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Do your homework
It’s important to note that USDA’s land value and cash-rent surveys offer a snapshot estimate of price levels at a particular moment in time. Surveys can be useful for discerning trends, but every land parcel has unique characteristics, so don’t rely on USDA survey data as a precise benchmark for establishing land prices or rent rates on individual parcels. The sharp rise in grain commodity prices has significantly increased forecast cropping revenue for 2011 and 2012. This is expected to fuel significant increases in cash-rent bids for 2012.
Both landowners and tenants should ask local farm-loan officers what rental rates they’re seeing both on leases in which there is no change in the owner or tenant, and in leases in which there is no legacy relationship.
Editor’s Note: Mike Fritz is the Editor of theFarmland Investor Letter.