Prepare for cash rent discussions

Prepare for cash rent discussions

Be ready to show and talk about farm's numbers with landlords

We're hearing more questions from farmers who are actively figuring out what to do about cash rented ground. Many have been very proactive about any anticipated trouble with cash rent levels in 2015, while others wanted to wait until after harvest to see whether those issues would pan out.

Some farmers have already chosen to get creative with their cash rent leases for 2015. And it really will take creativity and a little bit different approach to make things work. Some of these farmers proposed a flex cash rent lease – or any other type of lease arrangement that includes a bonus when the land produces well – to their landlords.

Be ready to show and talk about farm's numbers with landlords

What farmers want to know is: How should I analyze and address this particular situation with this particular landlord? You might have already had some meetings with some of your landlords. Whether those meetings resulted in negotiations, no negotiation at all, or a slight change to the lease – each time you meet with them, you need to have a plan going in to the discussion.

Tailor the plan
That plan and approach should be tailored and based on what you know about that landlord and his or her situation. Think about which landlords will want to see more data and numbers from you.

One farmer who rents some irrigated and some non-irrigated land from the same landlord used a couple spreadsheets with that landlord. The spreadsheets showed the difference between what it will cost the farmer to grow a crop on the irrigated land versus the non-irrigated land in 2015, taking cash rent levels and all input costs into account.

After that meeting, the landlord said he was willing to make some changes to current cash rent levels based on the major differences in how the irrigated versus non-irrigated acres will likely produce.

In this case, the landlord hadn't grown up on a farm or been very in tune with the farm world. It was a matter of education and showing him the numbers – what it would really cost his tenant to farm the ground.

The discussion with each landlord will likely require something different to be successful. Be prepared with as much knowledge as you can and look for the win-win situation for both of you.

When your landlord understands the challenges that you're facing, and also sees that you're taking his or her interests into account, that's a big deal. That can help build a lot of trust between you and your landlord.

Read more about this topic in a couple of my recent blogs on how flex cash rent leases work – Part One and Part Two – as you prepare for discussions with your landlord. Or read our latest Smart Series publication, bringing business ideas for today's farm leader.

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