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Published February 18, 2013, 10:52 AM

Dipping into a two-sided debate

Setting 'fair' farmland rental rates not an easy task

By: Jonathan Knutson, Agweek

A nice, earnest man phoned me a few weeks ago to ask for my help. He’d read one of my news articles on farmland rental rates and wanted my thoughts on how to set the fair rate for land he owns.

No, I said, I’m a journalist. It’s not my place to advise you, nor do I have the expertise to do so. Talk with your local extension service agent; he or she can help.

It was just one call, of course, but that landlord is the tip of a large iceberg. Many farmers and landlords are struggling this winter to negotiate a fair rental rate.

Determining rental rates can be thorny in the simplest of times. The task is even tougher now because of drought and volatile crop prices. We can only guess what 2013 yields will be like. We can only guess what will happen with prices. All that guessing clouds what landlords should ask and what farmers should pay.

Most landlords and farmers, I think, make good-faith efforts to come up with realistic offers. But there are exceptions. I’ve heard too many horror stories from county extension agents and others in ag. Stories of farmers expecting to pay a price that was fair a decade ago but that’s absurdly low today. Stories of landlords expecting to receive a price so high that the farmer or tenant would have little chance of turning a profit.

That’s not an indictment of farmers or landlords en masse. It’s a recognition that some folks in both camps need to try harder.

As for farmers and landlords in general, I’ll say this: People who own something tend to put a high value on it. People who want to rent something tend to put a low value on it. Inevitably and unavoidably, those conflicting tendencies affect land rental negotiations.

Consider both sides

Whenever I hear about farmland rental rates, I think of what impartial experts say: There are two sides to the issue. Landlords should be compensated fairly for their property. Farmers should have a reasonable shot at turning a profit.

Yes, there are honest differences of opinion of what constitutes “fairly” and “reasonable.” What can’t be disputed is that both the farmer’s side and the landlord’s side should be considered.

I’ll pass along something else from impartial experts: To be a fair offer, the person making it would need to be willing to accept it if he or she were on the other side of the negotiating table. Farmers, would you accept the offer you’re making if you owned the land? Landlords, would you accept the offer you’re making if you farmed the land?

One last thought about the nice, earnest landlord who asked for my help: I hope he and his tenant arrive at a price that both can live with.

When all is said and done, that’s what really matters.