I`m not blaming landlords for wanting top dollar, it`s like selling a used car or anything you want the best price. BTOism can be and I emphasize "can" be so greedy that you best stay away. For example, one that loses a farm will bale the corn stalks (nutrient removal) and leave the bales in the field with the sole purpose of bollixing up the new tentant`s ability to do fall tillage, just out of spite. One BTO was renting way under value for years from a widow and told her "You don`t have to tell anyone what you get in rent, it`s your business" when she passed away the clueless heirs put the farm up for bids and his bid was DOUBLE what he had been paying. I`ve educated my family to all the tricks and read everyone`s pedigree in the neighborhood so when I croak they will know who to deal with. Actually it`s easier to deal with a BTO as far as raising rent, with all their new paint it`s harder for them to play the pity card. I think what has some worried about these rent auctions is they have rented a high 50s CSR farm for a fair $175 the last 3 yrs and have surprisingly taken off 200 bu yields (+$1200 gross last yr!) ...always justifying their rent by "maybe next year won`t be so good" when each yr it`s been getting better (price+yield). Now that renter is behind the 8-ball and is at risk of a ticked off landlord and these auctions only put his sweetheart deal under a microscope. Alot of Silverados have been purchased by remaining silent about that windfall.
Big Tract Operators
15 years ago or more, I first ran across the term "BTO" in a trade magazine for fertilizer plant managers that I subscribed to. I got on the mailing list somehow, and it was a source of great information on chemicals and wholesale costs of fertility products.
It defined the BTO as a "big tract operator", not as the "big time operartor" that most people think of. Obviously, the needs of a BTO, using this defination, are different than the guy farming the home quarter and working off the farm. It had insight, from a plant managers viewpoint, of how to deal with and handle these operations.
I am not a BTO in an acre sense, I don't farm 10,000 acres, but I am gearing up for large fields and have been revamping my equipment and changing how I put my farms together to get more efficient. Went to 24 rows on planting this year and I do have some large farms that will be easy to farm this way. I already had a big digger and plenty of horsepower and this way, I can plant what I dig the same day. It will make me look at fields differently, and also will make me more apt to look at renting other large tracts and paying a premium for those farms that are laid out efficiently. Irregular fields and smaller tracts won't command the same interest, and I am sure this shows in the bids for the large tracts.
Like it or not, farming has been following a consolidation path, and we are seeing larger operations with more efficient use of time and capital, and the net is a higher return to the land, either owned or rented. We can stand still , and act like the dutch boy trying to stop the flood by putting his fingers in each hole that water starts spurting out of, or we can see that the dike is going to break no matter what we do, and get out of the way of the flood. Many operators have been paying less than $200 per acre for land that, as the recent rent auction shows, command a free market bid of possibly $ 400 to $500, or more. Landlords don't live in a vacuum and news travels fast in farm country. If you are only going to stay in business and show a profit with below market rent, now is the time to look at what you need to do to be more efficient and profitable. If you are not going to offer the landlord the going rate, you can be assured one of your neighbors and competitors is gearing up to do so. Maybe you need to go to bushel per acre rent or some other form of profit sharing. If the landlord isn't happy, you can rest assured that you won't be happy for very long either as someone else will be happy to put the smi$e back on their face, maybe the local "BTO".
Having said that, it is apparent that operations can get too big, also, as the recent bankruptcy of the 30,000 acre farm unit shows. Once you get past the point where you can personally manage and supervise what is going on, you are going to have production problems. I think anyone that can put together a 2000 acre operation is going to compete well with the 20,000 acre operation if they don't try to copy them in equipment and overhead. The 200 acre operation will have to subsidize itself with either inherited land, sweetheart rent, or lucrative off farm employment.
Re: Big Tract Operators
What an interesting perspective. There is a totally different mindset in deciding to make your expense of days more efficient, rather then just making yourself into the biggest acreage producer.
By focusing on efficiency, you avoid the risk of a situation where you get too dependent upon too many hired people, such that you end up with a diluted dedication to the overall operation. If it costs as much to pay someone to plant 24 rows at a time as it does to plant eight, then as long as the time saved is utilized in a meaningful manner, then it is easy to see the price of the bigger planter as justified.
