Do you find it difficult to negotiate a lease with your farm operator? Is he a family member/relative? A long-time friend of the family? A long-term tenant/operator?
Many times these types of relationships make it difficult to negotiate a satisfactory lease rate due to family ties or friendships. However, in all cases, a farmland owner should receive a fair and equitable rent for the farm. Fair and equitable by definition means it is fair for both landowner and operator. The landowner should have a fair rent, and the operator should have the capability of making a reasonable profit on a typical year.
If you are in a situation that makes it difficult to conduct reasonable negotiations, MRI can assist. As an independent third party, we can analyze the soil productivity of the land, calculate the potential income and input costs for farming the land, and thus illustrate the fair and equitable lease rates for both parties. We can then explain those results to the operator, with valid numbers to support them, and negotiate the proper rate.
Are you considering an improvement to the farm, but not sure if it will improve the profitability? MRI has the experience analyzing a variety of capital projects and can show the potential returns on those investments.
Grain marketing is a challenging part of Midwest farming. Commodity prices vary dramatically from year to year. Record yields can cause commodity prices to remain relatively low, but price volatility still exists every year. Often there are seasonal fluctuations that provide pricing opportunities. Often there are ethanol plants or feed mills that require a steady flow of grain throughout the year. Those buyers are willing to price grain at very good basis levels--but often at times when other operators are not able or willing to deliver.
Therefore, many of these pricing opportunities require on-farm storage in order to take advantage. On-farm storage often will provide a high return on investment. But, how can those numbers be analyzed? What type of investment return should be expected. MRI can analyze the price volatility, the local basis spreads and the cost savings of storing on-farm vs at a commercial facility. The result is a reasonable expectation of returns to an investment into a new or expanded on-farm storage system.
Can a systematic drainage system improve the productivecapacity of the farm? If so, how much? If I lease the farm, how can I gain a return on a new drainage system?
MRI has extensive experience installing drainage systems--and obtaining solid returns from flexible cash rent leases. Drainage systems should include both surface and sub-surface facets. That is, excess rainfall and surface water should be remain on the surface and allowed to drain into regional drainage outlets. That surface water should NOT be ‘pushed’ into a sub-surface system. This is one example of the mistakes often made in designing a system. It is this type of problem that MRI can assist in avoiding. Therefore, proper design is the start of a successful drainage system.
Once a design is in place, MRI can analyze the potential yield increases and return on the investment. We have installed systems in six different states across the Midwest, on a wide variety of soil types. Therefore, we have the track record of successful installations and high ROI’s (return on investment). We also have a track record with several highly qualified drainage contractors capable of designing and installing those systems (in a timely manner!).
Subsurface drainage systems have evolved rapidly over the past decade. Several additional structures can now be considered which will enhance the capabilities of a drainage system:
BioReactors: BioReactors are designed to have the drainage water flow through from top side to bottom. It is filled with wood chips. The wood chips provide a habitat for microorganisms and bacteria. Those bacteria feed on the nitrates contained in the drainage water. The system therefore removes a majority of the nitrates from the water prior to the water entering the drainage outlet.
Saturated Buffers: This system is designed to have subsurface drainage water run through a series of drainage pipe installed adjacent to the drainage outlet. Rather than outlet the water directly into the stream, it runs through the pipe and eventually through the soil along the stream. The natural microorganisms and bacteria within the soil absorb the nitrates to reduce the amount running into the stream.
Drainage Water Management: A ‘new’ approach to farm drainage is to further control the flow of the subsurface drainage water. One of the approaches is to install “water level control structures”. These structures are installed to hold back subsurface drainage water during specific seasons, such as winter or mid-summer. By holding water within the system during the winter, some nitrates are absorbed in the soil microorganisms while held throughout the system. Prior to spring planting, the gates are opened to allow full removal of excess water in the soil profile.
During the midsummer months, the gates can be closed to hold more water in the soil profile and thus create a partial sub-surface irrigation system. Depending on the overall topography of the land, this sub-surface water could provide additional available water across the field and to the growing crop similar to an irrigation system.
MRI has experience working with a variety of drainage contractors. Many of the top contractors are members of the Land Improvement Contractors of America (LICA). That organization promotes drainage improvement and water management, as well as provides education regarding new developments in the field of drainage management. Therefore, MRI can assist with connecting landowners with highly skilled and knowledgeable contractors capable of designing and installing a drainage water management system specific to your farm property.
