$32 vs $62 Rent!

[burnt]

I forgot to add one thought that was on my mind. My Dad was a very gentle-natured man who often repeated and tried to live by the credo - "Live and let live".

It seems to be a forgotten proverb today.

[cottonpicken]

I was trying to make sort of a joke but after rereading
it it may have not seemed like one.

To each his own.

I often wish i was farming in a few thousand foot
green house growing flowers for city people.

[may-be]

My father only had 2 quarters of land and he was very rich...because he was always happy.
Back to the rent topic I had an interesting conversation with a fellow that retired a few years ago. He got top dollar for his land at the time. He told me his deal included his bin space that is 120,000 bushels,all areation with fans working except hydro. He would also turn fans off when needed. He would also clear snow when needed. He was a very good farmer and had a dozer all his life so his land I know was in top shape. But he told me after everybody found out what he got thats what everybody else wanted and started getting. So this year he is raiseing the rent because he feels his land is worth more.
Sounds like a merrygo round to me.
I rented 2 quarters close to home this year for quite a bit less than the going rate. Guess I did not step on his shoes in the past is his statement.

[mbratrud]

Sorry SF3 but I missed my opportunity to rant about Pike in a previous thread.

So more in depth on your topic let me stick up a bit for the Landlord and your friend in Moose Jaw. What’s crazier buying land for twice as much as it was worth 3 years ago or paying a little higher rent for a couple years?

The Land owner has an investment of $1200 (what Heavy land or Black has been trading for) at 5% return is $60... So is it over paying? $700 land is renting for $35. You can argue whether or not the $60 land is worth more then the $35. The last couple years the heavy land has been generating 2000lb plus lentil crops; sure the Canola Crops are not any better but there is a wider range of cropping options. My Point is not all land is equal. How can you say in a free market society that it’s too much? Prices will be determined by what the market will pay.

Personally I think there is substantial risk right now, and I was reminded of a old saying it's not the bad years that kill farmers its the good years. Ultimately time will determine who has made good or bad decisions. In the Eighties when interest rates went through the roof and commodity prices softened it wasn’t high cash rent that killed farmers it was crushing debt from high priced land and equipment.

So if its my choice in uncertain times I would rather pay an extra $10 bucks an acre for a couple years while real-estate stabilizes vs. getting into long-term debt in a volatile market. Especially from a young farmer perspective look at it from a risk management standpoint.

[poorboy]

SF3,

Are the rest of farmers overpaying for rent, or are you underpaying?

I would consider yourself lucky that you have the chance to rent good land for that amount. There must be a real lack of farms and competition around you.

In my area of Alberta there is very little land that ever comes up for rent or sale. Rent prices are extrememly high when compared to returns, but there is no other choice, it is take it or leave it. Rent amounts are not general knowledge here, so some operators are probably low balling landowners with low rents, on the assumption that the renter will be treating them fairly, but that would be a rare occurance.

Rent does not seem to be based on cost of production or yield as much as on demand for land. When very little land comes up for sale it seems to keep rents high as there is no alternative.

[dmlfarmer]

To justify rents by an expected return on investment is wrong and both landlords and tenants who use percentage return are major contributors to unaffordable rents.

First, the purchase of land is an investment decision and in many areas has little to do with agricultural productivity. Urban sprawl, recreation, industry and oil and gas exploration, and extablished farmers using equity in owned land have driven land beyond the value which can be justified by agricultural operations on the land itself. While some greedy landlords may expect $60 rents because the land is worth $1200 at North Battleford is no more justifiable than a landlord expecting $180 rent near Calgary because land there is selling for $3600 and acre.

Second, over time land has increased in value faster than most other assests. It is the appreciation in value of the land which the expected return on investment should be sought, not the productivity of land. Returns from ownership of land equals returns from production PLUS returns from capital gains. A fair landlord recognizes this and will charge a good tenant a rental rate that reflects the productivity of the land, recognizing that a good tenant will protect and increase the capital value of the land.

Over time, the captial gains have typically exceeded the returns from rents, yet most landlords don't even want to acknowledge the returns from land appreciation. Yet they are very willing to seek higher rates based on higher land value when owned land appreciates. They have no trouble seeking 60 rent on an assumed value of 1200 even if they actually only paid 250 for the land.

For those landlords insisting on a 5% return on their investment, maybe it is time for tenants to start asking for a share of increase in land values. Afterall, if the owner insists on a 5% return, and land value increase 2% a year, he is actually making 7% therefore he should be willing to rebate 2% to the tenant.

Greed is the biggest factor in high rents landlords seeking percentage return are just as guilty as the farmer willing to overpay rent just so he can have more dirt to farm.

[Hopperbin]

Looks like Wigmore farms has an ad in the producer for farm help perhaps they are making that 7000 acre expansion again. They think they are number one when it comes to keeping employees so it must be an expansion.
Didn't they sell their land so they can purchase new machinery and rent more land? Then complain about the rising cost of rent, with rising rent prices the land has been given away. Grain farming is not a game for someone starting with nothing. Just like no bum off the street is going to go build a potash mine. Your not going to farm without some parent or long lost uncle helping out somewhere. What a farmer does with his wealth while farming is up to him. Myself I am opposite of wigmore, I bought land while maintained older equiptment. Worked for me now I get to make machinery purchases. Mbtrud when you pay more for rent you effectively also increased the cost to purchase that land.

[cottonpicken]

Trust me,when god was making the earth he stopped
and spent some extra time in mbratruds area.

[mbratrud]

Dmlfarmer, I agree that Landlords will take into consideration appreciation in land values as well as who is going to be a good steward of the land. Particularly around large urban centers.

I am simply pointing out that in a free market the market will decide and if you don’t like it and think land is such a good investment go buy some. Some of these comments are so hypocritical. This is like the consumer saying farmers are unreasonable for wanting to sell their grain for higher prices than 6 years ago, give me a break.

As for land on a steady rise in value tell that to the guys that bought in the late 70’s early 80’s that just in the last 3 years have seen land values go above their purchase price.

I lost some land in my area for $48 cash rent, sour g****s? No, my own fault everyone puts the number on it that they think works for him or her. Who am I to criticize them, I could have paid $48 and made money.

I guess my position on this thread is from farm size to paying rent its different strokes for different folks, and I think for someone to say someone else is doing it wrong without knowing all the circumstances around their situation is a little on the ignorant side. And I like to debate

[mbratrud]

LOL CP.... I can't disagree. And Hopperbin I am not saying I am paying more for rent I am not, I pay $35 or 18% crop share, and that’s why I am only 3500 acres... But I am also very conservative and a capitalist, and it annoys me to here socialist comments like rent is to high and its not fair wa wa wa wa.

Again my point is If I choose I choose to buy land and rent it out for as much as possible to whom ever I want, I’m just looking after my own interests. If I choose to rent I can pay what ever I want it’s how can someone across the fence telling me I’m doing it wrong.

I look at it the same way when land values drop, I don’t feel sorry for landlords when rent goes down I’m looking to buy.