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The End of the Maze

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As we make the transition from CashRent to CommonGround and GroundOS, we’ll be dramatically increasing the capabilities of our platform. Adding in new transaction, land, and auction types will be complicated, but is certainly within our abilities with proper planning and mindset. It is going to be an incredibly exciting puzzle for us to solve as a team. The easiest way to navigate a complex, twisting maze like ours is to start from the end. This letter aims to lay out what the end of the maze looks like, helping us get there in the most efficient way possible.
Different Lease Types
Cash rent
Up until this point, has focused on connecting farmers and landowners to better facilitate cash rental agreements. A cash rental agreement consists solely of cash being exchanged for the opportunity to lease agricultural ground. With CashRent, these lease payments are made at a predetermined time and rate through our auction bidding process. Cash rental agreements are the most popular form of agricultural lease in the midwest, where the majority of our transactions have occurred, thus far. However, as we look to expand outside of the “I-states” we must also expand the types of lease agreements that we’re able to facilitate.
Crop Share
A popular transaction in the southern part of the US is called a crop share agreement. A crop share agreement functions as a partnership between the farmer and landowner. a 50/50 split of all costs, expenses, and profits that come from growing crops on the ground is the most common version of this transaction, but other percentages and tweaks can be made to the agreement. A crop share benefits the landowner in that they are able to, in a good crop year with stable or high commodity prices, earn more money than they would have in a cash rental agreement. Crop share agreements benefit farmers who are cash strapped and would prefer not to lease land with dollars or farmers who want to hedge against poor yields and the uncertainty of lower commodity prices.
Crop share agreements are popular in the southern United States. Being able to faciliate leases of this type will help us to expand our footprint outside of the I-states
Flex Lease
Halfway between a crop share agreement and a cash rent lease is a flex lease. In a flex lease, the farmer and landowner agree to a base cash rental rate, but also share in the profits of the crop yield. The base cash rental rate paid in a flex lease is likely lower than in a strictly cash rent lease, however, the landowner has the opportunity to bring in a larger total income if the crop output is good and commodity prices remain at a reasonably high level. This type of agreement can benefit farmers as well who don’t have the cash on hand to pay a full cash rental lease payment or want to hedge against potentially poor crop yields or lower commodity prices.
Giving our users composability in creating leases will be paramount to CommonGround becoming the most widely used platform for farmland transactions in the United States. Flex leases are also becoming increasingly popular with farm managers, meaning that this feature will be crucial for our GroundOS clients.
Sale Properties
Land leasing has been an incredibly underserved part of the agricultural property space, making it a fantastic entry point for us at CashRent. We want to take the lessons we’ve learned in building our farm leasing platform and apply them to sales transactions. Farmland sales is an incredibly lucrative industry in which billions of dollars change hands each year. Whether you’re a farmer or a land investor, farmland is one of the safest investments out there, averaging a 7% return on investment year over year for the past 50.
As CommonGround has grown in popularity, so has our userbase. We’ve formed a trusting relationship with thousands of farmers and landowners who are interested in leasing land. The opportunity for us to leverage this userbase of agricultural professionals and investors to enter the farmland sales space is obvious. There is a natural funnel for users that come to us interested in leasing their land for a few years and then selling it after. By providing our farmers and landowners with stellar service during these lease, we will be top of mind when it comes time to sell. We will be able to segment our users to see who may be interested in selling their land once their CommonGround lease agreement expires and then make the process as easy as possible for them without ever leaving the platform.
As CommonGround is not a licensed broker and does not plan on becoming one, we’ll host the land auction on our site and then partner with brokers local to these properties to complete the sale.
In addition to properties that our users post themselves, we’ll also be hosting lease and sales auctions for properties that come via GroundOS clients. The auctions will be hosted on both the CommonGround site and the GroundOS client’s whitelabel with bids submitting on one platform being shown on the other, and vice versa.
