Trading in Tile
Farmer Exchanges Drainage Infrastructure for Long-Term Leases
Dave Albin has a strong motivation to ensure his family’s six-generation Illinois farm continues for decades to come. In doing so, he tries to make the farm as productive as possible for their operation as well as their landowners.
To that end, Albin has embarked on the relatively uncommon strategy of footing the bill to install drainage tile — which costs hundreds of dollars per acre — on land he rents. In exchange, he seeks a long-term lease, up to 10 years.
“The idea for this really came about 12 years ago,” said Albin, who farms about 2,000 acres near Newman, in eastern Illinois. “We decided to tile all of our own land. We felt we benefited from not having the same wet spots slowing us down in the spring, among other things.”
A UNIQUE APPROACH
He then considered approaching landowners with the plan to pay all or part of the cost of tiling in return for a longer-term lease.
“We did this with the understanding that there may be a day when heirs or whomever may decide they don’t want to own farmland,” Albin said. “So, we write the leases such that either party can get out with some financial consideration.”
When it comes to landlord/tenant agreements, “whatever works” for both parties is fair game, said Allan Vyhnalek, Extension educator with the University of Nebraska. In his region, it’s common for tenants to foot the bill for applying lime with the caveat that they will be able to reap the benefits of that work for at least several years.
Likewise, Vyhnalek said he knows of a tenant who paid for an irrigation pivot for a small field in return for a longer-term lease. When the move paid off with much better yields — along with the strong commodity prices of the early part of this decade — the landowner received a bonus check that, at least in one year, was more than the rent check.
Dennis Stein, business management educator with Michigan State University Extension, said a lease that trades time in exchange for the cost of tiling has become more common for many “progressive farms as they develop what are considered win-win agreements.
“When we see a 25 to 30% discount for nontiled ground, it is very much in the landowners’ best interest long-term to consider finding a tenant that would be interested in helping with this issue,” Stein explained.
Current commodity prices may be a deterrent to many tenants being able to finance tile installation alone, he said. This is often when landowners and tenants devise some type of agreement to split the costs.
EVERYONE GETS AN OUT
The length of such agreements requires both sides to be able to cancel the contract early with financial considerations.