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Veteran Contributor

Opportunity

Looking for a little input on a opportunity to rent 400 acres of ground. I have been back on the farm for 10 years now farming with my father. I have bought 2 farms at really good prices and have always wanted to expand my operation. I have a gentleman that contacted me today to rent his ground. He has a large farmer running it now that drives 40 miles to farm it. I believe the outlook for 2014 has put some of these type operations back on their heels. Now here is what I am wondering. With the outlook, and the RF outcome this week, how should I approach this? I have a feeling that the current tenant is paying a good chunk to rent this ground. I am young, not a lot of capital, but run a good operation, and am conservative with my business. What is the best approach? Flex lease? Straight cash? I know my costs, but with lower crop insurance, and the markets very unstable it is hard to put a hard number on this. What do you think? Plus it's right in my back door. Any thought would be helpful. And please, no snide comments please.
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8 Replies
Advisor

Re: Opportunity

At this point your likely better off to grow Soys, forward contract enough production to cover costs and to take it on the year, with. An option to renew the lease at the end of year.

This way you won't lose money.
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Senior Contributor

Re: Opportunity

If it's good ground and close I'd try to make it work. But wouldn't pay to much.
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Senior Advisor

Re: Opportunity

I would gun for a 5 year lease. Tell this land owner that you will leave the ground in better condition after your 5 years are over and back that up with annual soil tests to show the trend the ground condition is moving. Having a long term lease allows us to build the soil up and reap the rewards of doing so. Short term leases leave the door open for soil depletion and in general isn't a good situation for anyone. A respectable land owner will appreciate you caring about improving his ground and not just wanting to make a dollar off him. A landowner who consistently changes tenants isn't looking for a long term relationship, only short term $. Good luck.
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Advisor

Re: Opportunity

Maybe a 1/3, 2/3 lease. Carry crop insurance at your cost but give landowner 1/3 if you have a claim. This way owner has a guarantee minimum with higher potential and tenant does not go broke. Also agree with Shaggy, multi year lease with soil improvements provided by tenant. Of course this will depend on initial soil tests. Good luck.
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Contributor

Re: Opportunity

Since you have hog manure close, this is worth more to you than many others. Just to get it, and to be able to build a relationship with a new landlord, (something you seldom even get a chance to do, in this wild land market), I would ask what they want, and just give it, even if if breaks even the first year, (unless, of course, it's outragesly ridiculous). Crazy as it seems, at this point, negotiations with landlords are still risky. One of my neighbors lost 700+ acres thinking he could get rents lowered. Go get it!!

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Advisor

Re: Opportunity

Yeah, as the number fella says, you could lose it by trying to use a low ball 5 yr agreement. Some people are bat**bleep** crazy landlords and will be insulted. I do the long term stuff.

The best advice is to get a commitment to one of your ideas before you leave, then put it on paper. Be it short or long term, high or low rent... Do not lock in high rent!!
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Veteran Contributor

Re: Opportunity

If it is in your back door its worth at least an extra 15.00 per acre. Unless the guy is way out in left field take it. I have never regretted buying or renting a farm in 30 plus years of farming. With that extra 400 hundred acres you may be able to negotiate some bennies also with your supplier or grain manager. I negotiated free trucking on 100000 bushels this fall. I've also found working with a local seed co versus the majors(Dekalb-Pioneer etc) can save alot on seed costs while keeping yields up. Remember theirs a line a mile long to rent ground.

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Highlighted
Veteran Contributor

Re: Opportunity

Thanks to all for the input. Got it done today. Lets hope it plays out the right way.

 

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