We also want to integrate an MLS (Multiple Listing Service) into the site for sales properties. This means that we’ll be pushing listings for sales that haven’t been listed directly on our site. However, leads will come to our site and inquire about the property, at which point we’ll sell the lead back to the brokerage by getting them to sign up for a GroundOS account. This will also help CommonGround to become the one-stop shop for browsing farmland in the United States, bringing more attention (and bidders) to our users’ listings
Different Land Types
Currently, our website’s language and logic is set up to facilitate the lease of non-irrigated, tillable farmland acres. When creating a listing or getting a CashRentstimate, step 2 is “Select your Tillable Acres”. We’ve had numerous requests for a CashRentstimate that incorporates irrigation into the value and have been asked dozens of times if we have any pasture land available. Additionally, we have built out a deep infrastructure for the facilitation of hunting property leases that is exclusively used by our whitelabel partners at this time. We want to bring these hunting lease capabilities to CommonGround as well.
Non-Irrigated, Tillable
Non-Irrigated, Tillable ground will likely continue to be the main focus of our website. The majority of the farmland in the “I-states”, our target demographic thus far, is non-irrigated, tillable. The reason for this is that the land is so naturally fertile that irrigation would only marginally add to the productivity of the ground. As shown in the image below, the incredible soil fertility leads these states to have the highest non-irrigated, tillable cash rental rates in the country.
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Irrigated, Tillable
As we move out of the I-states, naturally occurring soil fertility starts to decrease, leading to lower crop yields for farmers, making leasing or owning ground less lucrative. In order to alleviate this concern, however, and proliferate the farming profession across the wide United States of America, irrigation is used to bring additional water to farmland. This dramatically increases the fertility of the ground, bringing yields to levels on-par with the fertile soil of the I-states.
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Irrigation is widely used in drier regions of the country that do not naturally receive much rainfall. One such state is Nebraska. 75% of the farmland in Nebraska is irrigated, accounting for 15% of all irrigated farmland in the United States. Irrigation is also common in the southeastern U.S., particularly along the Mississippi River Valley in Arkansas, Louisiana, and Tennessee as well as southern Georgia and central Florida.
In order to expand our reach beyond the I-states, introducing irrigated land types to our CashRentstimate algorithm is imperative. We’ll also need a way for users in the listing creation process to indicate to potential bidders that their ground is irrigated. The latter is currently being worked on and I am excited to see the results.
Pasture
Another way for us to expand outside of the I-states is to facilitate lease and sale transactions for pasture ground properties. Pasture ground is used for housing livestock, usually consisting of cattle, goats, and hogs.
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As shown in the image above, much of the ground located west of the I-states is used for housing livestock. This is because the ground does not produce high crop-yields naturally due to lower soil fertility as a result of a small amount of rainfall in the region. The wide-open expanses of these areas, however, and relatively dry conditions make them the optimal location for housing livestock. Facilitating pasture land transactions will help grow our footprint in the American west and will help us to reach our goal of becoming the one-stop shop for browsing farmland of any type.
Facilitating pasture transactions means that our CashRentstimate algorithm will come to estimate the value of pasture land for a given property and listings created on our site or by a GroundOS client will be able to be marked as Pasture
Hunting
We currently support hunting leases on whitelabel websites, but want to bring those capabilities over to CommonGround.
What we have built thus far is nothing short of amazing. CommonGround yields landowners an average of 39.5% more in lease income for the asset and helps ambitious farmers grow their operations, all from the comfort of their homes. As we continue to gain traction and have been able to raise fresh seed funding, the end of the maze has become clearer and clearer: CommonGround will become the main hub for farmland transactions in the United States. However, in order to make this vision a reality, we have to expand our capabilities beyond facilitating cash rental agreements. Doing so will create a self-propelling ecosystem of farmers, landowners, agriculture professionals, and land investors that will net us more listings, more users, and more transactions. I am incredibly excited to build CommonGround with you all.
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