I would compare BTO farmers to the Lakers, Patriots, Yankees, etc. We all like to rip on them but know they have talent and are good at what they do. Even our operation has approximately 3x the acres as most of our immediate neighbors. Maybe we are on the cusp of BTO.
The negative association of the term comes from the ones we see fail. Too big too fast seems to go to their heads and they become a house of cards. All equipment is new, but none of it is owned. $100,000 unpaid fuel bill. An entire year of inputs unpaid. You know how it goes down. The successful big farmers I know have done it the right way. Paid for equipment. Bought ground when it was next to or near them. They never saw success as a certain # of acres, instead saw it as $ in the bank.
Those two amazing stories (Illinois FF and rent auction) finally brought on this thread, and it is everything I had thought it might be.
Thanks-----great input------especially the reality based humor. Since my humor is usually lame, I will spare u.
Kay-----Your thoughts were mine at the same point.-------Most every bto I know is heavily engrosed in the thought of effeciency and his business management. That includes the care of all the folks he is responsible to(banker, owner, employee, family, supplier, purchaser, etc.) and a constant eye for the risks and direction of the future. They just don't have time for much else, and didn't when they were farming small. The past brings a smile but does not eat up their time.
What determines a BTO-------sorry for the orange grabber but it is three letters i have not wanted to type before, I dislike the smear that comes with the threads that include them.
What determines a BTO------- IMO-----------LONG Term BTO's
1--- longevity-------I am always amazed, not at the new farms they take on, but at the ones they maintain. Good multigenerational relationships take work, patience, respect, and ----------forgiveness.
2---Selective Land Owners----no explantation needed----but could be lengthy. A little more than C-A-S-H in an owners mind. But good Bto's don't mind saying no, they don't need every deal that comes along, that is an unspoken benefit of size.
3---Innovation & Technology------------Bto's are usually looking at the potential as well as the cost of new tech. But ALWAYS looking.
4--- New ideas "How can we do it better"----that's the stuff they loose sleep over.
5--Work for Mutual Benefit The deal that benefits me over you(or you over me) is easy but has a short life. the mutual benefit deals are hard to do, but have great, long term reward. Bto's will spend their time and resources to get there.
6--inflation-- makes growth necessary as RED STEELE pointed out. We been in this position for years in grain.
IMO---The Illinois Family Farm --------------------was not a BTO. It takes a lot more to manage a large business than website skills and cash flashing.----That was a scheme for land owners and managers, taking advantage of owners like all the
others the retired face. How embaracing it would be to be one of those owners involved in that house of cards. To openly say we will market the same crop 3 or 4 times. Why rent more acres----lets just plant a garden and sell it 20 million times.
Cash rent auction----------------a circus, where greed meets greed. Most Landowners enjoy more than the cash and the real BTO's won't and don"t need to play that game.
WE JUST HAD TO DISPLAY ALL OUR DIRTY LAUNDRY IN ONE WEEK.------I am still a little embarrased.
Re: Big Tract Operators
Red Steele I know about spreading your cost of machinery out over more acres, and I agree that if you are cash rent you should give the landlord what it is worth. No one has yet to answer me if all cost can be covered by those cash rents paid on that auction. I have heard a few hints that that answer is no. My question is IS ITefficient TO BID CASH RENTS ABOVE RETURN LEVELS?
Re: Big Tract Operators
They probably aren't, high yields. At least they think they aren't. We all have our own cost of production and our own prospective yields. And our own risk managment and marketing skills. Efficiency of scale & purchasing power would be another advantage. You don't know what kind of deals they are cutting with suppliers. You don't know their machinery and labor cost per acre or their cost per bushel.
We can pretty much project what our own costs are but we do not know what our competitors costs are. Wew can use our rates but are clueless about their rates. Yes volume customers getr better deals. Surprise surprise!
A few years back I had a friend that was running a new big Deere combine on 3000 acres. He was trading annually and his per acre cost was less than mine and I ran a 7 or 8 year old machine. He had no repair bills on his and I had more than enough on mine.
BTw I think some tie up land for extreemely low margins thinking margins will improve or rents will lower. Think of the chaps that did that 7 or 8 years ago.