Thursday, March 29, 2012

Crazy Cash Rents

Progressive Farmer:
Put cash rent on the auction block and normal, rational farmers act like they're buying a Picasso, not the rights to farm a piece of flood-prone or sandy soil for only two years. That was DTN's Elizabeth Williams' impression after attending a weekend cash rent auction in Mason City, Iowa where many of the 300 people attending ignored blizzard warnings to observe a new phenomenon for Iowa: the public rental auction. (See her story today in Top News or on the Farm Business page).
As Elizabeth reported, several parcels brought $520 per tillable acre, but most of the winning bids ranged from $425 to $490. Several farms came with warnings that they were rated a crop insurance risk and paid surcharges for coverage. So by all accounts, that denotes a huge premium given that USDA surveys show farmers in Iowa's most expensive cash rent county only paid an average of $235 an acre in 2011, according to USDA. (Keep in mind that "average" factors in below-market rates charged by elderly grandparents and other blood relatives.)
A handful of landlords also solicited renters this winter by posting newspaper ads asking for bids on their Iowa farms. One of my Iowa friends--a loser at $465 an acre in the newspaper auction battle--thinks they can make high rents pay if they have long-term leases and reap the benefits of being able to spread hog manure (a potential $75 value versus the commercial stuff). Cash grain operators have trouble competing.

$520 an acre?  I've got 160 tillable acres to rent at those prices.



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