Farm Cash Rent in Ohio – That Fickle Subject
NOTE: No podcast today. Just a good old-fashioned article.
If I had a dollar for every question I get about cash rent (also referred to as cash lease) I’d have enough money to take my entire staff out to a nice lunch . . . twice.
Contrary to popular belief, I do not tell landlords “You should be charging $X dollars per acre.” Nor do I tell farmers that they should pay $X dollars per acre. Between peer pressure, media reports, and family attorneys, there is enough information to fuel the cash rent frenzy without me getting involved. Yet I seem to be involved quite often, probably because OSU conducts cash rent surveys.
Here’s how a typical conversation goes.
Caller: What’s the cash rent for (fill in the blank). (the blank is either Van Wert County, a township, or a even a specific farm).
Andy: I don’t have detailed cash rent information specific to Van Wert County, but I do have data that is collected annually from ag lenders, FSA employees, Extension employess, farmers and landlords. This data is summarized by Barry Ward and available online (at which point I refer the caller to the online document: http://ohioline.osu.edu/ae-fact/pdf/Cropland_Values_Rents_07_08.pdf).
(I continue): Ohio survey data indicates that cash rents in the “average” cropland category equal 3.5% of land value. Rents in the “top” cropland category equal 3.7% of land value. (Every caller considers their land as ‘top quality’ , but I digress)
At this point the caller and I discuss land value, which has risen sharply over the past several months, and we do some multiplication to get ‘a number’. From that point I say: “This is a starting point for negotiation, but understand that cash rent determination should be based on many factors.” I also add, “Would you consider a flexible arrangement for cash rent, to share the risk with the farmer?” But frankly, most individuals that contact me want ‘a number’ that they can count on, and are not very open to flexible provisions.
I’m thanked for my time, and the call ends. That’s 99% of cash rent calls in a nutshell. I’ll save the story of the other 1% for another article.
To review flexible provisions with cash rents, I suggest reading the excellent article by Fleming and Breece at http://ohioline.osu.edu/fr-fact/0002.html or the North Central Publication http://www.extension.iastate.edu/Publications/NCR76.pdf.