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 Logan County at 50.6 percent has the highest percentage of rented
farmland in the United States. How did that happen? One
word….Scully.
While Logan County owes a great deal to the Scully family in that
they converted thousands of acres of swampland into productive
agricultural soil, the Scully's also became land barons. As such,
even today the potential for young farmers to become land owners is
slimmer here than anywhere in the United States; rented ground is
going to be for many, the primary, means of being able to farm for a
living.
But, the big question is can young farmers earn a living in Logan
County?
Doing the math
In the LDN fall farm magazine article,
Will corn
producers make money this year?” University of
Illinois figures projected the profitability of the fall corn crop
-- the price per bushel, a state-wide estimation of yields and it
utilized a state average for land costs. Since the February release
of the National Ag Statistics Office showing that the 2014 corn and
soybean yields came in higher than the state projection, but grain
prices fell, that potential profit picture has dimmed.
Some local farmers are reporting farm-wide losses of least $15 an
acre in 2014. In addition, there are farms locally that had the
potential of losing nearly $100/acre.
Is there a solution?
What can be done to help keep the Logan County farmer stay afloat?
The first obvious wish would be for high yields AND high prices.
That is the great American farmer pipe dream, and most everyone will
tell you that is never going to happen.
The next step then may be to look at the variables that can be
controlled. Is cash rent one of those variables?
To start, recall that $308 is an average per acre rent with some
rents lower, some higher. Speaking with one landlady recently, she
rents her 100 acres of tillable farmland for $400.00 an acre. That
is an annual income of $40,000. But that is her principal income.
From that she is responsible for the property tax, some property
maintenance such as ditches, culverts and roads, and she has to pay
income tax on the gross. Can she afford to take less in cash rent?
Possibly not.
But, if a landowner has 500 acres rented at $250/acre, that
landowner is going to gross $125,000 in a year. Again there is
property tax to consider as well as land maintenance, but could that
landlord afford to negotiate a lower rent, even temporarily?
Possibly so.
 Before a tenant begins a negotiation, it is important to know the
landlord and understand his or her circumstances.
In the spirit of the new 2015 State of Illinois mantra, we all need
to sacrifice in order to get through this. Knowing ahead of time,
what position the landlord might be in to make sacrifices, is going
to be important.
For the tenant, knowing the true cost of farming, and determining
what is needed to survive, is going to be the key to the
negotiation. Everyone wants to be profitable, but now is not the
time to be greedy.
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This summer, while the corn is growing, take time to sit down and
take a seriously hard look at what you have to do to survive. While
the 2015 lease year has already begun for most, 2016 will be here
before anyone knows it. Being able to present your case with facts
and figures is going to be to your advantage with the landlord.
Figure everything except the land cost. For this exercise DO sweat
the small stuff. Throw every imaginable expenditure into the final
figure from the cost of seed and fertilizer to equipment maintenance
and repair, to the monthly phone usage related to the farm and your
labor. Then take a red ink pen to it.
If you are going to ask the landlord to make a sacrifice, show him
or her that you too are going to sacrifice. Trim that number as much
as you dare.
When it is time to face the landlord, lay it all out there. Your
parents may have taught you to keep your business close to the cuff,
and never tell anyone all the facts. But in years such as these, it
may become an essential practice. In many cases, in Logan County
especially, farm ground is owned by well-informed landlords who know
the local farming environment. Be straight forward with those who
know the score; it adds creditability. It will do the same when
dealing with those landlords who don’t know farming. Giving them a
straightforward education on what you are going through is going to
make it easier for them to understand why you are asking them to
sacrifice. In both scenarios, it will also demonstrate that as a
young farmer, you are well informed and on top of your business.
Finally, when the landlord agrees to the reduction in rent, don’t
forget him or her when things get better. A prime example of ethical
farming is to share the wealth when no one is expecting it. You are
the one asking for the reduction, so when things do get better,
doesn’t it stand to reason that you should be the one offering a
greater benefit to your landlord?
We would encourage everyone to read a November 2011 article from
Corn and Soybean Digest; “Lease
with integrity | How to foster trust, fairness in landlord-tenant
relationships.”
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