Summer 2012 • Volume 29 Issue 1
Summer 2012 • Volume 29, Issue 1
Passing the torch to the next generation
When you put your heart and
soul into building up your farm
operation, it is heartening to see your
grandchildren take a keen interest in
its management even when they’ve
split off into other careers. At Ken
Gorden’s 90th birthday in December,
his two children, five grandchildren
and their spouses met with Hertz
Farm Manager, Brent Bidner to
go over the management of their
farm operation.
“We had lots of questions,” said
grandson Ben Gorden, “and Brent
was very patient in answering all
our questions thoroughly.” Patriarch
Ken Gorden of Decatur, Illinois
was proud to see his grandchildren
actively asking questions about the
operation he has helped build from
the 80-acre home farm started by
his great-grandfather more than 120
years ago into a thriving 1,200-acre
operation in central Illinois.
Finding a way to preserve his farm
legacy in the family, Gorden formed a
family corporation in 1976 and began
gifting shares to his son and daughter,
and eventually to his grandchildren.
“I always thought I would leave the
farm to the kids,” Gorden said.
From left to right: Ken Gorden, grandson-in-law Chris Santarelli (standing), granddaughter Rachel Santarelli
(kneeling), granddaughter-in-law Nina Gorden, great-grandson Finnegan Gorden, great grandbaby Cosette
Gorden, grandson Seth Gorden (with the hat), grandson Ben Gorden, son Paul and daughter-in-law Ruth Gorden.
When his son and daughter opted
for non-agricultural careers, Ken
adjusted how he would include
them in the farm operation. First,
he needed to find a young farm
operator in the neighborhood to
help Ken when he had to be away to
attend numerous agriculture board
meetings, church and community
activities. Gorden has been active in
the Illinois Farm Bureau and is also
past president of the University of
Illinois Alumni Association. “In 1980,
Tom Ritter started farming with me.”
And as Ken expanded his farmland
holdings, Ritter farmed those acres,
too. In fact, for the past 30 years,
Ritter, now joined by his son, has
been Gorden’s only tenant.
Continued on Page 2
www.hfmgt.com 1
Summer 2012 • Volume 29 Issue 1
Passing the torch to the next generation
Continued from Page 1
“And he’d like that next year,” Hertz’s
Bidner added with a laugh.
New bins in July, 2011
Through the years, Gorden has
continued to maintain an active
role in managing his farms,
preferring a 80/20 modified
crop-share arrangement. “Then in
2000, it dawned on me that people
die and maybe I should look for a
professional farm manager to help
my children and grandchildren
manage the farm when I’m gone.”
So, at the age of 79, Gorden decided
he needed to find a farm manager
“who would continue to manage the
farm the way I wanted it managed.”
He interviewed some bank trust
departments but saw that many
banks were getting out of the farm
management business. He went
with Hertz Farm Management
and has been pleased with how the
relationship has developed.
It is important for Gorden to keep
improving the productivity of his
Class A soils. “Two-hundred bushel
yields were not even in our thinking
10 years ago,” said Gorden. “But now
we’ve had several years where we’ve
averaged over 200 bushels of corn.
It goes back to maintaining the land
with good fertility, drainage and
soil conservation. Technology keeps
improving and Hertz helps keep us
on top of what’s out there. Now, we’re
looking at ways to reach 300 bushels
per acre for corn.”
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800-593-5263
Yields, soil fertility and drainage are
somewhat foreign terms for Gorden’s
grandchildren. But they are becoming
more interested in how it all works
together. As shareholders in the
family farm, Bidner started sending
them detailed farm management
reports. “We’re not shy about asking a
lot of questions,” said Ken’s son, Paul.
“Brent is very good about explaining
everything. Besides the land, I’d say
Brent is our best resource in our
farm operation.”
