September 7, 2017
Farmland can be a very emotional topic for most farmers. There’s land that family may have been farming for generations. That brings pride for such a rich tradition and dedication to family and the land.
That land represents much more than meets the eye – it’s about the legacy and commitment of previous generations, too. With it comes the knowledge that you’ve been entrusted to continue that legacy. There’s hope that the business planning and decision-making you’re doing now will help that family land continue to be farmed for generations to come.
Family land is a special type of farmland for many of us. It’s the roots of how our current operation got its start. There are other categories of land – that we’re currently farming, whether through ownership or rental agreement – that we may approach in different ways.
Different types of ground
Think about ground your family has owned for some time, yet wasn’t passed down through the family. We may approach it in a similar way as if it were longstanding family ground. It’s likely been part of the operation for quite some time – maybe so long that it feels like it’s always been owned by our family. It’s tough to imagine it not being part of our operation.
Then there’s the ground we’re renting. Perhaps we haven’t been farming it for quite as long and might not be as familiar with it as with our owned ground. But there’s a special link to this land through those we’re renting it from – our landlords. This is about doing the best we can for them with their ground, stewarding it as if it was our own.
One of the toughest things about rental ground is that it’s generally less stable – no matter how great of a job you’re doing, circumstances can be out of your control. A landlord can decide to sell or rent to someone else. Building strong relationships and having regular communication with all landlords is key.
Here’s another category of land: The land you’re hoping to rent or buy in the future, but aren’t currently farming. Maybe it’s a piece near home that you’ve had your eye on for a long time. Maybe it’s a new opportunity you recently became aware of – and a decision must be made quickly.
‘Future land’ can be emotional, too, but in a different way than longtime family ground. It’s exciting as you consider the possibilities that new land could bring for your operation and the potential added efficiencies. It can also bring up some anxiety as you make decisions about what to do. Often, a decision must be made quickly, bringing the added element of time pressure.
The key question to be able to answer is: Is this particular piece of ground worth it for my overall operation, right now? When emotions are running high, answering this in a factual, logical way is tough.
Making the choice
Having actual data on how buying or renting this additional piece of ground will impact your overall farm brings more fact-based information.
Maybe your gut is saying one thing, but the numbers reveal a different situation. Or you’re not sure if the additional ground will benefit your operation, but find you’d actually be able to use your current equipment line more efficiently with added ground.
The numbers in front of you – along with analysis of what they mean by an ag finance advisor – can make a huge difference. Through feasibility studies, many of our farmer clients say they’re able to get a better sense of whether this is the right opportunity, or if they need to pass and wait for another to come along.
How are you making decisions about land opportunities that come up? Do you go with a gut feeling? Do you know how any given decision will impact your overall operation? You might get in touch with one of our ag finance advisors to discuss any of the land possibilities you’re considering.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
About the Author(s)
CEO, Water Street Solutions
Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.
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