It’s well known that land prices have moved substantially higher the past several years. Whether the sale was private (between landlord and tenant), or public (auction), the details of the transaction are recorded at the local courthouse so the final sales price is readily available to anyone. Information on the amount of rent being paid by farmers, on the other hand, is generally more difficult to obtain. Yes, you hear about an occasional cash rent auction (usually conducted by public entities like airports, universities, etc.), but what recently occurred in Iowa takes the idea of bidding to lease land to a new level.
The story begins with Charles Lakin, a large landowner in north-central Iowa. To ensure that he was receiving fair market rent for the 3,300 acres he owns, he decided to take bids on his land at a series of four different auctions. As could be expected, interest in the 24 tracts was quite high and at one site there were over 350 people in attendance. The final bids ranged from $325 to $530 per acre per year with a two year lease term. An article written by Jeff Caldwell on the Agricultural.com web site (Land Rent Auctions Stunning) provides more details on the background and outcome of the sales.
I think the entire process will open the eyes of both farmers and landlords – not necessarily for the amount being paid as much as for the open and public method that was used. There are many leases throughout the Midwest that have not been adjusted to reflect higher commodity prices, and I can’t necessarily blame the farmer if the landlord refuses to follow what’s happening in the marketplace. The results from a well publicized cash rent auction, however, will certainly provide landlords a mean of discovering what farmers are willing to pay for land.
It will be interesting to see if the cash rent auction concept becomes more popular in the future. For landlords, it’s definitely a way to guarantee that they are receiving top dollar for their land. And for farmers… there will be more risk. Yet, for many, bidding higher cash rent is the quickest means for increasing the size of their farm business – the primary goal for many operators today.
Tags: auction, farmers, farmland, landowners, rent land
