According to the United Nations, the global popu-lation will increase by more than 2 billion people in the next 40 years, and many reports have indi-cated that food production needs to double by 2050. Industry experts agree that increased food production will be achieved by intensified crop production, more so than by an expanded arable land base.
In the February issue we looked at cash rents from the landowners’ perspective: what they want and the attributes they look for in a tenant. Often, landowners want a 4-5% return after real-estate taxes are paid on the current value of their investment. Then if you figure on a 4% appreciation factor that we spoke about in the December Profits column, they have about an 8% total return.
Probably the most important task for growers today is negotiating cash rents. Most of our clients rent about two-thirds of the land they farm, and I think that percentage will go up in the years ahead. So it has a big impact on their bottom line.
Recently, I learned of two situations where farmers were upset by land-rental situations that happened to them. That doesn’t surprise me, as tenant/landowner relationship is often a lightning rod in the game of farming. One occurred where a client called me and said his landlady was proposing to more than double his rent.