Farm land management: What new landowners need to know

So, you’ve become a farmland owner. Congrats! Now it’s time to sit back and watch the profits roll in, right?

While turning your agricultural investment into a profitable venture is certainly possible, it takes more than just owning it.

Especially in the beginning….

That’s because as a new landowner, there are multiple decisions you need to make.

Perhaps the most crucial one is how to manage your farmland effectively. 

Understanding your farm management options is important because it can significantly impact your return on investment.

To help you understand this aspect and make an informed decision, here’s a complete list of what you need to know about farm land management. 

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What is farm land management?

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Farm land management is a holistic approach to the strategic planning, stewardship and operation of agricultural land. 

However, it’s important to distinguish farm land management from farm management.

Farm management, also called "field management,” is primarily concerned with the farm’s day-to-day operations at the ground or “field” level. Farm management services involve a hands-on approach that revolves around agricultural activities like:

• Deciding which crops to produce
• Implementing planting and harvesting schedules
• Overseeing labor and equipment management

In contrast, farm land management — commonly referred to as land management — is focused on managing and protecting your land asset itself. Farm land management services include:

• Assessing how best to use the land
• Incorporating sustainability practices 
• Managing relationships with tenants, including lease negotiations and renewals
• Ensuring compliance with environmental regulations and tax laws
• Managing property taxes
• Overseeing property improvements that can increase your land’s value 

Effective farmland asset management is crucial to the success of your investment.

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Why?

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It can maximize your profits and minimize your losses. 

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This requires strategic decision-making to support four key farming objectives.

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4 objectives of farm management

Effective farmland management revolves around these primary objectives:

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1. Risk mitigation: This involves protecting your farmland investment from potential losses.
2. Asset enhancement and preservation: Your goal here is to maintain your land's productivity and value over the long run.
3. Generating annual returns: Your aim is to maximize the farm’s profitability and get a healthy return.
4. Promoting environmental stewardship: This entails prioritizing your farm's future sustainability by mitigating the environmental impact it has on the surrounding ecosystem.

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Accomplishing these objectives requires balancing potential profits with risks while taking into account both short-term gains and long-term sustainability.

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Types of farm management 

As a new landowner, you have three options for managing your farmland.

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The route you choose depends on your personal preferences, level of expertise and how involved you want to be in daily operations:

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• Manage the land yourself and hire a custom farming service
• Engage a business that manages farm land
• Partner with a professional farmer who can both manage the land and operate the farm

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Let’s explore each in detail, along with the benefits and drawbacks.

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Manage the land yourself and hire a custom farming service

If you have farming expertise and a decent amount of spare time, you might consider self-managing your land and having it custom-farmed. This approach requires your involvement in all day-to-day farm activities, while a hired farmer-operator carries out those tasks.

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Pros and cons

When it comes to overseeing your farm, self-managing offers several benefits:

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• You’ll handle all farming decisions, which gives you direct control over operations.
• If you have a passion for farming, it can be rewarding to play a hands-on role in cultivating the land.
• Since profits aren’t shared with an ag management company or professional farmer, successful operations could bring higher returns.

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On the other hand, there are some drawbacks to managing the land yourself:

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• Successful farming demands a significant time commitment and active involvement in daily activities.
• You’ll need deep knowledge and experience in agriculture, market trends and risk management.
• As the sole decision maker, you’ll bear all the risks (and stress) that come with farming, such as unpredictable weather and market fluctuations.
• Staying updated with agricultural technologies and methods can be daunting.
• Compliance with environmental regulations, tax laws and other farming policies will be your responsibility.

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Engage a business that manages farm land

Another option is hiring a land management firm that specializes in caring for your farmland as an asset. While they won’t directly conduct farming operations, land management companies will manage either custom farming activities or the lease agreement.

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Pros and cons

Enlisting a land management firm can be a good choice if you’re seeking a more hands-off approach. Here are some key benefits:

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• A land management company will provide strategic oversight of your farm land as an asset, ensuring that all activities align with your broader objectives.
• They’ll bring industry knowledge, skills and established practices.
• You’ll receive regular income from various avenues, including leasing arrangements (either via fixed or yield-dependent rent) or through the sales of crops in cases of custom farming.

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But, like self-managing your land, hiring a farm land manager has some drawbacks:

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• Some land management companies may apply a ‘one-size-fits-all’ approach for all properties in their care. 
• You’ll have less direct influence over decisions related to your land.
• Land management companies charge fees for their services, which may reduce your profits.
• Your farm’s success is dependent on the company's competence.