Since becoming a shareholder,
getting the management reports, and
meeting with Bidner, “I feel more
directly connected to the farm and
agriculture than I ever thought I
would be, growing up,” said Ken’s
grandson, Ben. “I pay more attention
to food prices, weather reports and
other agricultural concerns.”
His brother, Seth, added, “I’m
interested in environmental quality
and it’s interesting to learn about
how we can make sure the farm stays
in good environmental shape and
educate ourselves on those issues.”
The family noted that Brent has
been instrumental in helping them
understand that input applications
are not only beneficial for the
crops, but administered in a way
that protects the environment. Just
in changing the terminology from
“chemicals” to “pesticides” on the
crop reports, Bidner was better able
to communicate to the younger
Gordens what actually occurs in
the farm fields.
Ken is proud that his children and
grandchildren are taking an interest in
agriculture. “I was surprised at Paul’s
interest and involvement when he and
I went down to Brazil, after investing in
Brazilian farmland through the Hertz
Brazil Farm Fund LLC,” noted Ken.
The fifth generation of Gordens hope
they can continue to add to the steady
growth path that Ken has maintained.
When Ken started farming in 1947,
he rented land for 10 years and then
inherited 200 acres. Through the years
he was able to add 80 acres here and
160 acres there. As he paid off the
mortgages, he bought more farmland.
He never became over-extended.
“Even when I bought 200 acres in
1980, which was not a strategic time to
buy land [at the peak of the market],
I never worried about paying for it,”
explained Ken. “I plowed all my profits
back into farmland.”
“When you get into this business,
you never know how things are
going to evolve in 20 or 50 years,
but I think our farm corporation
has grown and progressed very
beautifully. It has surprised me how
far we’ve come.” Gorden added, “I
feel like the Topsy character in ‘Gone
with the Wind’ when asked where she
came from. She answered, ‘I don’t
know, I just growed.’”
As his farm operation has improved
and increased through the years, Ken
recognizes it’s time to help pass the
torch to the next generations. Last
year, he turned over the presidency
of the farm operation to his son,
Paul. At a recent family gathering,
Farm Manager Bidner asked the
grandchildren, what was their vision
for the future? Their response:
“We would like to see the farm
corporation continue to grow.”
Ken just sat back and smiled.
Summer 2012 • Volume 29 Issue 1
Tradition of Leadership
The American Society of Farm Managers and Rural Appraisers (ASFMRA), founded
in 1929, provides members with the resources, information, and leadership that
enables them to provide valuable services to the agricultural community. Hertz
Farm Management is proud of its support and ongoing leadership within the
American Society both at a National and State level. This year, we have several of
our managers taking on leadership roles within the organization.
Rich Grever,
AFM, CCA,
became the
Illinois Chapter
President in
February, 2012,
at their Annual
Land Values
Conference.
Rich Grever
In 2007, Rich
was awarded the Professional Farm
Manager of the Year by the ASFMRA.
In Iowa, Jeff
Troendle,
AFM, became
the Chapter
President Elect in
February, 2012.
Jeff was named
the Professional
Farm
Manager of
Jeff Troendle
the Year in 2009.
He has appraised, managed, sold, and
acquired rural properties for clients
since 1986.
Kirk Weih, AFM,
ALC, became
the ASFMRA
National Past
President at
the annual
convention in
Phoenix, AZ
last winter. Kirk
Kirk Weih
has served the
organization in many roles over the
years, including Iowa Chapter President
in 2003, and earned several awards. In
1993, Kirk was named the Professional
Farm Manager of the Year.
Tim Fevold, AFM,
is currently the
Vice President of
District IV, which
includes IA, MN,
WI and MO. He
was President of
the IA Chapter in
2007.
In 2000, he
Tim Fevold
was awarded the
Professional Farm Manager of the Year.
Stan Lierz, AFM,
became the
immediate Past
President of
the Nebraska
Chapter in
February. Stan
has served in
several roles
Stan Lierz
within the
organization including both Summer
and Winter Meeting Planning
Committees, Legislative Committee
and the College Liaison Committee.
