I recently shared a few thoughts on flex cash rent leases – some basics, and how to propose them to landlords. From the responses we had from readers, cash rent is in the forefront of your minds right now. That shows you're actively thinking about ways to address any issues you anticipate.
It makes me wonder about farmer-landlord relationships – the current state of those relationships right now, and the way they are changing. I'll start this week by looking at the current state, and in the next few weeks, I'll share some more ideas on what farms can do to strengthen them.
State of the relationships
Looking at tight margins for the 2015 crop year, many farmers are evaluating cash rents as they pencil out how to make things work. You might be considering how to best approach your landlords about renegotiating a lease that's come up.
I wonder if there have been times in the past few years when farms have opted to pay more in cash rent rather than build a strong relationship with their landlord. Now more than ever, the relationship and line of communication you have with landlords are critical to creating open, honest discussions.
While facing tough times, you may be able to draw closer to your landlords and build an even stronger relationship with them by being open and honest about your situation. Start with who they are. Consider their current level of knowledge of agriculture and the operating environment.
If you realize they will need more explanation from you, plan how you will address it, with their particular situation in mind. The closer the relationship you have with them, the better, because that will help you approach how to address it.
Focus on them
Try to keep your focus on what they need to know about the current situation in ag in order to bring them to a different understanding, rather than what you want to tell them. That will help you explain it in a way that focuses on their needs and interests rather than your own.
You might propose a flex lease with them, with a built-in bonus arrangement. Maybe you already have a bonus structure in place – that may have already strengthened your relationship with them in certain ways.
Remember that they do not have to make any change at all. And if that's how it ends up, then it might be time for you to make some tough decisions.
It's best to look at what's really going on, financially, in your operation as you make decisions about whether or not to keep certain ground. You might have a gut feeling on whether or not you can afford a certain level of cash rent, but what's the reality?
It will help to take emotion out of that decision-making process by using a financial analysis to make decisions. That starts with knowing exactly where your operation is at, financially.
Next week, we'll take a more in-depth look at some ideas for building strong relationships with your landlords, for the long-term.
Until then, you might consider signing up to attend a Water Street EDGE farm business seminar. I'll be speaking at the seminars this winter – sharing communication skills you can use with your landlords and others in your operation – as part of a full speaker line-up that includes Dr. David Kohl, Jolene Brown and Arlan Suderman.
The opinions of Darren Frye are not necessarily those of Farm Futures or the Penton Farm Progress Group.