I’m just starting up my farm and facing all the challenges that come with trying to finance a start-up, like getting livestock, finding land, and figuring out how to operate profitably. As I said last week, the traditional business structure of farming, where the producer owns all the land, livestock and equipment for the operation, just doesn’t work anymore. By thinking outside-the-box, and exploring all kinds of ideas, I’ve come up with some solutions that will work for beginner farmers and help established farmers break free from dead-end traditional business practices. Last week I shared ideas for reducing input costs. This week I’m looking at alternatives to land ownership and leasing.
First, you don’t need to own the land you graze. My series on building a business on leased land will give you some good tips on how to go about finding and leasing land for your grazing operation. Here’s the first in that series with links to all the articles in it.
To add to that, here are some more, non-traditional ideas for making leased pasture more affordable:
Lease Land for Free by Selling Land Improvement Services
This is something I have not tried yet. The idea grew out of something Bill Roberts of 12 Stones Grassland Beef told me. He said that land can be had for free if you’re creative. Every conference I go to features mob-grazing ranchers with dozens of slides showing how they have increased forage production and nutrient density, built topsoil, fostered soil life, controlled weeds and brush, stopped erosion, fixed water and nutrient cycling, attracted wildlife and beautified landscapes. They have attained incredible results in a short amount of time. Instead of paying people for use of their land, why don’t you sell your land improvement services to landowners and have them pay you?!
Talking landowners into this is going to require sales training and prowess. You will need to have proof of the radical improvements you have made on other farms you’re already managing. Before-and-after soil test results and photos are the best examples. Because proof will be required, this probably isn’t a feasible strategy for getting your first farm. It will be most useful for expansion. You will need expertise in grazing and the skill to consistently produce rapid land improvement.
It will also take a lot of legwork to find receptive landowners. You will probably have to talk to dozens before you find one who’s interested. Target wealthy absentee landowners whose land is just sitting around collecting brush. It will need to be someone who doesn’t need income from that land, doesn’t want to sell it and doesn’t want to work it themselves. Receptive landowners will have an interest in sustainability and conservation. Hunters are a good bet because mob-grazed land is an oasis for wildlife.
This isn’t going to work if the landowner is or was a farmer, because they know how traditional leasing works. This won’t work if you have land nearby that you are paying a traditional lease on. The prospective land improvement client will just talk to your current landowner down at the town diner and think you’re trying to swindle them. There will be people who think you’re trying to swindle them no matter what, since this isn’t anything anyone has ever heard of.
Play the Tax Break Card
Here’s a way to sweeten the deal on a land improvement services sale, or to get a discount on the rate for a traditional lease. Offer to make your landowner eligible for agricultural tax incentives if there are any that your farm business qualifies for. I don’t know what the rules are outside of New York, but all states should have something. In New York, land that is leased to or owned by a farm operation that generates a minimum of $10,000 in annual income is eligible for a significant reduction in property tax rates.
When selling land improvement services, tell the owner that their tax savings will far outweigh what they pay you. (Don’t charge them much for your services: no more than $2-3 per acre in the East and less than a dollar per acre out West.) For a traditional lease, tell the landowner that this tax savings puts the same amount of money in their pocket as they would receive with you paying them that amount. Therefore, subtract that savings from what you agree that the lease is worth, and propose to pay them the difference as a lease payment. This could get you a lease rate far below what is average in your area.
Avoid Winter Headaches by Using a Custom Wintering Farm
Winter weather in much of the world forces even the best graziers to use at least some stored feed. This is the biggest profit-killer in the livestock industry. It is hard for a year-round livestock operation to be profitable in regions with short growing seasons and deep snow. Seasonal grazing operations work well for stocker cattle, but my goal is to be a seedstock provider. Therefore I can’t sell out every fall and start over every spring.
Having resigned myself to being a year-round farmer, I went through my first winter the way most ranchers do: feeding hay on my own farm. Because I’m running a low-capital, low-overhead operation, I don’t own equipment and I buy all of my hay. While it’s much cheaper than the way most farmers in my area do things, I have to make an educated guess on how much hay to buy. I’m forced to come up with a big cash outlay to buy it. It needs to get delivered by a dump truck because that’s the only way it gets unloaded at my farm, and this has posed access challenges. I must place the hay in the field for bale grazing before the snow flies, or drag it out there with my ATV and unroller trailer during the winter. If I buy too much I will have to move it or sell it, or feed year-old hay next winter. If I buy too little, I may not be able to find it in the eleventh hour. Weather may prohibit me from getting it to my desired feeding spot at that point. Plus, there’s shelter and freeze-proof water to worry about. My first winter wasn’t much fun.
But Jimmy Bulich of Pathfinder Farm in Catskill, NY shared a much better idea with me. He suggested that instead of handling my own wintering, I find a farmer who makes hay and take my cows to that farm. When I get done feeding stockpile (hopefully late December-January) I will have my cows trucked to the wintering farm, where they will get fed until probably mid-March. Then they’ll come back to my land and graze again. The wintering farmer will feed his hay to my cows, so I only pay for what the cows actually eat. No moving hay, no fighting the weather, no quantity-guessing. It will be set up under a contract just like custom grazing. The cost of hay delivery will most likely be replaced by yardage and cow transportation, but I save the ATV fuel to move and place all those bales. I also don’t have to spend time feeding and checking cattle every day. No worries or expenditures involving winter water. I can pay my wintering farmer weekly or monthly, which makes cash flow more comfortable. I can be a seedstock producer AND a seasonal grazier! While my cattle are away, I will take a worry-free vacation down south! I will have a better quality of life, and a chance to take a breather and regroup for the next season. I have also allowed a fellow farmer to add an enterprise to his operation and help justify his expenditures on machinery and land. There’s tons of retired dairy farmers in my area too, with empty free-stall barns (including freeze-proof waterers) and old tractors. I’m sure they’d jump at the chance to be back in the business in this way.
Gone are the days when a farmer is just a guy out in the country with cows and tractors. A successful modern farmer needs to be an economic analyst, salesman, marketing professional, and businessman. And, unfortunately for some, a people person. You need to make a commitment to constantly learning and exposing yourself to sources of new ideas. You can’t get any water out of a hose if it’s not hooked up to a faucet, and you can’t implement new profitability-boosting ideas if you have no source of them. Don’t expect to be able to solve every problem through your own brainpower. Many heads are better than one, so harness the power of your peers. Together you can all do infinitely more thinking than one person is capable of. Everyone’s brain works a different way, so they will come up with things you won’t. You also have the ability to help them with your own ideas.
Consider these non-traditional business practices to build a low-cost, low-overhead, low-labor, simplified farm enterprise. Regardless of region, species, product or marketing method, you can’t go wrong. As bovine genetics expert Gearld Fry says, “sign the back of the check, not the front!”