As farm incomes have been up over the past few years, investment in drainage and tiling improvements has increased on farms across the Eastern Corn belt. In some ways, this has been no different on the farms we manage, but in some significant ways, it has been different. For the past few years, we have been making those same tiling and drainage improvements on our managed farms. However, we’ve been doing it for half price! This difference hasn’t come from finding a different, lower quality, or cheaper ditching outfit, but by simply having our farmers pay for half the tiling cost. You read correctly. Farmers are spending their money to improve our landowners’ farms.
As profits have been good and competition for farmland has grown, farmers have been willing, even eager, to spend their money on tiling a landowner’s farm. Farmers understand the importance of good drainage and its impact on crop timing and yields. Drainage improvements are especially beneficial on farms with heavier, poorer drained soils, like those we predominantly see in the areas we manage. Depending on the year, the impact of improved drainage can mean significant differences in yields, which means more money in the farmers’ pockets.
For our share crop farms, it is obvious to see how the owners benefit from these drainage improvements. However, we aren’t leaving our cash rent owners out of the party. On a flat cash rent farm, an owner has a farm with a tile system, which is much more desirable and can demand a higher rent. On a flex rent farm, an owner benefits from higher yields, which result in higher bonus payments.
Investment in tiling is a long-term investment, but one can often see results quickly. In our experience, most tile systems will pay for themselves in 5-7 years. Although this is relatively quick for a farm that you might own for decades, it does bring up the issue on a rented farm of a farmer committing thousands of dollars to someone else’s farm when the farmer only has a 1-year lease. We have developed a cost sharing clause that we add to our leases to ease this concern. The farmer agrees to pay for half the tiling costs knowing that if he/she does not farm the tiled ground for a specific period (usually 5-7 years depending on the farm), then he/she will receive a reimbursement for their portion of the tiling investment on a prorated basis. This provides them peace of mind, and the landowner will still never have to foot the bill for the other half of the tiling costs. This is because, we would simply make sure that, if the original farmer leaves, the new farmer assumes the old farmer’s position in the cost sharing arrangement and pays for the reimbursed tiling costs.
Investment in drainage and systematic tiling can help turn a good farm asset into a great farm asset. Not only does tiling pay cash dividends, but it also provides instant value to the farm. In addition to demanding more competition from a leasing standpoint, a farm that is pattern tiled also demands a higher value in today’s farmland marketplace. Whenever possible, we highly recommend that our clients spend some extra money to improve the drainage on their farms, especially if someone else wants to pay for half of the investment cost. Maybe this is something to consider on your farm?