How to position your farm for maximum appreciation
By Howard Halderman, President of Halderman Farm Management Services, Inc.
printed in Ag Professional June 2010 edition
Professional farm mangers typically enter each year with two primary goals. The first is to maximize the current farm income. This is done via changes to lease terms. The second goal is to improve the long-term productivity and value of the farm. Initially this goal is harder to define, but from a business perspective, most landowners plan for their investment to go up in value.
Sometimes a farm’s capital value appreciation is more significant than the performance of its annual income stream. Therefore, professional farm managers focus their effort on maximizing the current income while positioning the farm to capture all of the value appreciation.
What do farm mangers consider when trying to position a client’s farm at the top end of the marketplace? Here are some of the things we seek to implement:
1. Find the best operator for the farm and foster a long-term relationship. Even though it may be via a series of one-year leases, we try to build with the farm tenant an informal partnership. If the farm tenant knows he will be able to lease the farm well into the future, he will invest in the property and try to improve its productivity long term.
2. The maintenance and improvement of the soils and fertility on the farm is extremely important. This includes regular soil tests and making fertilizer and lime applications that meet the prescription defined in the test.
3. Increasing organic matter and reducing soil erosion are part of a farm’s overall improvement. A few of the tools used to accomplish this goal are reduced tillage (as appropriate), the use of grass waterways, buffer strips, terracing, the Conservation Reserve Program, etc.
4. Water management is another aspect one must consider. Some farms benefit from additional drainage. We strive to prevent our clients’ farms from being labeled a “wet farm.†Other farms need irrigation, and the accessibility of water long term at a reasonable price is an ongoing endeavor. In many locations, maximizing the accessible water supply, reusing it as necessary and retaining acre feet if not needed are critical parts of farm management.
5. Improvements. Any improvements on the farm should add value. Professional managers will diligently work to maintain those with value, remove those without and/or recommend construction of improvements such as grain and tool storage, irrigation development and other value-added improvements.
6. Alternative crops. One goal of a farm manager is the development of a library of information on each acre managed. If done well, this library positions a farm to take advantage of alternative or value-added crops since the historical production history is well defined.
7. Alternative income opportunities. Farm mangers are aware of various other income opportunities for farms such as wind turbines, water/irrigation development and maximization, solar energy, cell tower leases, billboard leases, etc. Navigating the legal contracts and terms on these can be a challenge and most farm managers have the knowledge or resources to assist a client in taking advantage of these opportunities if their farm is positioned to do so.
All seven of these services, as well as many others, can impact the value of a farm significantly. The management of each one is important and needs reassessment on an annual basis. Professional farm mangers are taught to look beyond the current year and into the future to make sure we are positioning our client’s farms for the most capital appreciation possible in the market place.
