We’re hearing more questions from our clients about plans
for the 2014 crop year. Right now, it’s not too early to be planning for 2014,
even if you’re still finishing up in your fields.
Farmers have been talking with our ag finance specialists
about 2014 crop year plans as they run “what if” scenarios for them on land
purchases or cash rent leases. These budget discussions are critical to success
It’s important to have a crop year plan every year, but 2014
looks to be especially important. With record farm incomes the past few years
and lower commodity prices more recently, margins could be tighter. Planning
will be a must for every farm.
One area to pay attention to is input price levels — and how
moves in input prices are going to affect your ability to cash flow any new land
you’ve bought or cash rent leases you’ve signed. You’ll want to use projections
to see what 2014 could look like for your operation.
Get that in place early. Then you can make changes and
adjust as you discover more about what your year will really look like from a
It’s going to be important to watch and manage your input
costs for 2014. Ask yourself: What could affect the success of my operation in
Look ahead to anticipate potential challenges. Then once
you’ve identified those, you can start thinking about how you’re going to take
action to address them.
As you finish in your fields, you’ll want to be scheduling
meetings with your banker, financial advisers and other specialists to do this
planning. Do forward projections for your operation.
Use the overall financial picture of your farm as you
consider when to lock in inputs or whether you should sign a particular cash
rent lease. The numbers need to back up what you’re choosing to do.
As we look ahead to next year, high cash rent arrangements
are top of mind. You want to keep your foot in the door with landlords, but not
to the point where you could lose your leg. And there’s a balance to keeping the
door open without getting hurt.
One of our ag finance specialists recently was talking about
this with a client. The farmer asked what he could do to be proactive about
keeping his foot in the door with his landlords. The finance specialist has seen
what other farmers have done and had some suggestions.
Understanding what your landlord values is a good place to
start. Does your landlord place a high value on money?
Getting to be personally involved with operations on the
farm? The level of care you give their land? A good working relationship with
You need to be speaking their language. You’re wasting your
time if you’re focusing on something they don’t place a high value on.
Have you talked with your landlords about the potential for
lower farm incomes in the future? Do they understand what that could mean for
them in connection with their rental ground?
Sometimes your cash rent may be “too high” — more than you
think you can afford — but it still might be worth keeping versus losing those
We’ve seen operations where the farmer needed to keep acres
on which he was paying a higher level of cash rent because that helped him
spread his total costs out. Basically, he couldn’t afford not to have
Then there are other situations where a high cash rent lease
just needs to be let go. Ultimately, all of your arrangements need to be helping
your operation in some way.
How can you know for sure whether your leases are helping or
hurting you? Run the numbers, figure out the situation and then have a
discussion with your landlord if you need to.
Feasibility studies on your higher cash rent ground can help
you make decisions based on the overall financial impact on your
When grain prices and yields don’t pencil out at high cash
rent levels, you have to make a decision. Do you have a conversation with your
landlord — or risk losing your leg?
Unless your landlord hears your side of the story, it’s not
likely that they’ll understand what you’re facing and lower your rent.
Show and explain what the numbers look like on your end.
That’s your chance to make your case — and keep your foot squarely in the door.