Moe Russell, of Russell Consulting Group wrote a very good article in the Corn and Soybeans Digest clear back in 2007 on the fact that you do not need to own land to be a farmer.  I personally think in today’s environment, most farmers who already own a bunch of land with no debt are most likely not maximizing their return as a farmer.  They are probably doing a good job of maximizing the return to them as land owners since they are farming it themselves. 

However, as both a landlord and a farmer, you need to review each year what your return has been as both.  Make sure in your management reports that you have allocated cash rent to yourself as landlord that is reflective of what cash rents are bringing in your area.  Make sure that you do not use the highest or lowest, but somewhere in a median range.  Once you allocate this cash rent to your farming operation, how profitable was your farm for the year and what is the trend.  I believe, in many cases, the farmer will find out that it is earning a good cash rent return, but as a farmer, it is generating a loss or very little profit.

If this situation continues for too long, the farmer has two good options:

• Stop farming and either sell the land or cash rent (this would probably be the most difficult for most farmers), or
• Increase the profitability of the farming operation to take advantage of the land that the farmer owns.  This may require renting more acres, sharing equipment with other farmers, etc.

Have you taken the time to do this analysis on your farm.  If not, I think the results may surprise you.

I am flying out of Seattle early Sunday morning and meeting up with my farm partner at the Kansas City airport.  We are then driving up to Sioux Falls, South Dakota to meet up with all of the Crop Tour participants that are doing the western leg of the tour.

The plan is to spend Monday to Thursday traveling through South Dakota, Nebraska, Iowa and Minnesota.  Another set of participants will leave Ohio on Monday and then meet up with us in Austin, Minnesota on Thursday afternoon. 

I plan on writing a updated post each night and let you know what we did that day and what my thoughts about the corn and bean crop are.  This is my first time of participating and I look forward to it.

I was skimming through the Reuters.com website the other day and came across an article on how US Farm Managers are enjoying the benefits of the Baby Boom Generation of farm land transfer and the continued high farm land prices.

Most of these larger national farm managers went through crisis in the early to mid 1980′s as they struggled with many foreclosed farms.  However, since the late 1990′s they are enjoying a fairly successful business climate.  According to the article, about 80% of the farmland in the US is owned by people age 65 and over and this property will be transferred to the Baby Boom Generation, of which almost all of them are not farmers.  This requires the use of a competent farm manager to manage the whole farm process in many cases. 

The largest US farm manager is Farmers National out of Omaha.  It was founded in 1929 right at the time of the stock market crash and like many others struggled with the 1980′s farm crisis and was sold to MetLife.  In 2000, MetLife sold the company back to the employees and it now employs over 200 employee/owners and sell well in excess of 25 million bushels of corn, 5 million bushels of beans and over 1 million bushels of wheat.  They actively manage 1.5 million acres of crop land in 23 states.

I believe that most newer farmers should view this as an opportunity to get to know these farm managers well and show that you can be a profitable farmer for them.  This trend will continue and it provides a great opportunity to acquire more acreage to farm.

I saw a great post by Chuck Schwartau from the University of Minnesota Extension deparment.  The post was related to the dairy industry, but is applies to all farming and any business.  For the last twenty years or so, it seems that most people thought they could make easy money by borrowing more than they earned and putting it into stocks, bonds or even farm land.

These days, it looks like we will have to go back to making money the old way – Earn it with both hard work and smart work.  Chuck has many ideas for the dairy industry.  Chuck refers to taking shortcuts that are less productive than doing something exactly the way that it needs to be done.

Are you taking these shortcuts.  If you are, review what the right way is and start implementing it.  It may take more effort, time or capital, but in both the short-term and long-term, your bottom line will be much better.

Some areas to look at are:

• Budget – Is it up to date.  Are you preparing the budget in conjunction with your accountant and banker.  Is the budget both realistic and prudent to maximize the bottom line.  Do you show one budget to your banker and then live by another easier budget.  Your banker is your partner.  You need to be honest with both him and you.
• Production – Are your production plans up to date for what the input costs are and related possible income returns.  There are may sites out there that can help you with this process.  One geat site is the Iowa State University extension department.  Use them to maximize your potential return.
• Capital – Do you have adequate capital.  If not, how can you get it.  Look at a part-time job for you or your spouse.  Many farmers have down time in the offseason.  This may be a good time to earn some extra money from non-farming sources.
• Labor – Is your labor force at the correct size, knowledge, pay scale, etc. for your operation.  At you maximizing your return on your labor.  Do you spend too much time on the tractor and not a enough on marketing and managing your crops.

These are just some of the areas you need to look at.  Sit down with your team and brainstorm on what other areas you need to look at.

As Chuck says make sure you cut the right costs.  “Do not cut off your foot just because it will save wear on one shoe!”