Rudolphi's Burning- May 2012

Rudolphi's Burning on

News From The Coffee Shop

May 15, 2012 7:31 AM

The mission of the column is to advocate agriculture, entertain (provided that you are entertainable), serve as a catalyst for critical thinking, and challenge the status quo amongst the agricultural community.

OFFENSE and DEFENSE

Throughout my professional career, I have been involved in sales as well as production agriculture.   

The similarities between the two are striking. There is the need to know and understand your market place, the importance of pre-planning and thinking ahead, and the ever important ability to put that plan into action at the critical and opportune time—the ability to “strike while the iron is hot” so to speak.

However, the stark difference between the world of sales (and the rest of the business world that functions on God’s green earth) and production agriculture is the view and animosity between competition in the marketplace.  

In sales and industry it is all about MARKETSHARE.  We strive everyday to offer a better, more innovative, or more competitively priced product or service to our customers than does our competition. Likewise competitive companies focus their efforts in the same place, and we routinely go to battle each and every day to gain new business and even take business away from our competitors.  It’s expected; we embrace it, and accept this as an ethical means of doing business in a competitive marketplace.

In production agriculture this is seldom the case.  Under most circumstances we tip-toe around our neighbors and competitors, respecting their landowner-tenant relationships without challenging the market or advocating our individual businesses.  Now, in recent years this has changed somewhat, but routinely producers who advocate for more acres to expand their business at the risk of displacing the current tenants and operators are viewed as cutthroat tyrants because they have the audacity to challenge the system and upset the proverbial applecart.  If a producer rents a farm away from another, in many cases this aggressive producer would fall under less local scrutiny had they kidnapped their first born child, and burned down their house!

Never is this more the case than when shirt tail (or not so shirt tail) relation is involved.  Let’s consider the following scenario:

Farmer A has rented 200 acres from their Great Aunt Ethel for the past 20 years.  Over time a relationship has been developed, and favors such as snow removal have been performed routinely as “part of the rent” to go along with cash payment that has escalated to a whopping $175/acre.  Above all Farmer A has grown somewhat complacent and developed a feeling of “entitlement” to farming Ethel’s land.

Suspecting such an agreement is in place, and seeing some real opportunity, Farmer B stops by, has coffee with Ethel, and offers her $425/acre. 

 Ethel who is fairly sharp (as most ladies are), but also very kind, has heard rumors of high cash rents, but has chosen to not deal with the conflict prior to this. Now, she sees an immediate opportunity to realize a much better return on the asset that her family spent so many years sacrificing and working diligently to pay for.  On top of that, the increase in rent revenue could buy her a new shiny Cadillac that would for sure be the talk of her red hat club for months to come!

Ethel then approaches her nephew-Farmer A with the offer. She requests that he match it, or she will be forced to make a tenant change.

Contact Brett at Vogel Crop Services by Cell: 319-240-8979 or Web: www.iowasoilsampling.com



We know where this going; Farmer A flies off the handle, makes all sorts of excuses as to why that is way too much money,  runs around town bitching to nearly everyone that will lend their ear, and seeks every opportunity to completely lambast Farmer B for having such nerve! 

While situations such as this may seem like a straightforward example of the most basic economics, they are not.  Producers take this stuff personally.  It’s not just a rent offer, it’s a personal attack, a shot across the bow, and they full well know that they have not taken the proper precautions to defend it.  Had Farmer A been willing to pay close to market price all along, it would be much easier to defend such an offer.



This stuff happens, people get mad, some even get shot (just go to Warren County)!  And like it or not, these situations are going to continue to happen more frequently.  The idea of a competitive market place for rented land is one that every farmer needs to come to grips with…pretty damned fast! 

Production agriculture has always been and will continue to be a very fast changing, evolving, and improving industry.  Entitlement and complacency has no business in an industry that is charged with the responsibility of providing a growing, hungry world, with the resources it needs to sustain itself.

As far as I am concerned, aggressively approaching land owners and renting additional acres is simply playing offense.  As a producer, if your cost structure, marketing plan, and cash flow can justify the risk; go for it! If you happen to lose a rented farm; accept the fact that you were just not playing defense well enough. 

On the other side of the coin, if you need to beef up your defense…here are a couple of take-homes to consider:

·         Be at the market.  If you are paying close to market price year in and year out, it will solidify your role as a tenant.

·         Differentiate yourself.  Make sure that the landowner knows and understands the value that you as a client bring to the table as a result of operating their asset.

·         Understand your values as well as the values of the parties you do business with.  At the end of the day, if the values and business principles of you and your landowner do not align: it will probably not be a very productive relationship for very long and it is unrealistic to expect any different.

Somebody get me some water…cuz we got a fire!

Editor's Note:

Rob Rudolphi resides in Eastern Iowa with his lovely wife Tara, where he is involved varying facets of several agricultural businesses. They currently have no kids, no dogs, and certainly no cats, and are generally up for anything involving a good time!

If you have a idea that would make a good "Burn Topic" for next month's Rudolphi's Burning column, please email the idea to prburmeister@gmail.com All entries will remain anonymous.