With rising corn, soybean and wheat prices, I’m grateful I locked in the rental rates on the land I rent last fall. But I do have a question. A landowner who farms next to one of the farms I rent asked me if I would be interested in renting his 250-acre farm this year. He said he didn’t sign an agreement with his current renter, and he wants to increase the amount he charges per acre by $50 to $225 per acre. I pay that much for some land, but my average is about $185 an acre. I rent 800 acres in addition to the 360 that I own. I could take on this land, but I’m concerned that the landlord will want to rent it to somebody else for more money next year. It is nice that the farm is only 3 miles from my home farm and is pretty level. What are your thoughts?

Kestell: Congratulations on locking in your rent contracts last fall. I hope they are all multiple-year contracts. I am sure you know that everyone talks in a farm community and everyone will soon know you are paying this neighbor a substantial bit more for his land then for other properties you are renting. 

Is this land of equal value, is it as productive and as profitable as or more so than the other properties you are operating? You can be sure that once your other landowners hear that you are paying more rent you will be hearing from them as well. If I were you, I would try and develop a long-term variable lease agreement with this new landowner. That allows him to share in profits in the good years, but also the risk in the less productive and less profitable years.

Having the landowner have some skin in the game will acquaint him with the risk and costs you are shouldering and will be educational for you both.  I would look for farmers in your area who are presently using these types of shared-risk land agreements and seek their advice on how this has worked for them. 

Every situation is unique, but I would be careful not to upset your whole apple cart just to add (one more apple) one more property to your operation. I would stress long-term lease agreements where everyone benefits from the business relationship. I would point out long-term rental agreements give you opportunity to make subtle and not so subtle changes to the land that will be mutually beneficial. In my experience, owners and renters working together long term result in the best outcome for all involved.

Miller: There are several ways for you to look at this issue. Complete a partial budget analysis using expected yields and prices, minus the cost to grow the crop, and then subtract the land rent to determine how much return you can make on the added land.

I suggest completing this analysis on prices you received last year to compare what you could have afforded to rent it for in a lower-price scenario. If you are concerned about losing the land after a year, negotiate either a multiyear agreement or an option to rent it for additional years.

One other option would be to negotiate a base rental rate with “profit sharing” if prices move higher. This could include a lower starting rate but additional rent paid if December corn futures move 50 cents (or some other increment) higher by harvesttime. An Extension ag agent or farm technical college instructor can assist in both completing the partial budget analysis and provide sample rental agreements either for multiyear or a base plus agreement.

Lastly, be certain you have the equipment and labor to handle the extra ground if you decide to take it on. Good luck with your decision.

Wantoch: Negotiating is important for the success of any business, but it is especially critical during lean times. It may seem like common sense, but many times people let their emotions get the best of them and ignore their basic instincts. It takes homework, discipline and street smarts to successfully make a deal. Here are a few things to consider when approaching your negotiation. Have a plan in place before meeting. What is your ideal result? What would be an acceptable outcome? What can you be prepared to walk away with? Think about what your situation is and what you will be asking before you meet. The best outcome might be one in which the landowner agrees to rent to you. The best alternative in this situation may be that you need to negotiate on the rental price.

What might you need to walk away from? Calculate your cost of production and determine at what rental rate would you be making a profit on this land. You should start with a strong offer and a fair rental price. You never know what the response will be if you aren’t bold enough to ask. Don’t give up when the answer is no. Many times, rejection is not personal. It just means that you may not have presented a case the other person can accept. The offer may be rejected, so keep your emotions in check and rethink your argument. Is there more information that you can share with the landowner? Have you adequately explained why the landowner should rent his land to you?

Try a different approach to showcase how you stand out from the competition. To avoid any misunderstandings, offers should be finalized in writing and signed by each person. You may think that you have captured everything the other person said, but what that person remembers may be different. Documenting the details in an agreement eliminates any misinterpretations.

Minimizing feed costs

My wife and I milk 60 cows and farm 160 tillable acres and 40 acres of pasture in southwestern Wisconsin. We also raise 50 heifers and about 30 Holstein steers. Normally, I buy some round bales of grass hay from a neighbor to extend our feed needs for our heifers and steers, but grass hay is a lot more expensive this year. I’m wondering if you could suggest some alternative feeds that we could feed our heifers to get them through to April 15 when we can start grazing them on pasture? Right now they are eating corn silage, a little grass hay and a little soybean meal. Please advise.

Kestell: I get a series of snapshots and photos in my mind of different feeding situations I have seen on my travels around the countryside and the world. I also fast-forward over the years of my own personal heifer feeding and how it has changed over the years. The steers are terminal animals and therefore their feeding needs are much different than a replacement heifer you want to have a long and productive life. So, let’s concentrate on the heifers. My most vivid snapshots in my mind of heifer feeding mistakes is the massive amount of feed I have seen wasted by feeding poor-quality feed in poor-quality feeders. This is a bit of a rare year where protein prices have skyrocketed, while forage prices are somewhat stable. In my opinion, good-quality hay is always a better overall buy than cheaper-quality hay, especially for growing heifers. Many times, grass hay is harvested past the ideal stage for quality. 

As a result, the nutritional value and protein percent go down much faster than with alfalfa hay. Heifers need a certain protein and nutrition level throughout their formative years to develop into productive cows that can reach their genetic potential. It is difficult and expensive to balance a ration at 12% to 14% protein if a large volume of 7% corn silage is fed with 11% protein grass hay. If higher-quality, over 20% protein hay can be purchased and efforts made to have heifers eat rather than waste it. Your overall cost will be lower, and your heifers better grown and equipped for a productive life.

I hope you are working with a nutritionist for your milking herd; the money spent is well worth it. Also, get his or her advice on your heifer feeding program. Try to keep costs low and results high. Remember, when you begin to graze, your heifers will be eating forage that is well above 20% protein. On my own farm, once heifers reach 10 months of age, they are raised on an all-forage diet. As our heifer care improves, so does the longevity and productivity of our dairy herd. Feed a high-quality diet and make every effort to have the heifers eat the feed rather than waste it.

Miller: I’d really like to provide nutrition advice, but being a banker, I’m not sure I’m best positioned to give you the best feedback. With that in mind, I’d suggest contacting your nutritionist or feed supplier to get their opinion. Your county Extension ag agent can also be a source for answering this question. Good luck bridging feedstuffs until you can get to spring pasture.

Wantoch: One very important consideration is to look at the cost of the alternative feed rations compared to purchasing hay. Other feedstuffs are also going up in price quite a bit, and in the end, you may find that the more-expensive-than-usual hay could still be the most economical ration for the cattle when everything is taken into account.

Other feedstuffs that you may want to consider feeding to your livestock include cornstalks, wheat straw, cottonseed hulls, soybean hulls, wheat mids and corn gluten meal. Each one of these alternatives has their own pros and cons, and it will be necessary to work with a reputable nutritionist to balance a ration to meet your animals’ needs for both energy and protein. Also, if it is possible, heifers and steers should be separated and fed different rations. Research has shown that steers could go on a higher concentrate diet for finishing.

Another option could be to use the limit feeding technique, where some of the forage would be replaced with grain. Limit feeding should also be done by making sure the ration is balanced. There are pros and cons to this technique, such as ensuring there is adequate bunk space for feeding. More information on this option can be found at UW Extension. 

Agrivision panel: Tom Kestell, Sheboygan County dairy farmer; Sam Miller, managing director, group head agricultural banking BMO Harris Bank; and Katie Wantoch, Dunn County Extension agricultural agent specializing in economic development. If you have questions that you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919 or email them to [email protected].