What factors affect rental rates.. continued
As I said last week, rental rates can be determined by many factors coming together in order to create a monetary value. The factor we will talk about today has a very big impact: soil quality. Soil types can affect a variety of things. Many universities have created models of “Good to Average to Poor” or some variation of this when describing and classifying land in order to come up with cash rent standards. Because the soil types have a major influence on soil quality, producers have been basing rental rates on this for years. But why?
One thing that is highly influenced by soil type is yield.
Since farming began, growers have recognized that certain soils often have significantly better yields. Many think this is because the heavier soils have a larger nutrient-holding capacity and can store more nutrients than a lighter soil. There may be a bit of truth to this, but it doesn’t tell the whole story. Heavier soils have a tendency to be higher in organic matter. This also increases the nutrient-holding capacity and the amount of soil nitrogen the plant has access to. But I think there is one thing missing when many people talk about the impact of soil types. It is that every soil type manages air and water differently. If we can make oxygen available in the soil, we can increase yield. We will get into the importance of air and water and how this affects rental rates next week but there again, many factors are coming together to influence yield. So why are we surprised when there are many factors that can affect rental rates?
How should you as a grower base your rental rates on these soil type standards?
The first thing I would do is take a look at your history. Have you taken what is considered average to poor soil and improved it to be competitive to your better soil types? I have seen this many times when working with growers and I think there is some major room for a producer to grow by seeking marginal ground and implementing the right practices to improve them. Do you have a system that will achieve this transformation in productivity? By taking the roughest ground and making it better will open you up to be noticed in the field. If you don’t have this history of improving these types of soils, I recommend finding someone who can help you in this area and if you struggle to do so, let me know, maybe I can help. If you have a history of improving marginal soils, you have the flexibility of what you pay on rent just because you predict the outcome.
The second thing to consider is how long it will take to implement your system to achieve these changes. The longer it takes, the more conservative you should be with the rent you pay. Here is where Bird Dog can be very beneficial. If you and the landlord have the right goals to begin with, the timeline to implement the plan will fall into place. But if there is no common goal, expectations aren’t realistic, then it is much more difficult to see and be content with the results. Start the relationship with a solid plan and realistic goals. If Bird Dog can help you connect with these new landowners, just let us know and we will be glad to help.