Land is expensive, plain and simple. For a beginning farmer starting out or even a livestock producer wanting to expand, it is practically impossible for the livestock to generate enough cash to pay for themselves as well as purchasing the land. Therefore many beginning producers have looked to leasing pasture as a means to get into the business. This allows them to focus on paying for the livestock and minimal machinery first. Once the breeding stock (the factory) is paid for, the factory can go to work generating cash to be allocated towards the purchase of land or additional livestock. A staged ownership approach has been successful for many budding entrepreneurs. However, it’s not without its share of challenges.
Ask any landowner why they like owning land and they will tell you it’s because they are in control of it. You are free to invest in the land with new fences, buildings, lime, fertilizer, etc., because you know it will be yours next year. But with leasing there is no guarantee of future possession. The incentive to make long-term investments is absent, so you farm differently than you would if you owned it. Plus, you have to be prepared for what you would do with your breeding herd if you suddenly lost the lease. Many beginning farmers have worked hard to build up a good cow herd only to be forced to sell them when the leased land was sold or leased to someone else. A multiyear lease is preferred, but the vast majority of pasture leases in our area are for only one year. So the livestock businessman must be constantly prepared with contingency plans.
The key to building a farm business on leased pasture is finding and developing the right landlord–tenant relationship. First, how do you find land to lease? Potential tenants run advertisements in newspapers and on the Internet, often with no response. That’s because most land is leased between people who already have an existing personal relationship. Trust takes time to develop, so most people naturally have more trust in the people they already know. If you are just starting out this is a very difficult challenge to overcome. Focus on going the extra mile for landlords and always doing what you say you will do, hopefully in time the word will spread and opportunities will come your way.
Once you’ve found land to lease, it’s vital that you invest sufficient time towards developing the relationship with your new partner. Marriages fail because of lack of communication, leases do as well. It can be as simple as stopping by to let them know what is happening or as complex as a quarterly newsletter mailed to someone in another state. But it’s important to stay in touch. Make sure you give them an opportunity to let you know what they are feeling or thinking. Are you willing to accept constructive criticism while there’s still time to change or would you rather find out when it’s too late? Good marriages take hard work to build, so do good landlord-tenant relationships. Take the time to communicate with one another.
Building your farm business on leased pasture can be an excellent way for farmers to get started or to expand. But it’s not easy, it’s full of challenges and forces you to structure your business so that it’s adaptable and prepared for “What if?”
Wesley Tucker, Agriculture Business Specialist with University of Missouri Extension.
