Handling Disgruntled Landlords

[Red Steele]

Lets say that you have an existing rental contract...decent ground $180 an acre, year one of a three year contract. Farmer BTO has just doorknocked the landlord, and told them they would give $300 to rent that piece of God's Country. The landlord is feeling like they now have a really bad deal with you. How do you handle this, and keep the peace?

My thoughts are this....you point out to the landlord the uncertainty of farming, the volatile nature of markets, how your grain may be forward contracted for lower figures than what the market is now offering, and that for a new piece of ground, you probably can pay more, now, too.

And then you point out that they have paper profits twenty times or more what they think they are losing in foregone rent...their land has just jumped in value from $4000 per acre to $6500 or more, and the $120 of lost profit  for one or two years is a small drop in the bucket compared to the $2500 they have just potentially been blessed with.

And then you go to the other landlords of that BTO and offer $325. Like Sean Connery says in that Al Capone/Prohibition movie with Kevin Costner...if they shoot one of yours...you shoot two of theirs. Show the BTO that they are not "untouchable".

[Jim Meade / Iowa City]

Are you  being a little facetious this morning?

1.  You have a contract - honor it and hold the landlord to it.

2.  The landlord doesn't care about volatility - he is talking cash.  If you were share rent, that might be different.

3.  Telling the landlord about paper profits is beside the point and meaningless.

4.  Offering the others more?  And your landlord, too?  Does that make you a BTO?

If you are being serious, I'd simply tell the landlord you will honor your contract and he can honor his.  When the contract is up, new negotiations will ensue and he can rent it to whomever he wants for whatever he is able to get and willing to accept.  If he wants out of it early, he can buy you out   Let's see, $300-180 = 120/2 = $60.  He can buy you out for $60/acre for 3 years and still make more money.

You might also check the lease and see if it permits subleasing.  If it does, you can rent it to the BTO and make $120/acre/year for doing nothing (except standing the abuse from the landlord, LOL).

[kraft-t]

A contract s a contract period. I suppose one might discuss extending the lease if you could establish a figure.

On the other hand there are tenants that when faced with poor yields or lower prices will ask for landlords to take a discount on the contracted rental rates. 

[hardnox604008]

The question is, how is the landlord going to be to work with after 3 years?

Of course future events will dictate that. If the going rate is $300 at the time, fergeddaboudit, he's going to ask for that, and maybe some to catch up as well. If BTO #1 got burned and couldn't, or wouldn't, pay rents would bring a different twist to it.

This is going on everywhere in real time. The really interesting policy question is whether the guvmint is going to backstop the BTO and his lender when the music stops. Don't know where it stops, maybe at $600, but it does stop sometime.

Most of the BTO phenomenon exists because everyone knows that the guvmint has their backs.

If the easy passage of the blenders credit is any indication they are right, it still does. And I suppose it does in the long term becasue 10,000 operations farming half the ground are TBF- Too big To Fail.

[Red Steele]

Good point about how the Federal Government has created the BTO phenomenom. Take away federal crop insurance, and today's BTO eventually suffer the same fate as the "Bonanza" farms of the red river valley and elsewhere from a hundred years ago.

I think the BTO march is government orchestrated. I read once about a policy paper that promoted the idea of 20,000 large farms to ensure the nations food supply is controlled. We are not far from that right now, I would hazzard to guess.

[Jim Meade / Iowa City]

I am put in mind of the huge farmers in the West and Southwest who raise vegetables and fruit.  Oranges, raisons, apples, lettuce, cabbage and so forth.  I wonder if anyone has their back?  Does anyone have the back of DeCoster and other big egg companies?

I think grain BTO will be in the same boat as others - if the governmentn gets out, the BTO will continue to survive, with probably a few spectacular but not significant failures.

[k-289]

Compare mega farms of northern Asia and Europe is very interesting--like dairy now--2 big 2 fail although the milk keeps coming--eventually the chickens will come to roost but in the short run every thing is glossy--the guy at Ernst & Young said you have to have window dressing just ahead of the audit ? Troubling to say the least ! ! 

[James22]

I would go with these (your) musings

"My thoughts are this....you point out to the landlord the uncertainty of farming, the volatile nature of markets, how your grain may be forward contracted for lower figures than what the market is now offering, and that for a new piece of ground, you probably can pay more, now, too."

Furthermore as others have indicated a contract is a contract.   I sold a bunch of corn for $3.60/bu earlier this year, yields were very poor and I couldn't quite cover the contract.  So paid them the $1.50 bu difference.  Certainly disheartening when corn went over $6.00.  The farm lost significant money this year, while many others are enjoying big crops and the high prices.  That is life and should be expected when farming.  I assume when you made the contract, it was competitive based on current and projected prices.  Therefore He/she might be disgruntled, but it would have "fair" at that time, and I would guess you didn't twist their arm to sign.   I don't make multiple year contracts with my tenant.   With today's market volatility, too great of chance either he or I get screwed.  I'd expect on the next contract they will be looking for some recovery money.

[nwobcw]

Stories such as this gives me more reason think our balloon is about to pop.

[kraft-t]

I don't think so Red> I think the growth and expansion of the BTO's (whoever they are) can be credited to two things mainly.  Size of row crop machinery and the availability of effective herbicides and insecticides,

Those Fsa Payments are peanuts compared to 200 bu corn and $6 per bushel. Or 60 bushel beans at $10 per bushel.