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Partner with a professional farmer who can both manage the land and operate the farm

In this approach, you team up with a professional farmer who wears the dual hat of farm manager and land manager. This isn’t a typical tenant or employee arrangement. Your partner-farmer has a significant stake in the farm’s success, like you. They could also function as the lessee/operator of the farm, which deepens their interest and involvement in your land's productivity.

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Pros and cons

Choosing to partner with a professional farmer who serves dual roles of land management and lessor/operator, like Weiland Farms, offers several benefits:

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• Having the expertise of a professional who understands farming operations and land management can maximize your farm’s productivity and profits.
• A partner-farmer who has a vested interest in your farm's success is likely to result in greater attention to detail, better decisions and more efficient operations.
• You can benefit from the farmer's local connections and reputation, which can influence the marketing of your crops.
• You can also benefit from the farmer's existing infrastructure, like storage sheds and facilities. This allows them to capture more value from the crop, which not only optimizes operations but also potentially reduces expenditure and increases profits.
• You can have flexibility in your level of involvement and reap the rewards without the daily operational hassle. (Remember that dream of kicking back and collecting your check? Here’s where it can really come to fruition.)

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On the other hand, there are some drawbacks to consider:

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• It can take time to find the right partner, which is someone who is both a skilled farmer and a qualified land manager.
• Profits from farming operations are shared with your partner farmer.
• Like with any partnership, there could be disagreements or conflicts that arise.

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In situations where a farmer both pays the rent and manages the farm, there’s also a risk of a short-term conflict of interest. 

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This can occur if the farmer is tempted to prioritize their immediate gains over the long-term health of your asset.

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For this reason, it’s crucial to foster a partnership where the long-term success of your farmer-partner is tied to the long-term performance of your farm. 

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This synergy forms the basis of a mutually beneficial relationship where the well-being of your farmland aligns with the best interests of your partner.

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Farm land management services and responsibilities 

How you choose to manage your farm land will determine the scope of your responsibilities. 

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You can be knee-deep in every decision…

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Or sit back and enjoy passive rental income and capital land appreciation.

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Here’s an overview of what farmland management responsibilities include:

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Managing crops

Crop management involves deciding which crops to grow, how and when to plant them, and what strategies to deploy to market and sell the harvest.

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Planning land use

Determining the best use of the land includes crop rotation strategies, conservation efforts and how best to leverage opportunities, like solar or wind leases. 

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Overseeing tenant relationships

If you lease your land, it requires selecting dependable tenants, managing their activities and setting clear responsibilities.

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Handling lease agreements

Lease management includes outlining lease terms, handling lease renewals and terminations, and resolving any disputes that may arise.

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Managing farm labor

Labor management requires hiring and training the right people, supervising their activities and fostering positive working relationships.

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Making investment and improvement decisions 

This requires assessing potential infrastructure investments or land enhancements (such as installing irrigation systems, soil conservation measures or leveling the land), which can maximize the land's value and productivity.

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Implementing farm technology

Choosing the right agricultural technologies to adopt (like agricultural drones, precision ag machinery or smart farming software) can enhance the farm’s efficiency. This takes research, cost-benefit evaluations, training and ongoing maintenance.

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Overseeing finances

Financial management requires budgeting, conducting audits and forecasting cash flows to maintain the farm’s financial health.

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Ensuring regulatory compliance

Complying with federal, state and local environmental regulations is critical to avoid fines or penalties. Taking advantage of tax incentives related to farm land can also boost your farm's bottom line. This involves familiarizing yourself and staying up to date with the laws, implementing any changes and maintaining detailed records.

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Safeguarding sustainability and biodiversity 

Sustainable farming involves implementing eco-friendly practices and promoting biodiversity  (like regenerative agriculture, soil and water management, cover cropping, etc.) to protect the land in the long run.

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Mitigating risks 

Creating a comprehensive risk management plan to address potential production, climate and economic challenges is needed to help ensure the farm's resilience. Doing this requires identifying potential risks, developing response strategies, communication and training, and implementing safety measures.

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How to choose the right farm management approach for you

There are many factors at play when deciding how to manage your farmland. This includes your personal preferences, expertise level and how involved you’d like to be in daily operations.

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When it comes to weighing the pros and cons of farm land management, it never hurts to talk to a professional.

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Beyond that, it’s a matter of individual preferences:

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• What are my goals for this investment?
• How involved do I want to be in the farm’s day-to-day decisions and operations?
• Do I have the expertise, or am I willing to learn about farm and land management?
• Am I prepared to take on the risks and responsibilities associated with farming?
• How will my choice of management style impact my financial returns and the long-term sustainability of my farmland?

The answers to these questions are unique to each landowner and your situation may vary. If you’re looking for support to navigate these variables, schedule a free consultation with our team to understand your options.