has two good options:
- Stop farming and either sell the land or cash rent (this would probably be the most difficult for most farmers), or
- Increase the profitability of the farming operation to take advantage of the land that the farmer owns. This may require renting more acres, sharing equipment with other farmers, etc.
Have you taken the time to do this analysis on your farm. If not, I think the results may surprise you.