What Do Changing Landlord Demographics Mean for Your Farm?
If you rent the land you farm on, there’s a big chance your landlord has a relatively narrow understanding of what it takes to run a successful farm. With rent continuing to represent the largest expense on a farm’s budget, understanding farmland values with tools like AcreValue and getting a good grasp of field profitability can often represent the key to expansion.
According to a USDA study published late last year, we have recent confirmation to long-standing beliefs: farmland is largely a family asset passed down through generations. Some families transfer the farm and the land, others just hold on to the land and rent it out to farmers.
- There are 911 million acres of agricultural land; 354 million (39%) of these are rented.
- 64% of rented acres are passed down, 36% are acquired through a third party.
- Corporations account for only 5% of landlords, but for 11% of rented acres.
The majority of landlords are removed from the day-to-day realities of running a farm or ranch. Of 2 million landlords, 87% are non-operators, and nearly half of these landlords have never farmed.
Fifty percent of all rented acres belong to the largest 7% of landowners, while the smallest 44% of landowners own only 6% of rented acres.
So what does this mean in terms of effectively managing your rented acres?
1. Communicate. Nearly half of your landlords will have never farmed. They own a highly valuable asset that they’ve entrusted to you,, and might not have a good grasp of what it means to manage the asset effectively. Making your farm’s data available on a centralized and easy-to-access platform is a good way to start to educating your landlord about your practices and progress.
2. Network. If you’re looking to expand by renting more acres, get connected with the active professional investors in your area – they are more likely to be looking for new tenants than other farmers. The majority of land sales go to farmers who will operate the additional ground themselves, but investors still account for a significant portion of purchases (especially for large ones – if you want to grow your rented acres by 1,000 , this is the crowd to watch). In Iowa, according to the 2015 Iowa State Land Values Survey, 76% of farmland purchases went to farmers and 20% to investors.
3. Modernize. Twenty eight percent of landlords are over the age of 75. This means that land is being passed down to a younger generation – one that’s more used to software, data and analysis than its predecessor. Generational transitions to younger landowners will require farmers to modernize not only their operation, but the way they build relationships. The ability to use tools such as cloud software to enable the quick and timely sharing of information and reporting will inevitably become an important competitive advantage in land negotiations and access to more acres.
Watch this video to hear what our network of professional investors look for in great tenants.