Renting Land and Lease Rates

Good discussion topic. We rent most of our land. All rented land is straight out cash rent with contract from yearly to multi year depending on landlord and our crop intentions. It is always difficult to set rents because if you give money on a good year many landlords expect it for eternity. We try to be fair with what we pay and reward owners that do improvements on their land. Many are decent but have ran across a few that were just out to make an extra buck. We are lucky as we have a good reputation and most of our new landlords come to us because we take care of the land we rent

Kevlar, you got my strange mind thinking as the first thing that popped into my mind when you commented on the hundred different ways one could please a land lord, King Pin and Woody Harrelson puking in a toilet after his favour was given to his landlord

Think this was mentioned before either here or on old thread. It doesn't matter how nice or if you do xtra stuff for landlords, when it is time to sell, and if their kids are involved, everything you have done for them goes out the window! And yes I'm speaking from experience!

Buying land does not pencil at current values unless we continue to see good crops, inflation in grain prices and stay out of the trap of expensive equipment. Clearly for someone to buy $5000/acre land and pay it off in any reasonable timeframe it requires subsidizing from other assets, crop failures and interest rate hikes don't pencil into the plan of long term mortgages. So given that I don't feel land rent can be expected to match the cost of owning land, simply because you don't have any guarantee that you will have it long term. 

Whether people admit it or not rented land does not get treated like owned land by-and-large. The statistics on low phosphate levels have a correlation to whether it is rented or owned in a general sense and that affects production levels a lot. Who is gonna build fertility on something you might not farm a couple years down the road???

Maybe I'm the wrong person to comment on rental agreements because I rent under 5% of my land base, but I have always treated my rented ground as good or better than my other stuff. Been farming it for 25 years now and I think a good relationship of trust and taking care of their asset has worked well. I will bonus on good years and even one year when we didn't get a crop in on a wet spring the rent was discounted. I'm a firm believer that the person taking the risk of growing the crop needs to benefit the most when things go well, but the people that own the land are still involved in farming and should share in the good years somewhat as well.

This year is especially weird because crops were very variable and depending on whether a guy had pre-sold crop or pre-bought inputs things could look way different! Every landlord sees that spot canola is $24 though...

Just thinking out loud, The biggest problem is trying to establish a relationship with the ex farmers children who are often a few years from retirement themselves and unless they had a decent pension that land is there chance of post work freedom!
What does this way of thinking teach our children though. I was lucky to have old farmers teach me the value of owning land and holding on to it. In the long run it has worked out to maybe live with a bit less and insure my land is paid off and have a comfortable retirement with land rent supporting my family. I worry the current generation has lost this idea and I think the liberal government sees this wealth as an opportunity to tax the heck out of your estate. The capital gains exemption I feel is a sacred credit and should be increased due to higher land costs.
I think if capital gains exemption were decreased , I think renting land might be even more popular, or and a big OR the cost of land would plummet.
Sorry to expand , but I have friends who own land and dont quilify for capital gains and have a huge tax bill coming when they sell.

So if a land owner who does not farm and does not qualify for capital gains, IS IT POSSIBLE TO HAVE a rental agreement were the land owner legally pays the farmer a custom fee to farm the land and a pro rated bonus happens for the farmer if the yield is over a certain pre determined amount?

The reason I suggest this is when I bought 600 acres 2 years ago, the son of the farmer I bought from paid around 1.7 million in income tax on the sale of the
land. He did not have capital gains exemption. I obviously tried to convince him to keep the land but he needed the money for retirement.
Its a complicated subject and usually its a cash grab.
The coffee shop talk does not help this situation usually!
What do you guys think of the hybrid custom farm idea? Does anybody do it this way?

I agree totally kenmb, My lawyer had to withhold that amount , because it gives the seller a reason to pay the government its share. I was stunned how much it added up to. Granted he was an american citizen and had some extra fees we dont pay. Still , my relationship with his father was one of the guys that taught me to value the land. His son invested in condos in florida and had some major hurricane damage with poor insurance is what his dad told me. My land lord gave him a quarter of land in Iowa and he sold it right away too.
I hope I never run into that situation where I have to offload assets to pay foolish debt, or hope my kids are smart enough to manage money properly. One older farmer who I look up to as a mentor said rich families hold onto their land! That is debatable to some.

I also want to suggest the location makes a huge difference. It seems like around central MB and around Winnipeg we have a fierce competition. Is it like that around Regina and Saskatoon or Calgary to edmonton? I think if my wife didnt have such a great career in Winnipeg it would have made sense to farm elsewhere!

Holy , on the weekend I was browsing at some equipment and could not believe the cost increases and was thinking its going to get a lot tougher to up grade!!!
maybe impossible. Yikes . Imagine the cost of the driverless tractors. I think it will still make sense to pay a guy 40 bucks an hour to drive combine or do tillage!lol

Around here land just keeps reaching new bench marks. I remember when land first hit 5000 an acre people said it’s crazy he’ll go belly up. Then it was 6 and 7 now we are seeing 10000 for small parcels of decent land but nothing special. But as they say they aren’t making any more land. What is sad is any young or beginning farmer is pretty much sol unless you are born or marry into farming