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profi t-sharing mechanism. In others, landlords agreed to share a few more expenses. Both of these options helped bring the cost of land for


Sipes back into line with profi t potential while leaving upside opportunity in place for landlords. Farmers looking to renegotiate should do their home-


work before winter meetings with landlords. West Texas landowner and banker Todd Pope always urges farmers to be sympathetic to their landlords’ fi nancial situations. “Are any costs


being shared? Sometimes ade- quate risk-sharing is already occur- ring,” Pope said.


“Good farmers make a diff erence,” Pope said. “As a


landowner you want a good capitalization rate, but if you aren’t willing to let your tenant do what it takes to stay in business, you risk driving him away. “If his replacement does a poor job you’ll soon fi nd


yourself in worse shape than you were before.” Sipes said farmers should look at the opportunity and


“That’s when we decided the leases would


have to change or we would need to consider cutting our losses.”





“Relative to compa- rable investments, land has to perform for landowners. Property taxes and repair expenses are real obligations that must be met, and these eat into capitalization rate potential.” Though he stresses caution, Pope has been on both


sides of the discussion and knows the importance of a good tenant.


risk associated with each leased farm on an annual basis. “Don’t let your


leased ground put your owned ground in jeopardy during tough times,” he said. With weak com-


modity prices and rapidly increasing input prices, Sipes contends farmers can’t afford to not


look at what their land is costing them and evaluate their options related to these costs. “Watch farms that don’t provide much opportunity for profit closely,” Sipes said. “Spend time looking at your true costs—costs of land and operations. It will be eye-opening.”


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SORGHUM Grower Fall 2015 17





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