Secure a Long-Term Farm Lease Agreement for Better Operational Security and Access to Financing
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According to data from the USDA, the number of beginning farmers (those with 10 years or less of farm management experience) has been declining for more than 20 years. Meanwhile, the average age of American farmers now stands at 58. One of the biggest impediments for those young and beginning farmers seeking to join the industry is access to land.
With cropland running at a U.S. average price point of over $4,000 per acre, a farmer without access to substantial capital can have a hard time both getting started and expanding his or her operation. This is partly why farmland leasing has become so common and why the negotiation of short- and long-term farm lease agreements has become a critical part of the ag economy.
But often, landowners are reluctant to offer producers the long-term farm lease agreements they need to ensure the security of their operations out of fear of potential conflicts and uncertainty about the future.
Why do landowners prefer short-term farm leases?
Landlords who typically negotiate year-to-year leases with tenants tend to work with the same lessees year after year. In Iowa, for example, a recent survey showed that 41% of landlords and tenants negotiating cash rent leases and 68% negotiating crop share leases had maintained a professional relationship for over 10 years.
If you’re among those farmers who work with the same landlord(s) year after year, you may be wondering why they prefer not to commit to a long-term farm lease agreement. They may wonder if you won’t manage and respect the land as if it was your own or even worry about potential conflicts that could impair your relationship—even if you’ve had nothing but positive interactions to date.
Though the reasons are understandable, it shouldn’t hold you back from trying to negotiate a longer lease. Short-term leases may not be the best solution for you as a farmer either.
Both the landlord and the renter should have their legal representatives review any long-term farmland lease. It is important to make sure long-term farmland leases are compliant with state laws. Check with your state bar association for legal professionals experienced in farm leasing to get the best advice for your situation.
Why short-term farm lease agreements can be challenging for farmers
While farmland leasing provides an alternative avenue for young and beginning farmers to build their agricultural operations, it doesn’t eliminate every logistical issue you face.
If your income relies heavily on the use of leased land, you can still face a variety of challenges:
- Banks may be reluctant to lend to you if your production depends primarily on leased acreage. This is especially true if you lack long-term farm lease agreements. Banks may consider a year-to-year farmland lease too risky to provide long-term financing for capital investments.
- You may face uncertainty when trying to form long-term operational goals for your farm if you’re reliant on one-year leases for access to farmland. It’s hard to plan for future growth when you can’t be certain the highly productive land you’re using this year will be available to you next year or the year after. A long-term farmland lease can assure you access to the same acreage year after year.
- You may experience concerns about your relationship with your landlord(s) if you don’t have a long-term farm lease agreement in place. A multi-year lease allows both of you to lay out your mutual income, yield, land use, and sustainability goals for the farmland you’re renting. It can also provide you options for resolving conflict should the two of you disagree on management practices and other operational issues.
How to negotiate a long-term farm lease from your landlord
Clearly, it’s beneficial to build a trusting and mutually beneficial relationship with your landlord in order to better position yourself to negotiate a long-term farmland lease agreement. Here are a few suggested methods for achieving that goal.
It’s hard to plan for future growth when you can’t be certain the highly productive land you’re using this year will be available to you next year or the year after. A long-term farmland lease can assure you access to the same acreage year after year.
Demonstrate understanding of your landlord’s income and land use goals
Many landlords may be reluctant to enter into a long-term farm lease with a tenant because they fear conflicting visions for their land’s use. That’s why it’s important you take the time to understand your landlord’s major goals for his or her farm and then be willing to adapt to those goals and adjust your own operations accordingly.
If you can show your landlord you understand their objectives as a farm owner take priority over yours and that you’re willing to work with them for a mutually beneficial partnership, your landlord could be more open to considering a multi-year, long-term farm lease agreement with you.
It’s easy for landlords—especially those who are non-farmers—to think tenants only care about their own profits and not the land they’re farming when it belongs to someone else. As you know, however, that’s rarely the case. Make it clear to your landlord that it’s in your own best interest, too, to care for his or her land as you would your own, and then demonstrate your willingness to do so:
- Help your landlord meet land stewardship goals. Be a partner in his or her vision for the future of the land. If the landowner wants to set aside some of the farm for wildlife, for example, offer your equipment and your labor to help establish food plots and habitat for deer, waterfowl, and migratory birds, or other animals.
- Help make improvements to the farm. Don’t be afraid to propose innovations or upgrades that could make your leased farmland more productive. Do grain storage facilities need repair? Negotiate with your landlord to cover the cost of materials while you supply equipment and labor. This kind of neighborly aid to your landlord might also lead them to lower your rent costs to compensate for your time and labor and position you to be considered for a long-term farmland lease.
- Provide regular reports to your landlord, especially if they’re an absentee landowner in a crop share lease agreement with you. Such reports might not only include a quarterly accounting of expenses but also photos showing crop conditions and status.
- Be a model tenant. Just as good landlords can be hard to find, so can good lessees. Be the kind of person you would want to work with. Be professional and compassionate in your dealings, respect your landlord’s property and do your part to maintain it, and be willing to listen and negotiate when there is a challenge or conflict.
- Establish long-term management plans. Suggest partnering with your landlord to create a plan for management best practices, put it in writing, and then demonstrate your commitment to the sustainability of the lessor’s farmland by executing the agreement.
Partner with your landlord for long-term farmland viability
Partnering with your landlord on a land management plan that will ensure viability of his or her land for generations to come will benefit both of you. Depending on where you farm, what you farm, and what you and your landlord’s goals are, such a plan could include anything from determining the number of grazing stock on any given acreage to prescribed burns to increase soil fertility.
You may find your landlord is more open to operational innovations than you think. Don’t be afraid to propose better management plans, land use changes, and new technology solutions. Not only might you suggest something your landlord is open to adopting for better crop yields or long-term soil sustainability, for example, but you’ll demonstrate genuine interest in the future of his or her farm.
Partnering with your landlord on a land management plan that will ensure viability of his or her land for generations to come will benefit both of you.
Most importantly, show your landlord how the stewardship and conservation goals you’ve agreed to in yearly leases can survive well into the future with the adoption of a long-term farm lease agreement. The same goes for plans the two of you have developed to build soil health, or forage or grazing systems you’ve adopted to build on mutual income, yield, and sustainability goals. Remind your landlord that a multi-year lease agreement offers you an incentive to help him or her with long-term improvements to the farm.
Ask for a long-term lease to demonstrate long-term commitment
The more you can do to demonstrate your commitment to good stewardship of your landlord’s property, the more likely you’ll garner the trust and respect necessary to win a long-term farmland lease agreement.
The information provided herein is provided gratis, and solely as reference. The information is not intended to be, nor shall it be a farmer’s sole and exclusive source of information on the subject matter. Corteva Agriscience makes no warranty, or other representation, express or implied, as to the accuracy of any information contained herein, and cannot assume responsibility or liability for reliance on or use of this information by any farmer in making specific decisions on farmland leasing, which in all cases is the responsibility of the farmer.