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AgWeb Editor Greg Vincent takes a big-picture look at agriculture and current events.

Honesty and Cash Rents

Apr 09, 2010
USDA’s annual County-Level Cash Rent Survey was released last week and it has sparked a lot of controversy in the industry. So much so, that it created a great discussion at the Farm Journal Media Editorial Summit earlier this week and we recorded a conversation between some of the participants in the room.
 
Mike Walsten has already discussed some of the concerns he has with the survey in his blog Your Precious Land. Walsten discussed these concerns with Farm Journal Economist Bob Utterback and U.S. Farm Report host John Phipps, who has discussed this issue a lot in his blog, Incoming. John even goes so far as to say some respondents may be “gaming the system” by not being 100% truthful in their answers to the survey.
 
John also points out that there is very little incentive for even replying to the survey at all. And judging by the letters I’ve received from those of you who have watched or read the report, you likely agree.
 
Here’s a sampling of a few of the responses:
 
Brad Starr from Indiana writes:
Producers continue to bid out any profits generated in 1 year to expand and project future profit streams.
There are groups who work to leverage size and are bringing in outside money to allow expansion to happen. This has occurred in the livestock business and is taking shape in the crops area now. What occurs is the one doing the work becomes a contract laborer in his own business for the right to continue to brag of their size. Expansion is outstripping Capital growth potential.
We are seeing operations whose business model is to own nothing. It exists only for the sake of moving dollars around.
Where as we may not like it, that is beginning to grow and will expand exponentially.
 
The second observation, in reporting cash rents, we are driving up rents by the mere reporting. My landlords read of the rents and want more because that is what is reported. There is no correlation of production verification to support values. ie-$/bu produced.
The landlords then complain their property taxes are going up and they need more rent to offset the tax. The tax is now based on cash rents being paid. Who is driving who? Taxing units get more from the land, the owner passes it through in terms of rent collections, and the producers "MARGINS" are weakened.
 
I spoke at a Top Crop seminar a few years back and was asked my thoughts of rising crop prices. I told the audience that will not help producers but only make their return on investments shrink considerably. I still believe that to be the case.
Each producer has a target amount of dollars they wish to receive and will get there through different means.
 
One of the best articles written this winter revealed a case where building a bin returned the producer more than renting another 200 acres of higher cash rents. Message?
 
Another unnamed farmer says:
We are like everyone else---looking for the great deal. Example (and I'm sure you already know this) mom and dad (in there older years) rent ground out to neighbor for $105 an acre for the last 6 years. The older couple's kids are all far away and visit on holidays. Do the producers tell the family we are going to raise it to $200. NO. Its a dirty little secret and know one needs to know.
 
Publishing rents only gets owners thinking and producers don't want that. It happens allot including me. Oh and most times it not a neighbor thing just some one with newer equipment and the owner has a sense of security about payments and maybe brag a little about who's farming their ground.
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COMMENTS (1 Comments)

Anonymous
The rental rates that were published are a joke. It shows Illonois is still ahead of Iowa, but not Lyon and Sioux Counties. Rent is bringing anywhere from 225 to 400 plus on the open market, no family deals here.Hence why ground is still bringing 6000-8000 an acre.
6:19 AM Apr 12th
 
 
 
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