He is also a two-time attendee of
the DuPont Leadership Institute in
Washington D.C.
Matt Mann
received the Early
Career Award
from the Iowa
Chapter at their
annual meeting in
Ames, IA earlier
this year. The
award is given to
Matt Mann
a member who
is making an outstanding contribution
to the Iowa Chapter, the ASFMRA, their
profession and local community.
In September,
Kyle Hansen,
ALC, will
take over as
President of the
Iowa Chapter
of the Realtors
Land Institute
(RLI).
Currently
Kyle Hansen
serving as
President Elect, Kyle also serves as
chair of the Land Trends and Values
Committee, responsible for putting
together the Iowa Land Trends and
Values Survey twice a year. Kyle has
been an RLI member since 2008, and
earned his Accredited Land Consultant
designation in June of 2011.
Catherine (Kate)
A. Mulder, CPA,
Controller, Hertz
Farm Management,
Inc. was recently
elected as
President Elect
to The American
Kate Mulder
Society of
Women Accountants (ASWA) Board
of Directors. The Board’s goal is to
develop opportunities for women in
accounting and finance. Kate will serve
one year as President Elect before she
begins her term as President on
July 1, 2013.
Kurt Lokenvitz
assumed the
role of President
of the Cornbelt
Chapter of
the National
Agri-Marketing
Association in
May, 2012. Kurt
Kurt Lokenvitz
joined Hertz
Farm Management in 2008 and has
been a member of NAMA since 2009.
www.hfmgt.com 3
Summer 2012 • Volume 29 Issue 1
Is a Custom Operation Right for You?
by Eric Wilkinson, Professional Farm Manager, Kankakee, IL.
A common question we hear from
landowners is: “How can I maximize
the return on my farmland?”
Most landowners know there are
many different types of leases,
with even more variations of each.
But, they may not know about an
excellent way to get the most from
their land that is not a lease at all.
It is an effective alternative to
leasing known as a Custom
Operating Arrangement.
A Custom Operating Arrangement
is a contractual agreement between
the landowner and the farm operator.
The landowner assumes ownership
of all crops and any government
program payments. They are also
responsible for paying all expenses,
including fees for the farm operator
to perform the labor and machinery
duties necessary to grow, harvest,
and handle crops.
Plus, the landowner is responsible
for making all the management
decisions, such as selecting which
crops to grow, deciding what inputs
to use, marketing the grain, handling
the accounting, and overseeing the
farm’s field operations.
The farm operator has the
responsibility of planting, spraying,
harvesting, hauling the grain, and
completing tillage operations. The
custom agreement lays out the
payment schedule for the fees to be
paid as each operation is completed.
At times, bonus or incentive
payments can be made to the
operator for timeliness of operations
or for crop yield, to ensure the
operator is compensated for a
job well done.
arrangement is assuming the risk.
Even when compared to crop share
leases, landowners assume twice
the risk, while assuming all of the
management responsibilities. It
may be difficult to negotiate custom
rates that are acceptable to both the
landowner and farm operator. Also,
landowners should not expect their
farm operators to manage the details
of the custom operation, because
they do not receive compensation
for doing so.
Custom Operating Arrangements
have many advantages over other
lease types. They provide greater
control over the practices carried
out on the farm, the crops grown,
and the ability to monitor expenses.
The greatest benefit is the upside
return potential. In 2011, we
experienced high commodity prices
and overall-average to below-average
yields. Even with less than expected
yields, it was quite common for
an above-average farm to earn an
accrual net profit considerably
above any other alternative
leasing arrangement.
The details of a Custom Operating
Arrangement can be challenging.
At Hertz Farm Management, we
specialize in the management of
Custom Operating Arrangements
for our clients. We handle the grain
marketing, develop cropping plans,
purchase the crop inputs, oversee
field operations, negotiate custom
fee rates, and handle the accounting.
