Renting Land: Think Twice About Farmland Values

11 November '13

'Farmland values', as in the price of farmland, is a hot topic. This morning, yet another day began with a news headline about ‘soaring farmland prices.’
There are some powerful perspectives about rising land prices. High values and other sector trends have many feeling like the agriculture industry is heading for crisis, and like the family farm is facing extinction. 
Yes – the demographics are shifting tremendously. Almost half of Canadian farmers are over the age of 55. 
Yes –  fewer young people are entering into farming, and only 8% are under the age of 35.

And yes – there are trends towards fewer farms, larger farms and numerous barriers to entry and success for small scale farmers. 
For all the attention farmland is receiving these days, it amazes us how little discussion there is about land leasing. In the midst of these trends, land rental is rising and this warrants more attention than it’s getting. For entry level or growing farm operations, rental arrangements are more realistic on the risk-load and cash flow than land purchases. But there are even more widespread benefits of leasing. 
When it comes to farmland values, land rental opens an entirely different sphere of discussion that goes well beyond price.  Land rental arrangements are highly relational, and these relationships reflect what we value, along with, and in some cases in spite of the monetary value of land. 
We want to shine a light on the importance of values, as in what we value – as rural landowners, as farmers, as consumers, and as investors. 
If I am an aging farmer and I decide to sell my land, my motivation is heavily, if not primarily, influenced by the best price I can get. I may have opinions about what the buyer should and should not do with the land once they gain ownership, and in some cases I may choose to forsake the highest price in order to sell in alignment with my values.  But personal values have an even larger role to play in leasing arrangements.
When it comes to rental, landowners retain ownership of their asset, and have a vested interest in who their tenants are, what they do, and how they do it. Not only can these factors skew the relationship between land value and rental price, but these factors influence the future value of the land itself. If the highest rental price comes at the expense of good farm practices, the land’s value diminishes.
Land rental prices certainly follow land values, but the rental price is just one of many important considerations.  For every value relating to farm practices, food security, sector sustainability, environmental stewardship (or you name it), there’s a value that can surface in land rental explorations, negotiations and agreements.
From our perspective, (as a young farm family ourselves), we understand first-hand the dynamics and considerations of renting. We recognized critical trends converging within the farm sector, and saw an opportunity to innovate with a website that would facilitate land rental matches. But it was crucially important that our model supported the full breadth and expression of values from both parties. is not an auction. Yet, we are so much more than a classified ad. We’re about helping the farmers and landowners find the best matches possible.
Farmers get equal access to find out about rental opportunities, and our process lets them highlight their unique competitive advantages and celebrate what they have to offer. 
Landowners benefit from more exposure and price exploration, without the restrictions or pitfalls of a ‘highest price wins’ system. 
Landowners can use to assess the value of their land, attract interest from a variety of potential tenants, and make a choice based on what they value most…and that’s worth talking about!

Leave us a comment to share your opinions.