Shake Things Up On Your Operation
A half inch of rain had fallen overnight, making the black Maxfield soil gummy as Al Witt walked a few feet into his soybean field to check the crop. The beans were blooming and appeared nearly perfect.
This farm, near Osage, Iowa, has been in Witt’s family for 135 years since his ancestors came over from Norway. This year, he’s decided it’s time to shake things up.
“I’m making a big switch this year,” says Witt. “I’m going 100% strip-till.”
When the crop comes out this fall, all 2,600 acres Witt farms with his neighbor, Bruce Johnson, will switch from conventional tillage to minimum-till.
“We sat down and agreed, number one, it’s the right thing to do for the soil. Number two, we need to focus on optimizing our labor pool,” says Witt. He and Johnson use family labor in all aspects of their business, including operating combines, delivering fuel, and providing meals.
“The history here with the soil is, you gotta turn it black to make it warm up in the spring, ” says Witt. “We know now you really don’t have to do that expensive tillage.
“In the past, we would have pulled a Case ripper right after the combine,” he explains. In the spring, they used a soil finisher and then planted. In between, they applied dry fertilizer and anhydrous.
The new strip-till rig, a Kuhn Krause Gladiator, tills, fertilizes, and applies anhydrous in one pass. “We will eliminate a tillage pass in the fall and in the spring,” he says.
What does that mean on a spreadsheet? “It’s hard to calculate the cost savings,” says Witt, “but tillage in the fall costs about $18 per acre. In the spring, tillage is $13 an acre, plus fertilizer applications. So it’s a $40 to $50 savings.”
Witt, who works part-time as an environmental coordinator for Smithfield Foods, already saves on fertilizer costs by using hog manure as fertilizer.
Talk To Landlords Early, Often
Every change Witt makes to his rented and leased land is communicated to his six landlords.
“We try to overcommunicate with them,” he says. “We share yield maps for every farm, give them a visual picture of the farm, and tell them how the crops did that year.
“Most landlords like to improve the land and watershed,” says Witt. “They are well educated on what’s happening in agriculture and the challenges we face. We are blessed with great land and owners. Communication is key.”
Consider Switching To Flex Leases
One of Witt’s farms is a flex lease. The landowner buys 10% of the inputs and takes 10% of the crop. These types of leases are not common, but now is a good opportunity to reintroduce the idea, says Mike Downey, farm manager, Hertz Farm Management of Mt. Vernon, Iowa. When he sits down with farmers this fall, the cost of rented land will be a major topic of conversation.
“A lot of producers are hesitant to give up land – even though the rent is too high – because they’re afraid they’ll never get it back,” says Downey. “Some are subsidizing rented land with cash reserves. This can’t continue for much longer.”
Many farms he works with should be 5% to 15% an acre cheaper in cash rent based on current commodity prices, he says. Cash rents tend to lag behind prices and farm income, just as they did as prices rose.
Tenants often think about short-term costs, while landlords have to consider long-term soil health.
“The challenge is you agree on a price at one given time during the year,” explains Downey. “We’ve all witnessed the extreme volatility and the way commodity prices can change during one year.”
A flex lease can help minimize this lag effect, as the rent flexes based on prices. Still, it’s a hard sell.
“Custom farming is not increasing much because some landowners are not willing to take the risk vs. the potential reward,” says Downey. “Some need – and are counting on – a stable income.”
Mike Lodge, West Branch, Iowa, has one farm on a flex lease. He would switch more of his 1,000 acres, but “landlords are not real receptive,” he says. “It’s hard to talk them into it. A lot of landlords don’t want to mess around with it.”
For his flex lease, he sets a minimum base price of what it costs to put the crop in, using Iowa State University cost data for seed, fertilizer, and chemicals. He adds to that interest, crop insurance, and machinery costs. The landowner receives a share of the gross revenue in excess of the base value.
“Right now, landlords are still in the era of high cash rent,” says Lodge. “Working off a base rent is more reasonable and safer for the tenant. It can flex for the landlord, too, with the upside that rent can always go higher.”
Soil Health Should Factor Into Rent
Tenants and landlords aren’t on the same page about fair rental value on farms, says Scott Neff, senior business relationship manager, Wells Fargo Bank, Marshalltown, Iowa. Tenants often think about short-term costs, while landlords have to consider long-term soil health.
“The landlord is concerned about tillage, intensive cropping systems, less organic matter, erosion from more frequent and intense rainfall patterns, and water-quality issues and lawsuits,” says Neff.
He suggests that landlords ask tenants:
- What are your tillage practices and how will this impact the value of my land?
- What types of fertilizer do you use? How are they applied?
- Do you use cover crops?
- How do you measure soil health and value?
Tenants should ask landlords these questions:
- There could be temporary yield loss as a farm is converted to minimum-till, so can you help me financially with that process?
- Will I be compensated if I improve the soil health of your farm?
- Cover crops improve your land, but they bring risk and cost into my operation. How can we both be fairly compensated?
“There’s no clear template for cash rental agreements that addresses the issues of soil health, productivity, related costs and benefits, or how costs and benefits should be allocated,” says Neff.
Lodge adds, “Some landlords want a good farmer who improves the soil – not someone who comes in and mines it for a few years and leaves.”