Tips For That Farmer, Landlord Conversation
Most of us don’t spend a whole lot of time working on farmer-landlord relationships. Yet, when times are tight, these relationships can become strained.
Because of the difficulty, or even inability, to pay rent. Farmers don’t want to have the uncomfortable chat to negotiate rent downward, and landlords don’t want it to move in that direction.
However, if both sides are getting what they want from the rental relationship, it’s easier to have that conversation.
After 15 years of leasing out farms and helping my clients with their leased farms, I think I have an idea of what landlords are looking for. Also, I’ve talked to several farmers about what they are looking for, in order to present both points of view.
What is a landlord looking for?
Here are four major desired areas of a landlord/tenant relationship expressed from a landlord’s perspective.
Landlords aren’t looking for a running narrative of what’s going on at the farm, but I believe they want to know when the property is flooded, suffering from a drought, and when trespassers have damaged crops, or unauthorized folks are hunting. Even while cash renting, I like to hear that the crops have been successfully planted and find out what the yields were.
2. Market rents
I once heard a farmer say, “I just won’t pay above $45 an acre in cash rent.” At the time, the county average rent was at least $90 an acre. Sometimes people just have a number in their heads and have no clue where the market is. When both parties are looking at the USDA or university Extension office data, that keeps the numbers in the right ballpark and fair.
One client of mine (not that long ago) was leasing out 70 prime acres near St. Louis for $20 an acre! Why? Because Grandma negotiated that lease 30 years ago, and the same farmer was still farming it for the heirs. In my mind, this is bad business. Shortly after I explained where market rents were, they sold the property, and the farmer lost his sweet deal.
No one wants to be told stories. If you tell someone the average rent in the county is $85 and it’s really $170, they will eventually figure it out and be pretty unhappy. I believe strongly that honesty is the best business practice in the long run.
What are farmers looking for?
I recently asked Wendell Klockenga, a southern Illinois grain farmer, about the main attributes a farmer-tenant is looking for in a landlord. He said that open-minded and fair were the ones that come to mind for him. Here are four top desirable attributes of a landlord/tenant relationship that a farmer desires.
1. Risk sharing
Most farmers I know would prefer some kind of crop-sharing agreement for obvious reasons. One third of the corn crop on some farms this year is going to be zero. Realize that the landlord’s ability to share that risk depends on his or her age and financial situation.
Sometimes there are trespassing invaders damaging crops with ATVs, hunting, or even stealing trees. It’s not the farmer’s responsibility to hunt these people down and stop them. The landlord needs to step in and talk to neighbors, the sheriff, or the game warden.
3. Cost sharing
Things like waterway repairs, terracing, or the removal of old buildings or unwanted ponds are reasonable costs for landlords to cover. Some improvements are long-run in nature and outside of normal farm maintenance. Landlords should listen to reasonable expenditure requests and pay for them.
4. Limited interference
Communication is good, but too much is too much. No farmer wants to talk to his landlord on a weekly basis. Also, some landlords might be the culprits actually causing the four-wheeler crop damage or leaving arrows lying around in the field after hunting. Landlords have to keep in mind that the farmer is trying to run his business and earn his livelihood on that land.