Who Really Owns The Farmland? 


f

From GENE LOGSDON

The general queasiness among farmers right now over low grain prices and whether we are headed into another big dip in land values reminds me of a story. Herb Walton, long gone now,  was a local farmer I much admired years ago. He was truly an original thinker. After World War II, the equipment manufacturers weren’t making bigger tractors fast enough to suit him, so he bought a couple of army tanks to pull bigger machinery he had coggled together himself. He saw big surpluses coming in grain production and put out fairly large fields of cabbage for awhile, something unheard of in our county. I got to know him personally when organic and natural farming methods were first being bandied about in our neck of the woods. Unlike most of our farmers, he was right there at those first meetings, wanting to hear all about it. He told me something once— this was in the late 1950s— that I have never forgotten. He had bought another farm to add to his holdings, farmed it according to all the latest approved methods for ten years, and then sold it. “This is the truth, now, Gene,” he said. “I made money buying and selling that farm, but as for all the money I made farming it those ten years, I might just as well have left it lay there idle.”

I think maybe that’s true of farming in general. High farm prices and competition for other uses drive up land costs. Farmers borrow money recklessly to get into the good times game. Then surpluses cause prices to fall. The big borrowers become the big losers. Those  who operate mostly in the black with inheritance help can then buy the land during recessionary dips, using mostly saved money, and become the big winners.  Over and over again.

The Wise Men of economics say that this time around, there won’t be as  many big losers as back in the 1980s because farmers are not as deeply in debt. I wonder exceedingly about that. They may not be as deeply in debt from land purchases but renting is a form of borrowing. In this case farmers unable to buy land were renting big time, driving up rental rates. Now they are in trouble.

A look at the statistics shows just how big rental farming has become. In Pennsylvania, for example, 85% of the land is owned by non-farmers. In Iowa, the latest figures I have, from 2007, indicate that 60% of the farmland is owned by people who are not farming. Some 20% of Iowa’s farm owners do not even live in the state. It is safe to say that most of the farmland in America is being farmed by renters. This is precisely what immigrants from Europe were fleeing when they risked their lives to come to America.

In some cases renters and landlords this time around are trying to work out flexible lease agreements where rental rates rise and fall along with crop prices.  But landlords have seen their taxes double in the last few years, and they are not all so agreeable, especially when there are still high rollers around who are willing to pay the high rents, figuring they can hang on until crop prices are good again. So what is happening once more is that smaller operations are being squeezed out, just like always. In its recent Oct. 1 issue, Farm and Dairy, a weekly newspaper, quotes a retired farmer who rents out farmland in three states and who is unwilling to lower rents because “he’s concerned that the savings [to the renter] would only help the equipment and seed companies. When farmers are making more money, the ag companies ‘charge accordingly,’ he said. ‘I think the ag companies step right in and take it’.”

I doubt that assessment is fair although I am tempted to believe it myself sometimes. Everybody involved takes advantage of high farm prices and everybody suffers when the good times fade away. Equipment dealers right now are hurting as much or more than farmers. They have been selling pieces of equipment that cost as much as a whole farm did back in the eighties and the farmers who borrowed to buy that machinery are in just as shaky a situation as the farmers who borrowed to buy land in the eighties. So nobody’s buying. The only bright spot is the market for horse-drawn machinery. What’s that tell you?

After watching farm profits rise and fall for so many years now, I become more and more convinced that farming is not really a business in the capitalistic sense.  Corn grows at its own sweet pace. It can’t hear the relentless tom-tom drumbeat of compound money interest. Humans don’t own the land. Nature does.
~~

10 Comments

Dad, Grandpa, and I are kind of oddballs in a sense as far a row crop farmers go. We own right about 80% of what we farm. That’s way above average these days. And after losing 250 rented acres in 2012 that we had farmed since the early 80s, I rather like owning more than when rent just for the stability factor. There is a fair amount of rented ground in our area going for $400/a or more. We don’t pay near that for the ground we rent. I don’t know how you could make it work to be honest even back a couple of years ago with $7 corn. Of course there are those who might pay that high price on a three year lease and do nothing to maintain the fertility leaving the next guy to deal with a farm lacking in nutrients and a landlord who still thinks they should get $400. I was born in 1980 so I’m not old enough to remember the crisis of the 80s, but I know the big difference now is we don’t have double digit interest rates like we did back then when things hit the fan. I’m being cautious, but as a younger farmer I’m looking at the leaner times we are in now as a time to grow our farm a bit if the right opportunities arise. I just bought 46 acres less than 2 miles from home base, so I’m pretty happy about that. There are some sales coming up in the next 3 three weeks. I’d like to pick up some more acres, but I’m in a pretty good financial position right now since I came back to farming full time in 2009 and I don’t want to spend myself into a bad place.

