DTN AG Summit – Day 2
I have already written a previous post on one of the first sessions at DTN AG Summit yesterday, but here is my recap of the rest of the day.
The president of International Farming Corporation gave a presentation on their efforts to both create long-term value to their investors and their tenant farmers. This is a company that has raised about $250 million in funds to be invested in farms around the US with I think the ultimate goal to turn it into a publicly traded REIT. The management of this company has been involved in farming for about 150 years and has a very long-term focus on farming. I think we will see more funds like this in the future.
My first break-out session dealt with cash rent versus flexible rent versus crop share rent. Much discussion was held in this group and sometimes it did get a little bit emotional. The idea of a flex rent almost brings cash rent back to the equivalent of a good crop share rent. Another point of the session leaders was that over time, the market will drive profits to farmers to be approximately zero. This does mean that the farmer will be entitled to return on their investment for machinery and technology and their overhead for management plus some profit on it, but in the long-run cash rents will tend to drive the other profit to zero. Farmers can either embrace this in their operation or not, but in the long-run, that is where market economics will take it. Another important point was to be proactively involved in communicaiton with your landlord.
The last break-out session dealt with the proper use of crop insurance, options and marketing. I especially enjoyed the farmer on the panel with his discussion of how the integration of crop insurance and options locked in a certain minimum profitable sales price no matter what the production or actual sales price was. Remember, this is a business and anytime you can lock a good profit with the upside potential of call options should not be overlooked.
Today, I am only at the Summit for about an hour and then head home for our Christmas office party. Since I have been on the road since Monday, I will be happy to get home.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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