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Think different: When is private lease negotiation a better fit?
Are you offering sensitive or erodible ground for rent? Does your farm have buildings or fences that need to be taken care of? Do you want the land farmed in a certain way? Do you want to avoid tenants who mine soil fertility or ignore weed resistance?
If so, you’ll probably be better off negotiating an agreement with a tenant, one-to-one, rather than renting your farm to the highest bidder at a public auction, says William Edwards, Iowa State University agricultural economist.
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Too public for some
Even though cash rent auctions often generate top returns for landowners, they’re too public for farm manager Jeff Troendle, Hertz Farm Management, Waterloo, Iowa. “The tenant has to bare his soul to all his existing landlords. We don’t subscribe to that.”
In cases where competitive bidding is appropriate, he prefers sealed bid auctions, a more private alternative. “We request bids from farmers and they mail in what they’re willing to pay. You don’t get the fervor of a public auction, but you don’t get the exposure, either.”
The landowner retains more choice, too, he adds. “We don’t necessarily take the top bid. We want to make sure the farm is well cared for, and the top bidder may not be the best for that.”
Landowners can do something similar if they want to entertain competitive rent bids, Edwards says. “The landowner can advertise and collect bids until a certain date, and then choose a tenant.”
Yet despite the recent turmoil in cash rent markets, “I still see strong loyalty between landowners and tenants,” says Nebraska’s Bruce Johnson – “as long as rental arrangements stay within the fence line of fairness.” There’s nothing wrong with offering or accepting a sweetheart deal, he says, provided it’s made with eyes open. But if tenants let rents get too far out of line with prevailing rates, “landowners might say, ‘Enough of this! We’re putting it out for competitive bids!’”
For their part, landowners should keep in mind that “loyalty has to go both ways,” Troendle adds. “It’s hard to get tenants to do the right thing if they are always worried about losing the land.”
