When The Farming Chips are Down…Tighten Your Belt

It’s no secret that commodity prices are down significantly, impacted drastically by the global agriculture economy. Ag economists are predicting that this won’t change any time soon and the solution seems clear – tighten your belt, put the horses in the barn and plan to weather the storm.

  • Sharpen Your Pencil

    Over the last few years, the cost of production has been ratcheted very high. Whether it’s seed, herbicides, fertilizer or equipment, there is always a way to control costs and save a few dollars. Reducing expenses is a critical step in riding out the ups and downs of the markets.

  • Crop Planning, Software & Management

    Whether you rely on spreadsheets or have upgraded to farm management software like FarmLogs, Agrivi or Ag Leader, one of the best investments you can make is better planning & marketing for the next crop year. Tracking input costs and even the ‘hidden costs’ of time spent in the field can give you a clearer picture of your operation. Success is never an accident.

  • Leases, Relationships & Communication

    If you are cash renting some or all of your farmland, it’s worth the time to invest in your landlord/tenant relationship. When farm incomes are down and leases or rents need negotiated, this is a relationship you’ll be glad that you watered & fertilized. Communication and addressing issues upfront can mean the difference between acres you farm for decades or acres that quickly pass to the next highest bidder.

  • What is your neighbor doing?

    We learn from our mistakes, but we can also learn from those around us. What are other successful operations doing that you are not? Whether you simply need to sharpen your pencil, choose a different supplier or take the time to carefully analyze your operation, there is always room for improvement. Often times, getting a fresh set of eyes on what you are doing is all it takes to get things moving in the right direction or determine if it’s time to move on.

  • Selling the Farm

    The market demand for farmland continues to be strong. Location, water resources and drainage remain a topic of conversation and play a big role in what the market will pay. With many buyers prepared to purchase for fair and equitable prices, selling some or all of a farm could result in well-deserved gains. As a seller, capital gains taxes should be taken into consideration, proper planning is a must.

The landscape of agriculture and land investment continues to buzz with risk management. Farming is a tough business and those that are successful deserve recognition for making it with their own two hands. If retirement is on your mind or your family is no longer involved in farming, consider the security of the income and inheritance provided by the well-deserved returns of your hard work and investment into farmland. Balancing risk vs. reward takes gumption; inevitably there will come a time for tough decisions that could mean the difference in plowing ahead or resting your hat on a hook.

Farm Real Estate Indiana  When The Farming Chips are Down...Tighten Your Belt Johnny Klemme Land Broker Farm Real Estate Indiana

About the Author

Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms & land in West Central Indiana. Born and raised on a local farm, his commentary on issues important to the farming community and land values can be found at www.PrairieFarmland.com/blog

cash lease, flex lease, 50-50 leases

5 Tips to Rent or Lease More Farm Ground

Negotiating a farm lease can be easier than you might think. Whether you are looking to expand with a cash lease, 50-50, 2/3 – 1/3 or prefer a flex lease, there are several important factors that will help you grow your farm operation. Ultimately, you want to build a great landlord / tenant relationship that is fair, equitable and results in long term success for you both.

  • Communication = Trust

    No matter if you are a landlord or tenant of a farm in Indiana, one of the best ways to negotiate a mutually beneficial lease and long term success in farming is regular communication. Address concerns when they happen, learn what the landowner values in a tenant and in the health or productivity of their soils and you’re putting together a recipe for great returns to both parties.

  • Values & Goals

    If a landowner values good agronomics, no-till or cover crops, it’s best to address these needs up front. If you can help improve soil quality during the term of a lease or cash rent agreement, this is a great way to negotiate longer terms that are mutually beneficial. Think Win-Win, no matter who your landlord is or what they believe is most important to their land assets.

  • References & Resumes

    With more and more absentee landowners in Indiana, having a great resume and set of references can mean the difference in your bottom line. Take the time to prepare a resume that includes your experience, education/degrees, how you approach soil health & fertility and what makes you a sound choice as a tenant and producer. It’s been said that the devil is in the details.

  • Land is Your Greatest Asset

    For both the landowner and the tenant, it’s vital to think long-term about productivity, soil health and nutrients. Best practices = great profits for both parties. Take a look at the most successful farmers & producers in your area and think about why they are leasing more ground. Are they using variable rate technology? Do they practices good crop rotation? How have they improve the soil? Your answers to these questions can help you build a great landlord/tenant relationship that results in higher profits for both parties.

  • What’s the Going Rent Rate?

    Avoid the coffee shop talk. The ground you own or lease has its own unique characteristics in both soil type, history and current or planned investments. Just because a farm in the same county gets $500 / acre does not mean your farmland is worth the same. Factor in the size, shape, ease of use & ability to get large equipment there, travel time, location, point rows, drainage, commodity prices, input costs….just to name a few!

No matter what type of lease you prefer, from cash rent leases to more complex flexible leases, sharecropping or 50/50, it’s really about understanding landowner and tenant needs and goals. If you aren’t able to meet each other’s expectations, then chances are the relationship may suffer and the lease will expire. On the other hand, if you have share common values , you’re most likely on the right track to helping each other be successful and profitable this year and many more. 

In today’s farm and land leases it is becoming more common to include provisions for the ownership of farm data. Landlords should take this into consideration to get a better handle on the productivity and fertility of their land. Long term, it is always best to improve soil health as many leases include provisions for “flex bonus payments” when bumper crops or prices are favorable.

About the Author

Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms, recreational property and development land in West Central Indiana. Born and raised on a local farm, his commentary on issues that are important to the farming and real estate community can be found at www.PrairieFarmland.com/blog