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Summer 2003
Volume 20, Issue 1
The Herrmanns of Tulsa, OK
Borrowing From Their Past to Create Their Future
At first glance, Rudy and Deb Herrmann of Tulsa, OK seem to be the antithesis of today’s contemporary landowners. White collar. City residents. Very successful with Master’s degrees in hand; one from Harvard, one from Drake. Both love to sail. Doesn’t seem like the next-door neighbors down the road, does it?
But on closer inspection, the Herrmanns reveal their passion for agriculture and the land. They possess a keen sense of finance, an exceptional knowledge of production efficiencies and their impacts on profits, a knowledge of crop production and marketing, but mostly, they both harbor a deep fervor for the sanctity of farmland.
"My parents were German immigrants," explains Rudy, "and they had a very serious land ethic. They always said, 'if you want the land to produce more, you must put more back into it.' That passion was shared by Deb's parents, who have farmland in North and South Dakota. I guess we both inherited those feelings."
The Herrmanns grew up in Iowa; he on a small farm in the southeast part of the state and she as the daughter of a minister who moved frequently. They gained their educations in Iowa, with Deb getting her Master's at Drake, while Rudy took his Iowa State University engineering degree to Harvard Business School.
Their respective careers eventually landed them in Tulsa, where today, Rudy is the retired chief executive officer of Dover Resources, Inc. and Deb is retired as vice president of finance and systems at Diesel ReCon.
In 1987, the two began to do some serious financial planning, which concluded with a need to diversify. They didn't want depreciable real estate because of "the hassles" that accompanied such properties. That, coupled with their emotional ties to the land, led them to begin the search for farm ownership. That's when Randy Hertz received the phone call from Rudy. They had met years earlier at Iowa State University.
"We actually bought that first farm without having seen it," Rudy shares. "That's how much we trust Hertz Farm Management." Hertz found that first farm in Hamilton County.
The couple was looking for land that could be purchased for an equitable price and could be improved with investments.
"We knew we were getting into an investment that would provide returns similar to a bond, but would also offer us appreciation," Rudy remembers.
Today, the couple owns four farms, geographically spread in Iowa. All of them have been purchased on the recommendation of Hertz, and without the Herrmanns having seen them prior to the purchase.
Economics Combine with Stewardship
There is no farmer today who will not acknowledge that making money is the only way to sustain their beliefs, values and lifestyles. Economics drives the ability to live on the land, stay on the land and do what farmers love to do; farm.
That same principle holds true for the Herrmanns. That profit and cash flow allow them to do two things they hold near and dear: hold onto the land and improve it over time. There is no question they will leave the land in better condition than that in which they found it.
"They've generated consistent cash flow, bond-like returns and the properties have gone up in value without us having to fix the plumbing," says Rudy. Part of that cash flow has been poured back into the land.
"When we first sat down with the managers at Hertz, we talked about land ethics and our collective stewardship philosophy," notes Rudy. Deb adds, "We've significantly improved these farms from our investments. That allows them to become more productive."
Even today, the Herrmanns ask hard questions about sustainable agriculture, soil tilth, organic matter, pesticide use rates, minimum and no-till and crop production safety. Most recently, they’ve become students of genetically modified organisms and the chemical industry.
"The Herrmanns are intellectually engaged, intellectually hands-on, but physically hands-off," says Hertz Farm Manager Cal Dickson, who manages two of the farms, while Dick Pringnitz, manages the other two.
He says, "The Herrmanns are very supportive of improvements we've recommended on the farms. They've implemented them despite the cash investments it takes. Rudy’s manufacturing background really comes through in his analysis of what's right and wrong with production. They're just great to work with. They put a lot of trust in us, which gives us the confidence to make decisions."
But what do the Herrmanns get out of Hertz Farm Management?
"We couldn't do this without Hertz," says Deb. "They completely understand the government farm programs, insurance mechanisms, managing crops and pricing mechanisms. They just really know the how to's of agriculture."
Rudy agrees. "Hertz understands. One of the things that gives me nightmares is thinking of my father managing the land. One of the things I always insist on is no surprises. Certainly, Dick and Cal follow that. Working with Hertz feels like family. We don't feel like we're talking to people that don't care. There is a lot of ownership with the Hertz farm managers and management, so that feels more like home," Rudy adds.
He sees the relationship with Hertz and the farmers as a positive one for Iowa agriculture.
Rudy says, "We provide the financial investment in the land, Hertz provides its expertise and the farmers provide additional production expertise. You know, the shape of agriculture is changing. For Iowa farmers to be viable entities, they have to farm more land than some of them can afford.
If we bring financial capital, then we're doing our part. Today, 50% of the land is owned by people who don't farm it, and 20% is managed by farm management professionals."
The Herrmanns also enjoy the crop reports, the weather reports, the phone calls, the tour of the farms and the annual report from Hertz. Deb laughs and says, "We get the annual report and pore over it. I look at the cash flow statement before they get the rest of the book done."
Purchasing land that can be improved has been an integral part of the Herrmanns and the Hertz strategies. The couple has approved tiling, the removal of trees, the installation of conservation strips and the construction of waterways. Production continues to improve.
Now, the couple is turning to creative options. Rudy says, "Iowa is largely a monoculture. It has lots and lots of corn and soybeans. Can we work alternatives into the rotation? Cal has been very innovative in a couple of value-added situations. He's gone beyond traditional fenceline thinking, and we like that."
They are also implementing more mutually agreeable leases. While at one time the farms were mostly cash rented, the farm managers have written custom leases and modified crop share leases. The Herrmanns say there are three different risk/reward platforms. "We've been hailed out and everyone has price risks every year. We've been hit with an early frost. That's why geographic diversity and mutually beneficial leases are so critically important."
When it comes down to it, the Herrmanns say Hertz is critical to the operation and implementation of both their economic return and their stewardship of the land. "We fully enjoy the Hertz people," says Deb. "They're fact based, they conduct fact analysis and they are data driven.” Rudy concurs. "They underpromised and overdelivered time after time."
For people who grew up on the farm and left, the values of trust, treatment like family, economic return, and soil stewardship are important. Welcome home.