Not only have our clients appreciated
the higher returns they receive from
their land and our management skills,
but they also have peace of mind,
knowing that our staff of farmland
professionals have the knowledge
and experience needed to manage
their ventures successfully.
One of the biggest challenges
for landowners with this type of
2011 Returns by Lease Type
% ROI
6
5
4
3
2
1
Custom
Operation
80/20
Crop Share
Based on actual 2011 Custom Farm Operation.
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800-593-5263
50/50
Crop Share
40/60
Crop Share
Cash Rent
Summer 2012 • Volume 29 Issue 1
A Pivotal Year for Land Prices
by Kyle Hansen, ALC, Licensed Real Estate Salesperson - IA, Auctioneer, Nevada, Iowa
Iowa’s Realtors’ Land Institute’s land
trends and value survey released in
March stated tillable farmland in
Iowa increased 10.8% for the prior six
months. Since September 2009, land
values in the Midwest have increased
over 50%, due to high commodity
prices, low interest rates, strong
on-farm balance sheets, and the desire
to have a stable investment. Where will
land prices go from here? Can they
continue to increase?
Net farm income is the single most
important factor that influences land
prices. The USDA report released
March 30 estimated 95.9 million acres
of corn in 2012, the highest number
of acres planted since 1937, and an
increase of 4% from 2011. Soybean
acres decreased 1% from 2011 to 73.9
million acres. With average yields, corn
prices may fall, but bean prices may
remain strong. We have a “tug of war”
between corn and soybean prices as
they are near the top of their respective
pricing charts. The American growers
have always been able to outproduce
the grain that the world needs, but
will the ending stocks be high enough
to change the price of the corn? How
will land prices be affected? Weather
conditions throughout the growing
season will be the deciding factor in
how large of a crop we produce, but
we are setting the stage for a large
crop. Land prices will follow what
happens with the commodity prices.
This growing season will be pivotal in
deciding the future path of the land
market. If ending stocks rise enough to
lower cash price of corn significantly, a
softening of land prices is anticipated.
However, if ending stocks remain tight,
commodity prices and land values
could remain steady or have additional
support to allow for higher prices.
Farmers are the strongest land buyers
as a result of additional income from
good yields and higher commodity
prices, and are reinvesting in farming
operations. Farmers are capitalizing on
an opportunity to expand their farming
operation by purchasing land or paying
higher cash rents to farm additional
acres. Many people ask, “How can they
pay the current price per acre and make
it work?” My answer is by managing
their entire farming operation. Land
buyers are using past earnings,
debt-free land, and usually require
little to no financing, resulting in most
purchases being cash transactions.
When adjoining farms or a farm that
fits your operation comes up for sale, it
is a great time to expand your farm and
potentially bring the next generation
of farmers into the family farm. Land
owners are financially conservative, and
understand they can’t over-leverage
themselves. If land prices and
commodity prices soften, land owners
have budgeted for that potential.
They currently have strong balance
sheets, equity in their operations, and
a memory of the 1980’s assisting in
managing their farming operations
$ billion
Forecast for 2011
better than they have ever done before.
Land buyers are strongly capitalized.
The strongest sales are a result of well
capitalized farmers competing with
neighbors. Investors are interested
but are usually outbid by farmers.
Since the demand for farmland is
primarily driven by expanding farmers,
location and quality is king. There
is a definite division between high
quality, highly tillable parcels compared
to parcels with lower quality land,
or flaws associated with the farm.
High quality, grade “A” farms can still
produce record-high sale prices for
their respective counties. However,
a farm that has a flaw (wet soils, low
tillable acres, CRP, timber) is less
likely to get the competition between
neighborhood farmers, and
needs a realistic sale price for a
successful auction.
Farmland prices remain strong on
concerns about inflation, poor rate
of return on bank deposits, and
the devaluation of the dollar. Land
continues to be a stable investment
opportunity, with high demand and
low supply supporting current values.
