I just wrapped up a story that really was interesting to write. There were some land rent auctions around Iowa last weekend, some of them in the northern part of the state netting more than $500/acre on 2-year leases. Pretty amazing prices. Some say it sets a dangerous precedent, while others say it's a way for landlords to get rents that are more reflective of land values. Some say it helps "level the playing field" for land and others say it could make it even tougher for people like young and beginning farmers to get started with land.
So, what do you think? This story sure brings out a lot of strong opinion. Curious to hear what you all think about this issue!
I agree $500 is too high but some feel they can make it work. There are lots of farmers who have purchased ground the last few yrs. at a fraction of todays prices and made huge profits...% wise...on it. They aren't going to go away. I think cash rent will definitely be in the $300+ area for 75 or above CSR ground. Maybe more. Don't blame the landowner, you would do the same thing. Wouldn't you rent all you could at $125? There ya go, same thing, only opposite side of the coin.
We've heard for yrs. "who's going to farm the ground"? It's still in high demand and will be, just take a look at the cash rent bids.
I don't blame the landowner...it is in their best interest to figure out whats best for them. I am just not comfortable shelling out 400 and 500.00 acre. Last, I doubt the farmer paying $500 / acre is going to have a corn/soybean rotation as planting soybeans on $500 / acre ground doesn't pencil out. If the landowner is comfortable having corn on corn for long periods of time then that is their call. It doesn't make a lot of sense to plant beans on certain soil types but at $500 / acre it doesn't make sense period.
Like other guys on here are saying it puts extreme pressure on the farmer to market well which is a guessing game at times..just like mother nature. If the landowner wants to make more revenue then flex rent or crop share is the answer in my opinion.
Just like land rent auctions seem to be trending, flex leases are growing in popularity too. We have a few flex rent and crop shares and both our landlords and us like them.
Agree with many of the comments on the post.
I often wonder if we are at the bubble some time this year. The more I read other opinions the more I think that way. There are a number of factors to consider such as any analist that I've read or listened to has said we could have $4.00 corn or $7.00 dollar corn depending on weather, the euro, or other non historic event (which means butterfly effect or more specific something that isn't the normal period market fluctuation). The analists have never been that wide in their opinions (at least not that I remember anyway). I don't think its an 80's event to label it but I do think if it does go down it will be for a couple of years. If it does happen I see it being the euro's fault. I wouldn't lock anything like those rent prices or buy land that high. Just too high risk at this point of time. That is my opinion on it, love it or hate it.
land rent at 500 an acre is a recipe for disaster if corn goest even 3 bucks you lost money without paying for seed or fertilizer i thought the idea of farming was to put some money in your pocket?
It is the right of any owner to try and get the most out of his land. That said, I totally agree with the rest of the guys. Farmers who pay these kind of rediculous cash rents are either "too big to fail" or not very open minded at all. Even at the current corn price there is very little margin of error with above rents. No banker in our area will support a young farmer at similar rents. The idea that this way of getting rents is more fair and balanced to young and upcoming farmers is just a way of the landlord to make him feel better about it, in reality it's the opposite.
I can't say I'm in favor of this. However, now that it's happened, we're probably past the point of no return as far as whether or not there's going to be more of those auctions. The "young farmer" justification that was given is weak, at best. As you said, there are very few banks that are going to stick their neck out for $500/acre cash rent with as much market volatility as we've had (and probably will see), especially for someone who has a limited borrowing history and isn't "established".
Unfortunately, it's probably a sign of the times. I hope it works out for those guys. The landowners are entitled to get what they can for their land; however, it seems as if this is a pure case of pitting neighbors against each other. Add in the potential for market volatility, and I can't see it doing anything but destabilizing our industry.
Disclaimer: I work for a retailer, so I have no skin in this game. I do feel that it is my obligation to help my customers do what is right for them, not only in the short-term, but also in the long-term.
Farming has always been risky. There's been great rewards the last 5-7yrs. for many who had deals and leases at less than "fair" value. If you've boughten a shiny new pick-up or added machinery unnecessarily then it's hard to feel bad for you. Many landowners get 1% or less on their cash. If you use the justification for buying things as saving on taxes, take a look at where our country is. Are you a 1%er? Did you offer part of your profits to your landowner(s)? Or take them as village idiots and not think something like this would transpire? I believe it's here to stay and will become the new standard. Now talk to your BTO neighbor and see what he says. He'll ask you where the ground is and who to contact. So you can say it's pitting neighbor against neighbor, but who doesn't compare cash rents and to an extent pit owner against owner, using every figure that's published as a bargaining tool? OH, the BTO is probably working on equipment or polishing relationships with owners, investors, bankers, while you read and write on here or drive around in that shiny new pickup.
Figure out that your competition is your neighbor or another farmer. There isn't a more fair way to determine value than an auction. If it were yours, you would feel the same way.
Strange that only now we suddenly have the need for "anonymous" users on here? Landlords invading? :-)
If this auction happened in our area, it would probably be a once off deal....farmers wont make that mistake twice, maybe farming in that part of the country is a little easier....don't know.
Yes, farming is a busniess, but it has NEVER been THIS kind of business. I hope those guys treat those fields like you would a rental car......because that's the way the "rental" business works.........
I don't like the rents, but I don't appreciate the "young guns" with all their toys puffing their chests out either, while they try to negotiate everything to their advantage. It's caught up with them and everyone is going to pay. I chose not to put my name here for several reasons, if it's against the rules please let the moderator remove me, as you know it had to be approved before I could post. You're wishing the owner bad luck is sour grapes, he didn't twist the bidders arms. If you think the rental business should all be to your advantage, then good luck to ya. I would be looking for another job to keep you in business. Your hoping the fields get treated poorly is saying you aren't a good steward of the land. I would guess you are but are just worried about the future. We haven't had a public auction in our area yet, but several sealed bids incidents. If you can't make it work, don't bid it, but don't fault the owner for doing what he did. It could have went the other way too. But I would say he would have not accepted low ball bids. If you've got some sweetheart deals do everything you can to keep them. This is already out and you can bet the landowners have or will hear about it. One last thing...your landlords "invading" statement seems like you think it's you against the landlord instead of the partnership it should be, where both get a fair shake. That's the kind of BUSINESS farming has been for the most part in the past and should be in the future. From your other post, I take it you are a young farmer. You aren't entitled because you are young. Get diversified, that's how most of us got established. Be fully employed instead of mad or jealous. You'll find the landlords notice those things. Take a piece of 60CSR ground and get it to produce like 85CSR ground. Believe me, you will get noticed and it can be done, most of it have done it.