By couching this conversation in numbers, you’ll be able to get a fair cash rent rate for both parties.
Even better, using a foundation of data positions you to strengthen your relationship with your farmer and ensure you’re working with someone who values stewardship and sustainable farming practices as much as you do.
It would be foolish to be overly prescriptive about when it might make sense to reduce your rent because it depends on the history of your farmland’s yields, your farmer’s performance, the weather, the area, and the farming season. But that doesn’t mean there isn’t solid advice for those wondering when it may be appropriate to cut a deal on your farmland cash rental rate.
Build your relationship on a foundation of trust
When it’s time to renegotiate your farmland rental agreement, before you start to talk about money, remember that this relationship has to begin with transparency about the farm’s performance. It’s important to make sure you have a strong foundation of trust in place, and this begins with sharing data.
Your farmer has custody of what’s likely your largest asset, and how they take care of it will determine its value going forward. You need to learn if they’ve done a good job taking care of that asset, and there are a few pieces of data that they can provide to confirm they’ve done so.
Yield information, fertilizer receipts, and any other documentation a farmer should have must be provided to back up their account of their past performance. If you’re not sure what to ask for, think about the last agreement you both signed:
- What did your farmer say they’d do in your last farmland rental agreement?
- Are they doing it? Proof is required.
It’s fine for someone to say they’ve been taking care of the farm like it’s their own, but without the data points to prove it, that statement has little value. If you were considering buying a used car and the seller said they’d done regular maintenance, you’d ask to see the receipts. The same is true of your farmland.
Familiarize yourself with your land’s performance and local agricultural trends
This year, you may have heard that excessive rainfall kept farmers from planting their crops. While this may have been the story in many areas, it’s possible that the weather was different around your farm and your fields were planted on time, or even early.
If you’re only hearing the headlines about agricultural news and tariffs that appear above the fold, you’re not well-enough informed to enter a cash rental rate negotiation. Make sure you’re familiar with your land’s past performance, the health of farmland in your county, and any larger local (and national) trends.
For example: When you get your farmer’s recent yield maps, check them against the USDA county average. Make sure you understand if the yield is the result of the farmer’s performance or the farm’s inherent quality. Doing this research (or hiring someone to help you collect this data) will give you benchmarks for how your farm and your farmer are performing going forward.
Before you entertain the idea of giving your farmer a price break next year, understand what’s going on with your farm.
A note on the friends and family rate: You may want to give a deal to your farmer for reasons that have no relationship to the data on hand—maybe they’re a family member, a high school friend, or a young farmer who’s just getting started. It’s still important to have data to ground your discussion and to make sure you know exactly what kind of deal you’re making.
Negotiate when the time is right
It can be difficult to nail down when it is the best time to negotiate. As a landowner, if you’re happy with your relationship, it’s a good idea to extend an olive branch before the harvest to find out if your farmer would prefer to negotiate their new farmland cash rental lease before or after the harvest.
Some farmers prefer to know what their plans are for next year in advance of the harvest. If they know they’ve renewed their lease, they can follow their harvest with tillage or fertilizer right away before the ground freezes. Farmers appreciate when a landlord demonstrates awareness of their schedule, and this kind of forward-thinking can go far to strengthen this relationship.
It’s typically a good idea to complete negotiations before the end of the year, in part because the winter holidays are typically a stretch of time during which it can be tough to communicate consistently with your farmer. If your state has an established lease termination deadline, make sure you’re aware of it and let your farmer know that you’d like to negotiate before that date passes.
Ultimately, yields make a huge difference, and your farmer may want to wait until they have new yield maps before they enter a cash rent negotiation. The best way to determine when to negotiate is by communicating with your farmer and working with them to find a time that works for both of you.
A note on the length of lease agreements: It’s a good idea to review your lease annually. Even if you decide not to make any changes, this yearly cycle will ensure you’re having the right conversation with your farmer and that things don’t slip through the cracks.
In an ideal world, you’d have a long-term relationship with your farmer built on regular conversations. This would include open sharing of important data, and negotiations based on real-world market conditions and the potential of the land. If you “set it and forget it” for years at a time, you’ll miss opportunities to adjust your lease.
Know your farmland: data transparency matters
The importance of data transparency can’t be overstated. Before you enter any negotiation, make sure you’re getting information on yields and fertilization from your farmer.
If a farmer wants a discount, the first thing they need to provide is data and transparency. An excellent steward of the land will come to the negotiating table with yield maps, ag applied maps and a story about the history of the land’s performance under their tenure that matches up with the data.
Especially after a tough year, remember that you’re negotiating rent based on the potential for the upcoming year, and not based on the previous growing season.
Make sure you have a clear picture of the land’s potential for the year ahead. This data will help you determine a fair cash rental lease rates and keep the land’s health front and center, for you and your farmer.
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At a minimum, lease agreement should include five things:
- The names of the landlord and tenant.
- A description of the property to be rented.
- The rent amount.
- The lease term with start and end dates.
- The signatures of both parties.
Additionally, landowners and farmers should consider adding more detail around expectations for data delivery, commitment to sustainable farming practices and soil health, proof of insurance, and frequency and types of communication regarding the farm and your agreement.
There are 8 types of data that are most important to understanding farm performance and land stewardship:
- Yield data
- Soil sample tests
- Fertilizer maps and other nutrient inputs
- Herbicide applications
- Removal rate of the last season’s crop
- Planting and harvest dates
- What’s planted on the land and its maturity rate
- Seasonal data including precipitation, crop rotation and tillage
There are many measures on which a farmer might rank as a good tenant, but there are a few major markers that distinguish the good farmers our eyes. A great farmer should farm full-time, use high-quality equipment, be able to demonstrate they’re a good steward of the land, provide data and reports on improvements and, ultimately, act like your partner in your farmland investment. Learn more about finding the right partner for your farm in this blog post.
Sustainable farming practices are designed to maximize profit for farmers and landowners while also ensuring the land is as healthy and productive as possible, so that it may continue to thrive far into the future. Following sustainable farming practices, such as strip-till or no-till and other methods, protects the health and value of farmland, which is a finite resource.