The Bryant’s family farm in Ohio relies on a broad vision to make every asset pay, including the land they own. So they rent the “owned” portion of the 12,000 acres they farm in southwest Ohio, through their general partnership entity Bryant Agricultural Enterprise.
Farmers are notorious for not paying themselves for their assets. The bottom line for any landowner is to make sure all land pays. “If there’s someone willing to pay $200 an acre or more for the land you own, then that is what you should be paying yourself,” says Mark Bryant, who farms with his wife, his brother and sister-in-law, his daughter, and his nephew.
“I consider this as an opportunity cost. If we can’t cover that, then we should rent it out to someone else. We need to see what part of the business is making the money, make sure we are not constantly just dipping into our equity. We don’t want to short change ourselves, or my mother and father on the income they deserve in their retirement,” he adds.
Don’t skip depreciation costs
Bryant calculates break-even beyond just checkbook costs, including depreciation cost on equipment, to ensure it is making money every time it goes across the field. Same with the grain storage system.
“My banker says, ‘We have very few customers that figure things this way; your breakeven cost are always higher.’ But that’s what we market to. It’s not every year that we hit our break-even. The market doesn’t allow it. But when it does, there are no reservations on selling because we know that all aspects of the business are delivering a ROI,” he says.
The Bryants rent from about forty landowners. In only one case do they use a true 50/50 crop-share. About 1,500 acres involve a custom-farming lease—where the landowner pays 100 percent of the costs (seed, fertilizer, chemicals) and the Bryants get a certain percentage of the production from those acres. It’s an arrangement that incentivizes good work, Bryant believes. But most of their leases are flexible, with a base rate and bonuses paid when the gross revenue exceeds a specified amount.
“We have landowners who only use flex leases,” says Bryant. “During the good years, like 2010 through 2015, the landowners benefit from them. It is a tougher conversation in this kind of price environment, because their rents are coming down. But they know that. It works automatically, according to the terms. “
Bryant knows they must remind landowner how this lease is designed to work. It’s all about keeping an optimistic frame of mind; that we’re just one crop problem away from having $5 or $5.50 corn again. “No one can predict the next crop problem or where it will be. This is a world market that we deal in and we truly are helping feed the world.”
Treat individually, communicate often
Bryant says the flexible leases are designed with the individual landowner in mind. For older landlords who depend on a steady income, they make adjustments to assure their security. No one landowner is the same; they try to accommodate to each need in the fairest way for both parties.
“It’s hard to sit down with a landowner and say you want to reduce rent $20 an acre—right when they’re paying $30 dollars or more in real estate taxes here in Ohio. So you deal with each situation, each person as you can, trying to hold things together. We have been very fortunate. Our landowners are very informed. We keep the lines of communication open.”
The Bryants are one of 10 farm operations that started working with Granular in 2014, when the company began to develop its comprehensive farm management software suite. Bryant feels that Granular’s report function is extremely helpful communicating with landowners.
“Everything is in real time,” he says. “During harvest, within a few hours of finishing the field up, we know exactly what it yielded. We can make a PDF of the report and email it to landowners, so they know how their crop did this year.”
This is valuable as we have landowners all over the country, and some overseas, plus working with three different farm management companies, Bryant says. This reporting helps us keep the line of communications open so landowners are aware of what is going on.