We farm 3,500 acres. We pay $275 per acre for one 340-acre tract. That landowner shows no signs of budging. We pay $225 for 300 acres of average to below-average land. That landowner is receptive to alternatives, probably a flex lease. Do we let the high-priced tract go, or is it still more profitable since it’s better land? Do we let the second tract go, or keep both?

The Profit Planners panel includes David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue University Extension, Putnam County, Ind.; Jim Luzar, landowner and retired Extension educator, Greencastle, Ind.; and Steve Myers, farm manager, Busey Ag Resources, LeRoy, Ill.

Erickson: I don’t know if you’re making fair comparisons. Compare actual production and expenses on these farms to make honest and informed decisions. Each lease negotiation should be evaluated on its own merit. We’re all prone to comparing one against the other, but what’s fair is not always equal. Inform each landowner about profitability of the current lease from your perspective. Listen to their needs. Ultimately, you’re the only one who can decide.

Evans: Sometimes strong-willed people seem not willing to budge, but a conversation and sharp negotiation skills can bring results. Just be careful to not make assumptions about another person’s willingness to budge.

A potential key starter with the 340-acre lease is to try to split payment to half spring, half fall. By virtue that you’re wanting to keep this piece of ground, my assumption is that you feel you have the greatest profit potential, and perhaps less risk, with better-quality soil possessing higher water-holding capacity and inherent soil fertility. Ultimately, the math will pan out your decision. Use your experience and histories with these two tracts, too.

Luzar: Each farm should be budgeted to determine projected costs and returns. Evaluate just how variable yields are. Consistent-yielding land should be worth more to you. Note that lowest rent may not equate to most profitable. A $50 rent differential could be absorbed by a soybean yield advantage of 8 bushels per acre.

The decision to cull or keep land depends on budgeted returns and your expectations. These tracts comprise almost 20% of your operation. If you cull both, how do equipment and labor fixed costs calculate in a smaller operation? A recent Indiana Prairie Farmer article suggested expected returns to land for a typical west-central Indiana farm at $125 per acre in 2020. How does your operation compare?

Develop your talking points for a serious discussion with landlords about the next few years. My wife taught me to allow myself to be surprised by others’ behavior. Both landlords may be more receptive than you think. Have a good, simple, flex-lease model ready. Be positive regarding your desire to continue to farm their land and honest about how margins have eroded.

Myers: Your math can answer this legitimate question. Do analysis of both agreements individually to see what your profit level or return to labor is for 2020. I suggest doing the same for the last few years, as it will help you weigh the relationship. It may surprise you, it may not, but that summary will tell you the financial implications of each agreement. From there, make decisions or tweak existing agreements.