Even in uncertain times, it’s important to keep actively planning for the future. That includes continuing to think about achieving your business goals for your farm. If you’re looking to expand your farming operation, it’s important to find the right parcel and to make sure it’s the right business move for you. Conventional wisdom says that larger businesses have a lower cost of production, but in order for this to be true for your operation, you first need to ensure that you’re being a good steward of the farmland while maximizing your margins.
Before we dig in, it’s worth noting that every situation is different. What’s right for you may not be right for someone else—the specifics may make you the exception to any of the general rules we discuss. This piece is intended to serve as a starting point for farmers who are just beginning to explore this question: should I rent additional farmland to expand my operation?
Let’s consider you might be thinking about growing your farming business, what this might look like, and what steps you should consider taking before making an offer on additional tillable land.
Reasons to Expand Your Farmland Operation
There are three common reasons folks look to expand their operations and each deserves consideration:
- Financial gains. If you are looking to earn more money and you’re already maximizing the returns you can reasonably and responsibly get from your current land, you may be looking to expand your operation because you want to earn more money.
- Interesting opportunity. This reason may sound vague at first, but that’s only because this is highly situational. Perhaps there’s an adjacent piece of land that you’ve heard will be available. Maybe you’ve always wanted to try farming acres in a different county where the soil is famously good. There could be any number of reasons, but it’s important to consider these opportunities when they arise before making the decision to expand.
- Help someone out. Whether you want to help a family member get a foot in the door or you know an apprentice who could use help maintaining a few acres mostly on their own, the opportunity to expand sometimes comes with the added mission of helping a new farmer get their start.
Whatever the reason expansion is on your mind, it’s probably worth your time to evaluate whether or not you have the time, energy and resources to make it work before arriving at a decision.
Before You Make an Offer on Additional Land for Rent
The idea of expanding your operation may seem straightforward or it may seem unimaginably complicated. Either way, you should take the time to think through what you’d need to do before making an offer to rent additional acreage.
Look for opportunities to improve your margins on the land you’re already on. This may sound obvious, but before you decide to add on, you should look under the couch cushions and confirm that you’re already maximizing your margins on the acres you work.
- Is there a way you could reduce inputs or improve the efficiency of your current operation?
- Would your current operation benefit from diversification? Is there another crop that might perform better in the rotation or produce more income at the end of the day?
- Can you tap any unused assets you have on hand?
- Is there a way you might use your current land more extensively while continuing to keep good stewardship at the center of your operation?
Confirm that your finances are in good shape. If you want to add more land to your operation, you will need to be able to finance the additional rental contract and all the things that come with it.
- Seed and inputs: Do you have the financial resources to purchase what you’ll need?
- Labor: Will you need to hire additional help?
- Machinery: Will you need to make any upgrades or additional maintenance?
Research whether or not you’ll need any additional education or training to manage an operation of the size you’re considering taking on. Your research should include getting to know the local landscape and as much history of the land as you can find. It takes time to get to know a new plot of land and to turn it into a profitable addition to your operation. Before you sign a new rental agreement, you should confirm that you’re prepared to take on everything that comes with it.
Pause and check in with your gut instincts. Do you really want to add more land to your farming operation? If you’re nearing retirement or considering how you’ll eventually downsize, investing in new land, an expansion or any kind of additional work may not be the right move for you.
Reach out to local experts for advice. Your local USDA office and local ag extension are great resources for farmers who are looking for help expanding their operation. In addition to pointing you toward helpful resources, their staff may be a helpful sounding board for your questions, as many are experienced farmers themselves.
Here's a related topic!
Mason asks attorney Dennis Composto, Esq., “What are the biggest mistakes that landowners make when it comes to protecting themselves and their assets?”
Put Your Best Foot Forward: Maintain Your Current Operation
When you’re looking for farmland for rent, one of the best ways to demonstrate your skill and qualifications is to take excellent care of the land you’re currently farming. Be honest with yourself, with your business partners and with potential landlords about your goals. While the gains may be great, you are taking on more risk and more responsibility by adding more tillable land to your annual business plan. Do your due diligence and look for opportunities to improve your operation before making an offer on additional farmland for rent.