High Cash Rent is Not the #1 Thing!

Why is high cash rent all you hear about?cash rent

A trend I have heard about, is it takes high cash rent in order to farm available ground. This is something that gets talked about often at the restaurants and local coffee shops. But does it truly reflect the relationship between the farmer and the landowner?

Is price the only thing a landowner is interested in when seeking new tenants?

Is bidding a higher cash rent a farmer’s only selling feature in their tool box order to do business with new landowners?

This shift in culture is something that has become self-inflicted. Even though this way of doing business is something that has started with the grower’s need to get bigger and farm more land, it does not reflect the majority of the farmers and landowners.

Cash rent is not the number one thing to most landowners. So why do farmers fall into the trap that it is?

Farmers are independent, but are they?

Farmers are by far some of the most independent people I have ever known to a certain degree. One of the characteristics I see with many farmers is what I would call “group think.” The people we surround ourselves with play a big role in influencing the way we think, what we believe, how we farm, and the way we do business. This network of influencers has more of an impact on a person, both positive and negative, than what is thought.

Many farmers are reluctant to make changes or do things differently for fear of what others may think. Breaking away from the farming cultural norms is a struggle for many farmers. It is so easy to stay comfortable, not change, and remain a face in the crowd. So if the group believes that in order to pick up land one must bid a higher cash rent, then their choices will be to pay more or choose not to grow at all. The issue then becomes that the more we hear these types of stories, the more we believe that is the only way to do business and grow.

I need to just get my foot in the door!

The other problem is many growers have thrown more dollars at the landowner is just to get their foot in the door. If a grower can pick up more acres, even if they have to reduce their profit margin on or even take a loss, it could mean farming more of the landowners’ acres he is not currently working with. When this does work, and sometimes it does, it this just means farming higher cash rent ground in the future.

Rarely does a landowner reduce the rent payment because the grower is a nice guy or has done an incredible job. The grower has already set the precedent. This is their offer, not just now but for future agreements as well. The grower at the same time is forced to reduce the necessary stewardship on the new acres just to get close to the breakeven cost. This can be a very dangerous scenario and the grower sets themselves up for a short term relationship at the expense of their reputation and greatly increasing the risk to their operation. Farming is all about managing risk.

What is a grower willing to risk?

So what is important to the land owners if a higher cash rent is not the only matter of importance? Each land owner is different in what they see as value.  It is important to ask questions and let them share their thoughts and goals with the land. Here are a few that are the most common to many landowners.

Soil Health

Soil stewardship continues to grow in its importance especially in the eyes of the public. Many today looks to buy the food from a producer who is farming in more sustainable ways. There can be a gap between the landowner and farmer. When cash rent goes up, does stewardship go down? In many cases it does, even at the expense of long-term productivity. The soil quality is the foundation of all our cropping decision. Everything a grower does has an effect on something else. Every decision a grower makes should have a long term goal in mind. Landowners will pursue growers with this vision for future productivity and stewardship.

Land Owner Communication

How often do many growers communicate to their current landlords? What types of communications work best? Again each land owner is different in what ways, how often and what level of detail a grower need to interact with them. I would also advise that more detail and communication is better than less. Communication is the cornerstone for a grower and the landowner to be on the same page moving forward.

If the landowner knows what a grower’s yields are, then he or she should also know why they achieved those results. By sharing this info with the landowner, then the partnership can now work together. This will improve the long-term sustainability of their farm. The landowner should know that the grower had a long-term plan and vice versa. Presenting future goals on their farm to the landowner could mean a long-term contract. A solid plan is something the farmer and the landowner can get behind and work together on.

Maintaining Land and Buildings

To many growers, mowing road sides, cleaning fence rows and maintaining buildings or other structures is not always a money making activity. To many landowners, it is important and it gives them the confidence that their tenant is willing to take care of their resources. These are just a few qualities landowners are looking for. But I wanted to get you thinking about what is important to you and what are you willing to risk. Is your reputation and short-term gain a higher value than the long-term results? If you have a dream of your kids or other family coming back into the operation, then there are many things to consider. Don’t let instant gratification be your decision-making approach. Make sure your decisions are part of an economically sustainable business plan.

If this is you and you have these same frustrations, Bird Dog is here to help.
Bird Dog exist to give farmers opportunities and landowners options.

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