$32 vs $62 Rent!

[checking]

I won't become emotional enough to bring out the tear blotter to pass around to those crying over high rents.

To them I say, who is it that is holding the gun to your head? Do you know how to say, "no."

Oh!, but I need the land to expand, and these greedy old farts won't sell their holdings, so I've got to pay the rent. Face up to it. That hamster wheel area you are in is not meant to gain you ground.

If your life's calling is to farm, and you are being squeeze out of your dream in a high value area, like every other smuck that wants a job, you pick up and leave to an area that can provide it.

[dmlfarmer]

Fair points mb. and I agree with your last comments.
All I am trying to point out is land values do not necessarily have anything to do with ag productivity therefore I disagree with anyone basing rental on a percentage of land value.
If however, a landlord insists on a fixed percentage of return on his investment(or current value of his land)then the return from appreciation during the rental period should be taken into consideration when calculating the actual dollars the renter has to pay.
As for your comments about a steady increase in land values, of course this has not happened. Land prices, like every other commodity have had peaks and dips, but over the long term land has outperformed most other investments. The long term trend is positive. Some guys paid too much for land at certain times, just like some farmers (based on economic analysis after the fact) have and are paying too much for rent. I agree, that is their choice. But their choice effects every other farmer and all I am saying is how can anyone rationalize rents based on land value. It does not make sense.

[hobbyfrmr]

DML, there is no need to rationalize what others are paying. Every farm has its own agenda. Some pay more because the kids want to farm etc. Around here its a battle of the checkbooks. The younger son of big farmer is not happy with the bigger farmer because he is greedy and will not give him a chance at land. All I can say is write a bigger check. Do not mistake greed for ambition. The largest farmer here is around 35,000 acres. I do not speak too frequenlty with him but he is a decent person. I suspect he has a 5-10 year agenda, and by 55, if it goes well, he will step off the stress train a multimillionare. If it goes badly, he shuts down, gives the stuff back to dealership, landlords keep their land for other farmers to rent again. I think this would be called a "correction". I am betting he will do well this guy is a very good manager. I dont agree with the trend because is displaces people off the farms and communities. Then again, the big farms employ many locals, and pay good rent to landlords. Its not total greed, ther is some ambition and risk mamagement involved. It was a very bitter pill to swallow when I realized I did not have the checkbook necessary to accomplish my early ambitions.

[wd9]

$62 per acre is not expensive if you are pharming at $5000 per acre. 70 bushels of $2 barley makes the rent not feasible. But shouldn't the market equalize these things out? If there is no one to rent at 60 or 70 or 120 or whatever, the rent will come down. As it is now people are willing to pay almost anything for it so it goes up. Simple economics.

It's called supply and demand and will always adjust accordingly.

[mbratrud]

cheers! wd9

[SASKFARMER3]

OK maybe Ill join the dark side when I get to 65 and rent out our land. But till I get to 50 or 60 owned quarters No way. Ownership wins. Even in the USA or Europe. Three four five generations off the farm, still own the land. My grandfather had property up until his death still in Europe. Name one Greek that doesn't still have something back home in Greece. Simply own it is way better than play farming.

[hobbyfrmr]

Agreed SF3. Ownership will be the best long term strategy. The guys who bought and struggled for a long time are now renting out to the ambtious farmers around here. They are now seeing the reward of ownership. My friends with jobs are buying farmland to rent out. Some farmers cannot afford to buy but they sure will rent lots of land to pay for depreciating stuff like machinery. Then, other friends of mine are renting out family inhereted land, its pays their taxes and a winter vacation, why not. Its a gift that keeps on giving!!! They live away and have jobs in the work force, they have learned about low wages, budgeting income, business/money, if $32 is good, then $52 is better. The surplus will pay down their city house mortgage faster. Simple grade 6 math. No hard feelings, not always driven by greed, just math.
On the farmer side, renting land is perfectly sensible when they are profitable.

[ado089]

I think this year will show who knows how to run machinery and who knows how to run a calculator.

[lakenheath]

What about supply and demand SF3?

Supply and demand is the drive, not greed. Greed is very abused word in agriculture. Some of people tossing that word around should look in the mirror first.

If there are lots of farmers interested in a parcel of land, then it is going to go for higher then it's so called "FMV".

If there are few farmers interested in a parcel of land it is going to go for less then it's so called "FMV".

I rent some land for $15 per acre because nobody wants it. I also farm in an area that land goes for $43 dollars an acre that is only 20 minutes away. Why? Because there are more farmers interested in the $43 land then there are in the $15 dollar land.

Simply supply and demand. Not greed. Not stupid farmers that don't know how to operate a calculator. Just farmers willing to pay what the market dictates.

Some of you need to take a basic coures on economics.

