Farmland owners: Let’s talk money and conservation

sunset on soybean field
Land Values: Farm managers say the off-farm landowner profile has changed over the past 10 years to be less relational and more focused on investment returns and sustainable farming practices.

Over the last 10 years, farm managers have seen gradual shifts in the profile of absentee landowners. What do they look like now?

While institutional landowners are gaining in number, off-farm individuals and families still own a significant amount of land. In the past, these landowners were often children or grandchildren of active farmers, which means they had fond memories of growing up on the family farm — or at least, of annual visits to the farm during planting, haying or harvest. Farm managers often played host to these annual visits and arranged meetings with tenant farmers to talk about projects, yield projections and finances.

We’re still seeing farmland handed down to the next generation, but this generation is one or two more steps further removed from the property. Today, these off-farm heirs see their land as less of a family heritage and more of an alternative investment, and understandably so. Now the farmstead may be gone, the longtime tenant retired, and the farm has become just another cornfield that is difficult to locate without the help of a good plat map.

With less familial attachment, today’s off-farm owners focus more on overall productivity and financial returns. In years past, owners and operators may have used a crop-share lease, but now many landowners prefer a cash-rent lease, to reduce risk and guarantee investment income.

Previous generations had more sympathy for the effect of weather, disease, pests and even equipment error on their farm income. Today, they have less tolerance toward unknown risk factors like those. The landowner’s relationship with the farm tenant has become less of a personal relationship, where joys and hardships are shared, and more of a business arrangement, where rents are negotiated based on pure economics.

Dollars and conservation

Communication has changed with the next generation, right along with technology. Farm managers make fewer phone calls to clients and instead share more emails, texts and comments on social media.

Many farm management customers still like to receive hard copy financial reports, but more and more prefer electronic reporting exclusively or in addition to their paper files. The items of communication have changed as well. In the past, a landowner might have had a lot of interest in local community news, how the tenant’s children are doing on the football team and, of course, how the crops are looking. Today, the focus is often on yield prospects, commodity marketing and the timing of the next cash distribution.

Sustainability is a hot topic across all of agriculture, and is becoming more so with current farm management clients and landowners. Many heirs want to be considered more socially conscious than previous generations of landowners, so they embrace farming practices that include cover crops, reduced tillage, regenerative agriculture and organic production methods.

It is important to understand each landowner’s preferences and desires. The challenge for us as farm managers is to educate clients about the short-term impact on financial returns anytime a new practice is implemented.

Some clients may choose regenerative agriculture through reduced tillage and cover crops, while others prefer to farm their land organically, which typically necessitates increased tillage and mechanical weed control. Still others are content to use conventional farming methods, with the latest in seed technology and chemical weed control.

A decade ago, many landowners would not have considered changing farm tenants over a lease preference or farming practice, but today, deciding who will farm the ground is based more often on sustainability concerns and financial returns.

Overall, we’re seeing the relationship between farmers and landowners change from a relational and sentimental interest to a more focused return- and sustainability-driven approach. For a farmer or a farm operator, that means they’ll need to adapt to changes in how the landowner wants the land farmed, to help make it a successful investment for everyone involved.

Wyss is vice president and farm manager at Heartland Bank, Normal, and is a member of the Illinois Society of Professional Farm Managers and Rural Appraisers. Email questions to ispfmra@countryside-marketing.com. The opinions of this writer are not necessarily those of Farm Progress/Informa.

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