COVID-19, historically low commodity prices, questionable demand and supply chain disruptions are just a few of the challenges chipping away at your margins right now. Since 2013, producer margins have been slashed by a seven-year run of low commodity prices. Yet some producers still seem willing to compete for additional land while accepting little, if any, profit.
2021 land rental discussions are now upon us. There are four questions to consider before starting the land rental discussion:
- Are you ready for a structured conversation?
- Do you know your numbers well enough to have an executive-level conversation with your landowner partner?
- Who is your competition?
- What fake news is misleading your landowners?
Listen to a podcast episode of the Ag View Pitch featuring Chris Barron on how to best prepare for farmland lease negotiations:
Let’s dive into each of these key areas.
Structured Conversation: Before meeting with your landlord, write down your expectations of the conversation. Detail exactly what you want to achieve, including questions you may want to ask during the negotiation. This will allow you to have a better understanding of their expectations and allow for a mutual decision. There may be degrees of formality depending on the landowner’s personality but formalizing the meeting process beforehand will yield a more effective meeting for both parties.
Know Your Numbers: Some landowners want all of the details; others just want a rent check. Either way, it is critical your numbers are accurate and detailed so you can clearly evaluate your rental payment capacity. It does not matter what the university numbers say or what some land management company might suggest is an appropriate rent level. The correct rent level is what fits into your specific cost of production, productivity level, marketing opportunity and profit goals. Define what rent number fits the situation without stretching land cost beyond your risk tolerance.
Competition: Be the competition. Strive to go over and above on service. Farming is a visual activity and for most landowner’s, aesthetics are as important as the financials. For others it might be doing some extra activities like mowing lawns and snow removal. Eliminate outside competition by asking two simple questions:
- What do you like best about me farming your land that I can continue improving on?
- What areas should I change or improve on to be a better farmer on your land?
Fake News: Be the first information source for your landowner. Provide as much financial transparency as your landlord is willing to review. Facts of your actual situation are much more important than misinformation provided by other sources. Social media has replaced the coffee shop with bad information. Also beware of predatorial land management services looking for an opportunity to get between you and your landlord. Someone else’s fake numbers can wreak havoc with your relationship unless you have actual documented proof of your situation. Keep numbers real!
.............................................
Chris Barron will be discussing 2021 rental decisions during the Farm Journal Field Days, which takes place Aug. 25-27. The more than 100 informational sessions align with key interests and needs of the crop and livestock sectors.
Learn more and register now!
Chris Barron is director of operations and president of Carson and Barron Farms in Rowley, Iowa. He is also a national financial consultant for Ag View Solutions.
