Diegnau Farms: Justification and negotiation of adding tile to a rented farm

Diegnau Farms was faced with the renewal of one of their many farm rental agreements. As with many farmers, Chad and Melissa Diegnau had grown weary of the unpredictability of their crop yield and profitability due to excess or lack of precipitation. Chad knew that installing tile would dramatically improve the yield and wanted to address the possibility with the landowner. Tile provided farmland drainage and benefits to the land including: no drowned-out spots and healthier plants because they were not sitting in thick, wet muck. This resulted in higher yield. Increased yield equated to more bushels, which equated to increased revenue. Chad and Melissa collected all the necessary investment costs, rental rates, expected yields, and required rates of return. Their task was to determine profitability of various funding and installation options, evaluate additional risks and opportunities, and determine a target plan for negotiation with the landowner. The critical incident provides a description of the organization and information revealing the nature of the investment costs, profitability, and required rates of return.