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Update: Renting land & losing money

Jeff Caldwell 05/11/2012 @ 11:01am Multimedia Editor for Agriculture.com and Successful Farming magazine.

If a farm next to yours -- a piece of ground that you've been yearning to get your hands on -- comes up for rent, how far would you go to get it? Would you go far enough to make it a financially losing venture, even temporarily?

That's the reality in today's land rental market. Land's in tight supply, prices are high and it's tougher than ever for some farmers -- namely those just starting out -- to get ahold of land in some areas. So, in some cases, renting it for a higher-than-sustainable price in the near term may be the only way to get it in your hands, some farmers say. Still, others see the circumstances as just that: Unsustainable and dangerous to future potential profitability.

"I have had one rule of thumb in my 30 plus years of farming. If the farm next door comes up for sale try to swing buying it and if ground in my immediate area comes up for rent aggressively go after it. I would be one of the guys willing to lose money renting the next door farm," says Agriculture.com Farm Business Talk frequent contributor dennymal. "It can be a very fine line between losing and making money. Getting 10-15 extra of corn or 5-7 bushels of beans , or a 15-20 cent higher price can make quite a difference. Plus, once you rent it, and farm it for a year there is always the chance of renegotiating with the landlord."

Some young and beginning farmers see the risk of an initial loss worth it in the long run, as long as it works out longer-term. "I would do it as long as it was a year to year thing it allows you to get your foot in the door," says Matt Duncan, farmer from New Boston, Illinois. "I’m a young guy but I’m not afraid to stick my neck out, if I fall off the saddle I have a long time to recover. But I don't know to many bankers that would support the idea."

But, is it worth the initial blow to profit potential to take such an action? Other farmers don't see it exactly that way.

"Let's just man up and compete in the real world like independent businessmen. People go out of business due to various aspects of business," adds Farm Business Talk veteran advisor kraft-t. "Such are the pitfalls in the real world of farming."

Adds Rod Tangeman, a farmer from Seneca, Kansas: "It all depends on if you will get the chance in the end to buy the property otherwise it's a losing game. You spend money to make money, not spend money to lose money."

   

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