500
450
400
350
Maximum feasible debt
300
250
Unused repayment capacity
200
150
100
Farm business debt
50
0
1970
1975
1980
1985
1990
1995
2000
2005
Source: Economic Research Service, USDA.
www.hfmgt.com 5
2011f
Summer 2012 • Volume 29 Issue 1
Grain Markets: A Forecast for the Months Ahead
by Rich Grever, AFM, CCA, Professional Farm Manager, DeKalb, IL.
With the start of the 2012
crop-growing season, focus centered
on how many acres of each crop
would be planted and the pace of the
planting progress. During the winter
months, there was much speculation
on the potential corn and soybean
acres in 2012.
The USDA provided an early
indication of their expectations with
the March 30 Planting Intentions
Report. The estimate was producers
would plant 95.9 million acres of
corn, compared to 92.9 million in
2011. The estimated 2012 corn acres
would be up 4% from last year. If
realized, this would be the highest
planted acreage in the United States
since 1937.
The March 30 report confirmed what
the market had anticipated: that
higher corn prices would encourage
producers to increase corn acres.
However, the actual planted acres
may vary from the initial estimate.
To plant 95.9 million acres, U.S.
producers were counting on an early
start and good planting weather. The
moderate winter weather extended
into spring and allowed an early start
for corn planting. As of the first week
of May, there was record planting
progress with 71% of the U.S. corn
crop planted, compared to 32% in
2011 and the average planting pace
for the last five years of 47%.
With an increase in corn acres, and
a potential above-average yield due
to early planting, the grain trade is
anticipating a large 2012 crop.
Fortunately, we are starting with
smaller grain supplies, due to the
decreased production last year, as
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800-593-5263
well as strong demand. On May 9, the
USDA updated supply-and-demand
estimates and gave an initial look at
their expectations for the 2012-2013
marketing year.
For the 2011-2012 marketing
year, estimated ending corn stocks
are 851 million bushels, compared
to the previous year’s ending stocks
of 1.128 billion. For soybeans, they
are estimating 210 million bushels,
compared to 215 million last year.
A reduction in available South
American supplies due to decreased
production has increased demand
and helped support U.S.
soybean prices.
The forecasted 2012 U.S. grain
production would produce a
significant increase in year-end corn
stocks and a decrease in soybean
supplies. For 2012-2013, the USDA is
currently estimating year-end stocks
of 1.88 billion bushels. If the 2012
soybean acres do not increase, the
2012-2013 potential ending stock
would be only 145 million bushels.
The price for 2012 corn has dropped
since late summer 2011, with the
potential for a large 2012 crop and an
increase in total available supplies.
though the current outlook for grain
prices is not nearly as optimistic as
last year, there have been excellent
opportunities to sell the balance
of the 2011 inventory and to make
forward sales for the anticipated
2012 production.
Day Soybean
1,525
1,500
1,475
1382’0
1,425
1,400
1,375
1,350
1,325
1,300
1,275
1,250
1,225
1,200
1,175
1,150
1,125
May
31
Jul
10
Aug
17
Sep
27
Nov
04
Dec
14
Jan
23
Mar
01
Apr
10
May
18
Day Corn
Soybean prices have been supported
by reduced South American
production, tight supplies, and
the anticipation of less acres being
planted in the United States than
last year.
As this year’s planting wraps up,
the market will focus on weather
and this year’s U.S. crop yield and
total production prospects. We
would anticipate volatility in prices
throughout the summer. Even
1,450
800
790
780
770
760
750
740
730
720
710
700
690
680
670
660
650
640
630
620
610
600
590
580
570
578’4
May
31
Jul
08
Aug
17
Sep
26
Nov
03
Dec
13
Jan
20
Feb
28
Apr
08
May
16
Summer 2012 • Volume 29 Issue 1
Understanding the Value of Farmland
Your relationship with the land goes
beyond just its financial value. There
is also a deep emotional commitment
that cannot be expressed in dollars
and cents.