I came to the same conclusion as Mr. Walton, after wasting 15 years back in the seventies and eighties thinking it mattered how smart you were and how hard you worked. The important thing is how much equity you either inherited or married, or both. It’s called capitalism for a reason. I’m always shocked when someone explains to me what a great business man Donald Trump is. He inherited $40M back in the seventies. Go to an Edward Jones store, and have them work out the actuarial tables if Mr. Trump would have leveraged his inheritance on farm land, and over the years refinanced every six years to cash out the equity and reinvest in more farm land. Don’t forget to add in the subsidy checks that were covered by taxes paid by working people, and the cash rent checks from the farm land. In the eighties, the largest growth sector in “agribusiness” was in the farm management business: people bought/inherited farms, and hired these companies to find farmers to plant crops and raise livestock, and the companies did the bookkeeping. I suspect that if a chimpanzee had inherited $40M worth of land, it might have as much equity today as Mr. Trump.

Was there a reason why you didn’t mention how much farmland is owned by “non profits” such as churches and universities? They also employ these farm management businesses.

The difference though between owning and renting is that eventually, I will get over the hump. Renting, the hump would always be an obstacle.

Hmm. The farm payment on my land makes it very hard for me to hustle up capital to actually farm. Between principal, interest, taxes, insurance and animal feed, t’s a tough hump to get over.

I always read your posts with interest. We currently have 99 ha in New Zealand which was farmed by my grandparents and parents, then sold by my brother. We bought it back at market rates (from the people he sold it to about 10 years or one property cycle later). We are now looking at borrowing huge money to buy 145 ha next door. We are diverse and try to be low input, but still need to be reasonable scale because of the quality of land we have. I am looking at value added to ease the load. The scale of the debt scares me, but I just hope the kids will appreciate it if we can get it debt free (again) – it is the debt repayments that kill it, we both work off farm to help with the mortgage, which leaves us always chasing ourselves. If we buy next door one of us will have to give up and run the place. Hopefully it will work. Not a day goes by I don’t wish things had been different in the succession from our father – who had a big debt-free farm but lots of kids.

Big debt in any business is economic slavery, but seems very historical and familiar in the south – on farms. I sharecropped for years until finding a local small farmer ready to retire and willing to owner finance half of his place. It was the only way I could have ever bought a little speck of the rock, for the speck of time our biological lifespan is. Yes horse drawn equipment is holding value, (avoiding the scrap yard)that includes brand new Amish manufactured equipment that is selling at a reasonable prices that generally doesn’t’ require financing or borrowing to own. After all the Amish are the only sector of the agricultural population that is actually growing in numbers. Staying small, diverse and low input, means organic – naturally and it is generally more human labor intensive. I don’t think there are easy answers or easy ways to farm successfully. It takes very special people to survive on the farm. “They’ve took the culture out of agriculture and put business in… ” ~ Jason Rutledge

I’m being a very evil Betty, as I sit here gleefully hoping all the farmers go out of business and quit killing my bees! Actually, I want the farmers to stay in business, make a decent living, not have to spend so much on inputs, and not kill my bees. It’s most likely too late for my bees anyway.

I believe anyone farming that does not own their own land or at least some of it will go out of business farming conventionally. I saw it in the early 80’s with that land boom and bust. The guys that owned some of their land outright and were able to slowly pay down debt made a living. I spoke with an elderly lady who’s deceased husband farmed his own land, lament her son who now has the farm is over $2 mil in debt and does not know how he sleeps at night. Life is just too short for that kind of stress.

We are all just renting space on this earth for a minute speck of time.

Again! KUDOS to you, Mr. Logsdon. My great grandparents were sharecroppers near Zanesville, OH. Bought their first farm near Coshocton, OH with a mule and a rifle. That classic tale that people moved on after they’d ‘played out’ a farm, so my ancestors were able to afford it, farm it the hard way to bring it back. Then my grandfather did the same thing, buying a played out farm and doing the right thing. My mother and her sisters remember going out to the pasture and pulling up the mustard to make the pasture better. I’m so happy I have my place here in the boonies. Gotta scoot, might frost tonight. Gotta cover the last of the peppers and tomatoes.
marsha

Please leave your comments...

Name and email address are required. Your email address will not be published.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

You may use these HTML tags and attributes:

<a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <pre> <q cite=""> <s> <strike> <strong>