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Two Types of Landowners, One Problem

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This is the tale of two types of landowners, but they both experience the same problem.

At Tillable, we have found that landowners often fall into two categories:

  1. Money Driven
  • Strives to maximize their rent every year 
  • Welcomes negotiation
  • Knows how much their farm is worth 
  1. Relationship Driven
  • Feels uncomfortable negotiating
  • Unclear about the farm’s value
  • Favors a nurturing farmer over a high rent 

Even though these two landowners could not be more different, they often have the same problem: lack of solid insight into their farmer’s farmland activities. They are not recording and storing the value created by their farmer’s good practices such as soil tests, fertilizer applications, harvest information, and repairs/improvements.

For the Money Driven Landowner in a cash rent situation, there is an expectation that the farmer will take care of essential land maintenance. However, a money-driven landowner may inadvertently create a perverse incentive for their farmer to be less mindful when caring for the farm.

Ask yourself:

  • Does your farmer suggest improvement projects for the land? 
  • Does your farmer communicate with you regularly? 
  • Does your farmer routinely mow ditches and control weeds in fence lines? 
  • Does your farmer invest appropriately in fertility management??

Take Action:
The high rent the farmer is paying may not leave the farmer the margin to justify additional time and expense. In the long run, this will cost the landowner, and it takes time and money to build up fertility. Eventually, mismanagement will catch up. Ask your farmer for fertilizer receipts and soil tests. If he is reluctant to provide them, it may indicate a problem. 

For the Relationship-Driven Landowner, the priority is often in the details of how their farmer cares for the land—activities like keeping the ditches mowed, maintaining access to driveways, and paying on time. Consistently we find this type of landowner does not feel the need to keep records of their farmer’s activities, and if ever needed, they could simply ask. 

Ask yourself:

  • Does your farmer share his yields?
  • Does your farmer provide soil maps?
  • Does your farmer let you know when the crop has been planted? When will the harvest be?

Take Action:
If you knowingly provide your farmer a deal on rent, you should be collecting data that documents and demonstrates how they are taking care of the farm and adding value to your asset. A few items can create large variability in your farmland’s valuation, including:

  • Historical yields
  • Soil Quality (Soil Productivity Index)
  • Presence of water management systems (irrigation or tiling, waterways, etc.)
  • Parcel shape and size

If you do not have records of the activities they are undertaking, then that data can not be used in the valuation of the property. 

Why Data Matters

Typically, when land is bought or sold, there is very little data on how the farm has historically performed, fertility, or stewardship activities.

In many cases, potential buyers are only given a soil map. They may also receive a couple of years of production history and a recent soil test if they are lucky. Tillable believes that a documented yield history and current soil samples will be the minimum in the future. In addition, potential buyers will want to understand practices, participation in carbon programs or contracts, organic material levels in the soil, records of improvement, and much more. A farm is often a million-dollar asset. The more data provided regarding past performance and care, the lower the risk becomes for the potential buyer. Less risk means a buyer can offer more because they do not need to budget unforeseen costs.

The most straightforward analogy to compare to is the used car market. Cars with verified maintenance records (often certified pre-owned) sell for more than cars without.

A well-cared-for farm with a productivity index of 130 can outperform a farm with a productivity of 140 if that farm has been neglected. Those that can prove that their farm has been well-cared for will earn more in the end than those that cannot.

Depending on your goals, Tillable can help you in a variety ways
  • If you have thought about selling your farm, learn what data you should track and request a free market analysis here.
  • If you want to use your Tillable account to gain insights and manage your land, make sure you have added your farm to your account. Login at https://app.tillable.com/auth/login
Once you add your farm you can access farmland insights, where applicable, such as:

  • Soil maps and productivity
  • Crop history
  • Rent Estimates
  • Historical county average rent and yield data
  • And much more! 
You can live chat us here.

Related Resources

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A month ago, we shared 2021 farmland cash rent values as reported by the USDA. Now that we have reviewed the 2021 data let’s explore how much rents will rise in 2022.

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