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Winter 2003
Volume 20, Issue 2
Pursuing Key Strategies Paying Big Dividends
Averaging 230 bushels of corn per acre across an entire farm is an accomplishment most corn growers only dream of, but for the owners of one western Scott County, IA farm, it's been done.
Growing that kind of corn obviously entails fertile ground and near perfect weather, but it's all the result of pursuing some key strategies over many years. After years of planning for maximum yields, hiring a farm management firm, making significant productivity improvements and maintaining the farm operation under a top corn grower for 15 years, landowners Jim Nicholson and Sue Buchheit hit the 230 mark in 2002 and over 220 bushels per acre in 2003.
Jim says, "We were blessed with perfect growing conditions. That's the best we've ever done, and I'd like to do it again."
Jim and Bow Nicholson, living in Columbus, OH, together with their sons, and Jim's sister, Sue and her family, own 308 acres of farm ground in Scott County, an area of eastern Iowa well known for exceptional productivity.
In addition, the Nicholsons own two farms in eastern Illinois' Iroquois County. One of those farms, also co-owned with the Buchheits, has been in the family for five generations, since 1851. The Scott County farm was left to Jim and Sue by their parents, who started farming it in 1940.
Nicholson took over management of the farm operations in 1974. But, in 1983, as a result of some management problems he experienced, he decided to hire a farm management firm. Jim says Joel Hertz flew to Ohio to meet with Bow and him. After interviewing several local and national firms, they chose Hertz.
While Jim continues to stay actively involved in farm management decisions, particularly marketing, he admits that staying on top of the complexity of farming and trying to maintain relationships with multiple operators became too complicated. Living a distance from the farms just added to the difficulty. He says, "Bringing Hertz and our Hertz Farm Managers into the picture completely solved that problem for me."
Since then, the farms have been operated under custom arrangements.
Incessant Improvement
Those 230-bushel corn yields aren't simply a reflection of the rich, productive eastern Iowa cropland. They also take into consideration the intensive planning for maximum yields by the owners and Hertz Farm Management as well as the contributions of one of the area's top farm families.
John and Sharon Kundel have farmed the Nicholson ground for 15 years and have lived nearby for 36 years. More recently, their son, Kevin, has joined the operation. That continuity breeds knowledge. Combine that knowledge with the emphasis on professionalism, constant improvement and management from the Hertz Farm Management team, and you're bound to see improvements.
Mike Downey, the Hertz Farm Manager who manages the Iowa property for Nicholson Farms, says, "We've addressed drainage concerns by installing tile and have added storage capacity."
Another strategy factored into the success of the top production team is to be on the leading edge of technology. This includes the implementation of Global Positioning System (GPS) capabilities. Where appropriate, they use variable rate technology for their fertilizer and lime applications.
Over the years, these finely tuned improvements culminated with nearly perfect weather in 2002 and 2003 enabling them to produce their record corn yields. While Nicholson acknowledges the importance of constant improvement and savvy management, he also emphasizes how important it is to have the right operator.
With this kind of high-quality ground, we're able to attract superior operators like the Kundels," says Jim. "John has been farming our ground for a long time and he knows it takes good timing to hit top yields. We've never had to worry about whether our farm is planted or harvested first or last. John and Kevin consistently do a great job and they do it on time."
Farm Management Also Key
Nicholson has equal praise for their farm management team of Downey and Rich Grever, Hertz Farm Managers. Grever manages the two Illinois farms.
Jim says, "I've told my family that when I'm not around to be the interface between them and the farm operations, they can trust Hertz implicitly. The Hertz people we've worked with, Mike, Rich, Jim Rebhuhn and Joel Hertz are firstclass farm managers. They bring a very high degree of professionlism, communication skills, timeliness and integrity to the table." Bow concurs with her husband's assessment of Hertz. "Integrity is at the top of my list and they have it," she says.
Grever and Downey compare notes frequently, but they also acknowledge they work in different states on different soil types in different markets.
For example, the Iowa and Illinois farms are approximately 200 miles apart - east and west. Nicholson says, "The geographic differences are important because of the weather hazards like drought and hail. We even get different weather on the farms in Iroquois County," he points out. "It's also important to note that in Iowa we sell to the Mississippi River markets and in Illinois, into the railhead centers."
Hertz has occasionally been able to secure contract seed growing opportunities from one of the dozens of companies using the Corn Belt as prime contract acres. In addition, they plant and market High Extractable Starch (HES) hybrids with a marketing contract in place at planting.
In 2002, the HES hybrids netted Nicholson Farms a per-bushel premium, adding $18 of income per acre. With seed savings of $7 per acre over traditional seed costs, the HES hybrids added $25 per acre over conventional corn acreage profit. In 2003, the added profit was approximately $30 per acre. Grever and Downey acknowledge the Nicholsons and Buchheits are highly motivated to be good stewards of their land as well as to try and maximize yields and income.
Financial Instrument
"I worked in the investment business, selling and trading bonds and other fixed income securities," says Jim. "With that kind of career focus, we naturally have a substantial portion of our assets invested in stocks and bonds. The farms have been a wonderful diversification. Not having all our eggs in one basket paid off in recent years as steady appreciation in the value of farm land helped offset a decline in value of some of our stocks."
We decided to pay off any debt on the farms in order to maximize our income. It's been nice to count on fairly steady annual cash flow."
Several years ago, Nicholson Farms was reorganized from a limited partnership to a limited liability corporation (LLC) to help facilitate the transfer of ownership to the two sons in each family.
The third farm in eastern Illinois, owned exclusively by the Nicholsons, came as a result of a 1031 tax-free exchange, masterminded and executed by Hertz Farm Management.
Jim explains, "Over the years, Bow and I had invested in several rental properties. We reached a point in our lives where we wanted a change. We have tremendous confidence in Hertz Farm Management, and it made sense to add to our farmland portfolio. We looked at every offering we could find from eastern Iowa to the Indiana border before Rich finally found the right farm in southeastern Iroquois County."
Nicholson places high value on the longevity of his relationship with their custom operators. The Kundels have farmed the Scott County farm for 15 years and Bob Kraft, a top farmer from Gilman, IL has operated one of the Illinois farms for 16 years. Sam Fry from Fowler, IN, is the custom operator on the new farm. "Sam's 10 years of experience on that farm contributes to our partnership."
He says, "Our partners know our land as well as they know theirs. They understand how to manage the unique features of each farm in order to maximize yields. These men are good at what they do."
It's not unusual for owners and operators to see farming from different perspectives, but that isn't the case with their custom farming operations. Jim notes all of their "partners" farm between 1,500 to 2,000 acres in addition to the Nicholson farms. He says, "Farming our ground allows them to amortize the cost of expensive equipment over the additional acreage."
"The farm operators get the benefit of farming our land and we get the benefit of their experience," says Nicholson. "All of us benefit from the expertise of Hertz. That owner/operator/farm manager connection is one big component of how 230-bushel corn averages are attained."
"We're already raising the bar for coming years," says Nicholson, fortunately with a twinkle in his eye. After all, he is joking...isn't he?
