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Farmland rental a give-and-take proposition

April 10, 2007|by JEFF SEMLER

As you can imagine, I get a lot of different questions in my line of work. Some are easy to answer and others are more difficult.

So you don't get the wrong impression, I don't know all the answers. Some of the time I know the answer, other times I must refer the person to an expert. Still other times I do research and "get back to you."

Certainly, interaction with the public is a very enjoyable part of my job 99.9 percent of the time. There are times when county residents think I have some sort of imputed powers - which I don't possess.

I am in the education business and not enforcement or regulation. However, even when I get complaints, I feel compelled to try and educate the caller if the situation calls for enlightenment.

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Many times it is most appreciated. I remember last fall when a caller alerted me about low-flying aircraft. I related that the farmer was having a cover crop planted by a method known as aerial seeding. The caller concluded, "Well, that is a good thing," and thanked me for my time.

One of my least favorite questions, however, is what the rental rate of farmland is.

There are many reasons why I don't like that question, but the main reason is because it is highly variable. The variables are soil type, fertility and landlord/tenant responsibilities.

At this point if you are a landlord, you should probably stop reading.

My contention is farmland rental should be nil. Before you run to Mail Call, hear me out.

First, when someone performs a service, they normally get paid. For instance, if you have a lawn service treat your lawn, you pay them for that service, for you getting a lush green lawn.

The tenant farmer does much the same thing. He keeps land open, in high fertility and the weeds under control.

This is a service to the landlord and the tenant's own pay is the sale of his crops. While the tenant is caring for the land, the land is appreciating and the landlord will reap the benefit of this appreciation.

If you say, my tenant doesn't do that, then you need to have a talk with them. They are stewards of all land, both owned and rented.

Secondly, by farming your land, your tax assessment as agricultural land is secure - rezoning by your own petition or that of a government body withstanding.

Don't get me wrong, there are a great number of excellent landlords out there. There are a few scalawags, just as there are farmers that are less responsible.

My main point here is, oftentimes landlords feel it is the tenant's responsibility to pay for the landlord's costs of owning land, taxes and insurance, for example. That is what is known as the cost of owning land and those costs will be more than covered by the land appreciation, even if it is your heirs that reap that benefit.

A caveat here is, buildings are an exception, since to the landlord, this is a depreciable asset and there are maintenance costs. I look at this as similar to renting an apartment or office space.

Now is when the farmers might want to stop reading.

Farmers need to remember the old saying, "If we don't hang together, we will surely hang separately." I hear about neighbors out-bidding neighbors for land that the one neighbor was already renting. I have also heard of bidding wars.

Recently, a piece of farmland came up for rent and I understand the rent was extremely high.

The problem is, once others hear the rental rate, they will think their land is worth that, too. I know the price of corn is up right now, but it has been low for many previous years.

While rent goes up now when corn prices are high, I doubt the rate will drop when the price of corn drops - as it will.

The moral to my tale today is, walk a mile in the other man's shoes. While crop prices are on the rise, prices have been low for a while.

In addition, costs are rising. Fuel and nitrogen fertilizer are approaching record highs.

So, tenants and landlords need to keep open lines of communication and work together for everyone's benefit.




Jeff Semler is an Extension educator, specializing in agriculture and natural resources, for the University of Maryland Cooperative Extension. He is based in Washington County. He can be reached weekdays by telephone at 301-791-1404, ext. 25, or by e-mail at jsemler@umd.edu

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