For more than 65 years, knowing and
appreciating the real value of land
– both financially and emotionally –
has been a crucial part of the Hertz
way of doing business. With land
values continuing to rise, it’s now
more important than ever to work
with farmland real estate agents
who truly understand the value of
Midwest farmland.
For those of you who prefer email,
we have a weekly New Listings email
to deliver this important information
directly to your inbox. To sign-up,
simply add your email address on
our Email Sign-up page.
Hertz Real Estate Services and
Farm Management agents realize
how much your land means to you,
and are ready to offer the objective
guidance you need in making the
best decisions for you and
your family.
New Real Estate section on www.hfmgt.com
A Hertz agent is your dedicated
partner, representing you and
working with you to realize the
greatest net return on your property.
We develop a unique, detailed
marketing plan for your property,
evaluating the local market and
maintaining clear communication,
every step of the way.
First, we meet with you to
understand not only your financial
objectives, but also to get a clear idea
of your personal and family goals.
Are you looking to settle an estate?
Enjoy retirement in sunny Florida? Is
the land part of a multiple-owner or
multiple-family-member situation?
The answers to these and other
questions will help us to determine
the best course of action for the sale
of your farm.
Email Sign-up Page
All of our real estate listings are
detailed on our newly upgraded
website. We’ve made it even easier
for buyers to use, and with one click,
they can contact the listing agent
directly with any questions. To check
out the new features, including the
Auction Calendar, click on the Real
Estate link on our website,
www.hfmgt.com.
www.hfmgt.com 7
Summer 2012 • Volume 29 Issue 1
g
Corporate Headquarters
415 South 11th Street, P.O. Box 500
Nevada, IA 50201-0500
(515) 382-1500
Return Service Requested
www.hfmgt.com
Iowa Offices
Clarinda, IA
Humboldt, IA Mason City, IA Mt. Vernon, IA Nevada, IA
New Market, IA Oakland, IA Strawberry Point, IA
Waterloo, IA (712) 542-4841
(515) 332-1406
(641) 423-9531
(319) 895-8858
(515) 382-1500
(712) 585-3369
(712) 482-3400
(563) 933-4973
(319) 234-1949
Illinois Offices
DeKalb, IL
Geneseo, IL Kankakee, IL
Monticello, IL (815) 748-4440
(309) 944-2184
(815) 935-9878
(217) 762-9881
Nebraska Offices
Norfolk, NE Omaha, NE
(402) 371-9336
(402) 697-7500
Indiana Offices
Peru, IN
(765) 319-3384
Landowners Invited to Educational Summer Seminars
All landowners are invited to attend
one of a series of summer seminars.
You will hear the latest information
on farm leases, grain markets, client
services, land values and trends, as
well as maximizing your farmland
investment, understanding a custom
operation, and an update on farming
technology. If you are planning
for the next generation, you’re
encouraged to invite your children
to attend with you.
Register now and save! The cost is
$25/person or $40/couple if paid
in advance, and $30/person or $50/
couple at the door. The fee is waived
for existing clients.
Registration includes the noon meal
and break refreshments.
8
800-593-5263
For your convenience, you can
register one of three ways: fill out and
mail the postcard in this newsletter;
register online at
www.hfmgt.com/seminars.php
or contact Denise Vallandingham at
1.800.593.5263 or
[email protected].
Landowner Educational Seminars Summer 2012 Schedule
Date
7/23/2012
7/24/2012
7/25/2012
7/26/2012
7/31/2012
7/31/2012
8/1/2012
8/1/2012
8/2/2012
8/2/2012
Time
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
8:45 – 3:30
Place
Cedar Rapids, IA
Fort Dodge, IA
Ankeny, IA
Bloomington, MN
Mahomet, IL
West Des Moines, IA
Colona, IL
Kankakee, IL Malta, IL
Omaha, NE