Widgets guys! Simple basic widgets. Some will overpay for widgets because their factory is more efficient and they can pull it off. Some will overpay for widgets because their grandpa's factory is filthy rich and the grandson wants to expand the factory for his future generations and has so decided that the price he pays for widgets is as such justified.

Like it or not agriculture is a business and it practices are driven by business principles, unlike in the past. Get use to it.

I am not saying it is good or bad, i am just saying it is a reality. But a lot of you put a twisted spin on it.

[lakenheath]

Wow, somebody to actually write something meaningful, good job Lakenhealth.

For the rest that are whining about how bad things are, (and maybe some will have good reasons) remember, if you are one of the those that jumped on the "interest only" program with FCC or your bank are you on the road to ownership??

If you rent or buy its a decision for that operation to make, not an open forum to debate. Some operators will do extremely well renting land, others will not.

If you have the cash, buying can be a good option. Traditionally land values continue to rise but what if they don't or even decline? Then you could be stuck with a stock you can't sell (like SWP shares a number of years ago). If you have borrowed and carry the loan for 25 yrs or more...what did the property really cost you? And yes, I understand equity growth but what I'm saying is if you didn't buy land, you spent your money somewhere else which potentially could have created equity of equal value.

Where I farm, land is very good quality. Rent is anywhere from $45-$60. Demand is influencing the rents as there is not a "surplus" of available property.

The well managed farm operations that are renting are not doing it for tax or because they are not profitable. If that is the circumstance, imagine what's happening to the property they own...I'm willing to bet the equity is declining and that's a core issue that needs to be addressed.

[SASKFARMER3]

Why over pay, simply farmers are their own worst enemies. Hell I know I grow more than moose-jaw area year over year yet they pay huge rent in that area, No oil wells.

[lakenheath]

SF3 could you define the exact point where one overpays for land rent. Is overpaying 40 or is it 42, maybe 43 or do we have jump up to 47, no it must be 50?

You seem to know so much, why don't you set the market value of land and we will all just follow your lead. In fact we all the bid the exact same on a parcel of land and just accept whomever the landlord chooses to farm it.

You would be kind of like the CWB of land rentals. You tell us what we have to pay so we are all equals and nobody is overpaying. You would be the protector from our own stupidity and lack of knowledge.

Do you grow the exact same crops as the Moose Jaw area? Do you know what all land rental values are in the Moose Jaw area? Is demand for land in the Moose Jaw area the exact same as your area? Or are the farmers in the Moose Jaw area just stupid. No maybe they are greedy!

[lakenheath]

The problem is, SF3, is that you have a little bit of knowledge and you use it dangerously. You spew from your mouth comments that don't hold water. Generalizing about "overpaying" with little objective backing.

Let me illustrate a point for you. Maybe you can learn something.

Two farmers farming 8000 acres each and both of them are interested in renting a parcel of land. One has no debt and one pays $75,000 in interst to the bank each year. They both have the same equipment and men and both grow the same crops. Yet the one with debt has poor help and his repair bill each year on equipment is $50,000 higher then the no debt farmer. Aside from those 2 differences their farm operations or identical on paper.

Now let's say the "market value" (as set by SF3 and all his knowledge) is $35 per acre. Do you think that one farmer has the ability to "overpay" for that land and still make more money then the other guy?

Or do we just completely ignore the fact that the one farmer has a $15 per acre operating advantage over the other guy and call hime stupid, greedy and has the inability to operate a calculator because he is bidding $40 per acre and "OVERPAYING".

How dare he be so stupid!

[ianben]

Here in the UK our farm is part of a farm business survey which takes all our figures and compares them with 45 similar cereal farms in our area.

We get the results with just our farm identified and the others anonomous.
There is a cost given to family labour and a rent alocated to owned land.

I hoped to learn where I could improve or whether a different way of farming was more profitable.

Results just show how different 45 farms are and show any combination of systems and costs can work.

Figures are in £ and Ha but dont think that matters

Total output ranges from highest £2420 1st to lowest £534 32nd, £1448 45th, £1904 22nd, £1798 39th, £696 19th.

Labour costs highest £685 21st to lowest £2 32nd, £114 1st, 206 45th.

Machinery costs £904 39th to £110 11th, £404 1st, £420 45th.

Rent and occupiers repairs £476 43rd to £120 1st but £148 44th, £191 45th, and £294 6th

Interest payments £53 1st £57 2nd and £0 44th £7 45th. max £125 39th, the guy with all the machinery.

The last 12 farms show a loss yet six have no borrowings and only one shows above average for rent and repairs.

[SASKFARMER3]

Laken I am just saying why over pay when grain prices are dropping. Yet some do. Good for them I dont believe in over paying yet the farm expands every year. Wow simple be tight enjoy life. Over spending never ever wins.