When considering hiring a farm manager to professionally manage your farm or a farm that has been in your family for a long time, the first questions that often come up are:
- What does a farm manager do?
- Can I do this myself?
- I already have a tenant who has farmed the land for a long time. Should I just keep them farming the land?
These are both great questions. They are good options to think about if you have inherited a farm. You might have farmed it yourself and now want to keep it for retirement.
What does a farm manager do?
A professional farm manager should always do a few things as a baseline, like any other investment or property manager. First, they should make your tasks as the landowner easier, more convenient, and add value. Next, they should not only add value via annual cash flow and return but also offer advice and savings.
Savings and contacts in the local market can be a significant benefit to a landowner’s bottom line. Trusted contacts, such as drain tile, fencing, excavating, Section 180 legacy nutrient deduction, surveyors, and drone companies, can all be extremely valuable to have on hand.
A great farm manager should also know the market exceptionally well, from land value, highest and best use, crop, and the markets to which those crops are sold. This ensures the tenant can do a great job on your land, make money, and be motivated to continue doing a great job long term.
Can I manage the farm myself?
Back to the first question, “can’t I do this myself?” The answer is yes, you can; however, you will likely not achieve the same price in gross rents, and you may get taken advantage of in the long term.
What happens is that markets, crops, property taxes, and equipment all change quickly. You may sign a lease today for $300/per acre when soybeans are $9.00 per bushel, and two years from now, they might be $15.00 per bushel, or organic food-grade soybeans might be $23.00 per bushel.
If that example is signed by a landowner, in my experience, it lacks an excel accelerator for the landowner to take advantage of the increase in market price, or many times the landowner is subject to a yield reported by a tenant.
A landowner who does not follow the local market closely can miss many important details. These mistakes can result in losses of tens or hundreds of dollars per acre compared to a well-designed lease. Multiply those by a 3-year lease, and you might get taken advantage of.
Should I keep the farm tenant?
On the second question, “I already have a tenant that has farmed the land for a long time, should I just use them?” The answer is maybe, and that is based on a few things.
First, what is the stability of the tenant? What happens if something unfortunate happens to them or their farming operation?
Will they still be able to pay rent? Will they have a lien for inputs tied to your property, or are they properly insured to run large equipment on your property in the event of a loss or death? These are all questions we start with when managing a farm for a landowner to ensure they are the right tenant for the job.
Next, we examine the advantages that the tenant and their operation have in the market to manage the farm effectively (equipment, fertility, technology), as well as profit from the crops grown there.
Does the farmer have access to manure fertilizer that adds in micronutrients and minimizes salt-based fertilizers to the property, what is their chemical application method, do they own a trucking company, grain market, and are they are seed or fuel supplier giving them an advantage in the marketplace to pay you a higher rent and make a higher profit themselves.
There are many cases where a tenant can keep farming the land. We want to create a lease that helps both the landowner and the tenant. This lease should protect both parties for the long term. It should also allow for changes if either party wants to make adjustments.
In conclusion, a good farm manager is essential for your farm. This applies to farms in Minnesota, Iowa, Wisconsin, Missouri, Nebraska, North Dakota, and South Dakota. A farm manager should provide value, knowledge, and support for your land ownership experience.
If you are ever interested in a conversation with a professional farm management firm, please contact any of our agents at High Point Land Company. Farm managers are a wealth of knowledge and want your land ownership experience to be a positive one in the long term.
Related Resources
International Farm Management Association
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