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Beware of the greed factor in farming

Is making maximum profit the most important thing on the farm?

October 17, 2022

3 Min Read
warehouse building under construction along rural road
SELLING OUT, REINVESTING: How much is 1031 income tax exchange money driving up land prices? Is that just a fact of farming today? Tom J. Bechman

The article you’re about to read is based on reality in 21st century agriculture. Names have been changed to protect the innocent — and the guilty.

Land prices for Indiana farmland skyrocketed from August 2021 through June 2022 and are still strong. Early indications are that cash rent bids in 2023 may be as strong as or stronger than in 2022. Farming is a business. You read that here often. But isn’t it also an honorable profession? When does outbidding neighbors cross the line from a sound business decision to downright cutthroat dealing?

Some say it’s greed. Rightly or wrongly, they wonder how many acres someone must own before they believe they own or farm enough.

Sentiments in farm country

Where are these ideas coming from? They come from time spent in barnyards and farm homes, listening to farmers and their spouses yearn for the “good old days,” when neighbors treated neighbors as neighbors first and competitors second. Whether those “good old days” ever existed is a debate for another day.

Yet, if perception is reality, some farm folks today believe that while their parents and grandparents got together regularly with neighbors to play cards or make homemade ice cream, recreating with neighbors is a lost art today. Your neighbor just might offer your landlord more cash rent.

Here are some things we’ve heard lately:

All about money. A landowner stopped to tell a neighboring farmer he wouldn’t rent his farm to him next year. “Sorry, nothing personal — you know, it’s just all about the money!”

How much money is friendship worth? Is it worth $50 more per acre? As little as $5 more per acre?

Cuts both ways. One landowner asked for soil test results and realized his 240-acre farm needed lime. He told the tenant to order lime and he would pay for it. Once lime was spread, he asked the tenant for extra rent and the tenant balked. The relationship slid downhill.

What happened to communication and goodwill? No one should expect something for nothing, and no one should just guess what someone else is thinking. Wouldn’t it likely turn out better if landowners and tenants had honest talks before anything happened in the field? Aren’t expectations on both sides better shared upfront?

Bitter pills. I know from experience that it’s no fun watching land you once farmed wind up as a housing development or warehouses, or watching someone else farm it. That’s especially true if you rented the land and didn’t have a say in selling it.

Some who sell land for development reinvest in land elsewhere under the 1031 federal income tax law provisions. And that’s their right. The law serves a useful purpose. Yes, it makes it tougher for someone else who lives where the 1031 seller relocates to acquire land. Competition drives up prices.

Perhaps that’s the business of farming in 2022. But what about when someone who bought land using the 1031 provision sells that land and cashes in again, and then uses that money to outbid a local farmer using 1031 tax exchange money a second time?

Is that OK too? Or is that crossing the line toward greed? It’s a discussion gaining traction in farm country today. Would restricting someone to one 1031 tax exchange per lifetime help put the brakes on escalating land prices? Would it be fair?

We don’t have answers, only questions. Yet anyone listening carefully in farm country today should realize that issues like ethics vs. greed simmer just below the surface. They won’t go away quietly.

Comments? Email [email protected].

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