Farm Progress

Profit Planners: More may be at stake than the opportunity to make extra money.

April 12, 2018

3 Min Read
SUNRISE OR SUNSET? Is the sun rising or setting on a cash rent opportunity for more land? Panelists suggest answering questions first, including if you can afford a bigger combine to stay timely.

A nearby landowner is upset because his current tenant was a month late paying his rent bill this spring. He’s already offering the farm to me for 2019. The price is reasonable, but I’m not sure it’s worth creating ill will in the neighborhood. Plus, I’m not sure I want to commit to 400 more acres until I decide if it’s feasible to trade to a bigger combine for 2019. He wants an answer. What do you suggest?

The Profit Planners panel includes David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue University Extension educator, Putnam County, Ind.; Steve Myers, farm manger, Busey Ag resources, LeRoy, Ill.; and Chris Parker, forage, livestock and timber producer, Morgan County, Ind.

Erickson: If you didn’t approach the landowner, then the decision was all his and shouldn’t be seen as something you caused. If you’re comfortable talking to your neighbor to explain how this happened from your perspective, that might be a good way to head off bad feelings. You can get trade proposals for upgrading combines rather quickly, so you can make some decisions with firm figures in hand. It sounds like a good opportunity, but you know the personalities involved in this business opportunity — I do not.

Evans: Usually if you’re uncomfortable with a situation, there is good reason. Listen to your conscience. However, complete your due diligence and take a few days to decide if it’s feasible to trade up to a bigger combine. Feel out the landlord more to determine if he’s switching tenants regardless of whether you lease the 400 acres. If the price is reasonable, your labor and operation can absorb the additional 400 acres, and you can rest more easily with the decision after research, then it would seem reasonable to accept the new proposal.  

Myers: Many moving parts in this question merit a great deal of consideration. If you’re not positive you want to rent it for whatever reason, don’t rent it. You must be all in, because you will be all in financially, logistically and personally. Break this topic into smaller questions. There appears to be three valid questions to ask yourself. Is the cash rent viable? Do you have the capacity to add 400 more acres? Is goodwill a legitimate issue? Answer each of those questions before saying yes or no.

Parker: Since you asked, I suggest holding off on this 400-acre acquisition, as you have cited not one, but two good reasons to do so. In my 31 years as a Purdue Extension ag educator, I saw the ill will created when a large amount of rental acreage changed hands as in the situation you describe. The ill will was significant and long-lasting. Also, if you’re farming around 2,000 acres now, like many full-time family farmers, the 400-acre addition is a 20% increase. It should not be undertaken without first doing some serious planning and projections related to budget, equipment, timeliness and labor. You have already identified equipment capacity as a possible concern.

Summing up: Different individuals look at this opportunity in different ways, perhaps based on their past experiences. All panelists seem to agree on one point: You need to do a lot of pencil pushing and soul searching before you say either yes or no to the offer. — Tom J. Bechman


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