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Landlord/tenant issue a time bomb

You can't blame landlords and real estate speculators for wanting to make a little money off their investments. But their influence on rice production in Texas and some parts of the Mid-South “is a time bomb in the making,” according to the head of the U.S. Rice Producers Association.

“Something needs to be changed or the rice industry is going to disappear or bottom out significantly in Texas. The same thing is true in Louisiana,” said Dwight Roberts, president and CEO of USRPA, based in Houston. “The landlord tenant issue has been the principal cause behind so much land going out of production in Texas.”

Texas rice acreage has dropped from a high of over 600,000 acres a few years ago to 200,000 acres currently.

“Besides the landlord/tenant situation, other factors, like low prices, are also at work,” Roberts said. “But that is the principal problem. And now it's started to creep up in other places — Louisiana, Mississippi and southeast Arkansas.”

“Landlords have squeezed just about all the blood they can out of the tenants,” said John Alter, Alter Seed Rice Co., DeWitt, Ark., who has been following the situation in Texas. “In a lot of cases, it's become more lucrative for landlords to take the government payment and not farm the land at all. That's the big issue, especially in Texas.

“The squeeze cannot continue,” Alter said. “I don't know if that's a market issue, that the market will tell the landlord he has to back off. But when you squeeze a tenant, something is going to be cut somewhere.

“What would happen to that land after a few years if you didn't apply P and K. In my mind, the smart landlord would allow his tenant to make some money.”

USDA hosted a listening session Nov. 21 to obtain views from farmers and other interested parties on the impacts of the new farm bill on the rice industry in the state. USDA will report its findings to Congress.

A big question is whether USDA can, or will, do something about the problem, according to Dennis DeLaughter, Edna, Texas, grower and past chairman of USRPA.

“We are constantly told in Washington, D.C., that they don't want to do anything that increase acres,” he said. “Well, if we fix this problem, it could increase acres. So we are damned if we do, damned if we don't. It's a very frustrating thing.”

The dilemma is to convey to USDA that acreage in Texas and other rice-growing areas is declining for all the wrong reasons.

“We have people coming out from the cities trying to buy up land thinking that the government payment will pay for the land,” DeLaughter said. “They're literally kicking the tenant off and essentially letting the government pay for the land.

“Most farmers rent from year to year. By law, if you lease land from me one year, and at the end of that year I don't renew it, you're no longer a tenant. So how does the secretary protect you when you're not a tenant anymore?”

The markets need to play a large role in an individual farmer's decision to plant, or not plant rice, according to DeLaughter.

“Right now, we are not working under a free market situation. When you ask some farmers why they are planting every year at this price, they say, ‘If I don't plant, my landowner will take the land away from me.’

“The market is telling us we don't need the rice, yet we have people out here growing it for non-market reasons. This farm bill gave us no mechanism to turn off the spigot.”

One solution could be for the government to establish a mandatory base setaside for the life of the farm bill, according to DeLaughter. “That would meet WTO rules, but farmers in general aren't going to like it. All it's going to do is let Brazil plant more.

“But the fact of the matter is that we are producing too much. How to fix that is the $64 million question,” DeLaughter said.

The issue is affecting more than just farmers, noted Roberts. “As rice acreage decreases, you began to erode your infrastructure.”

Landlords are also looking to capture government payments for conservation practices under the well-funded Conservation Security Program. Those payments are especially lucrative in rice country, which plays a significant role in waterfowl habitat and wetlands and water quality.

Mississippi rice producer Gary Goode says it's not clear how the new CSP plans to allocate payments for conservation practices. Goode was interviewed prior to attending an informational session on the CSP in St. Louis. “Right now, if I can into the FSA office and I have a cash rent, I get 100 percent of all my direct payment and countercyclical payment. If I have a share rent, every payment that comes out of FSA is split according to the percentages.

“I don't know how that's going to work under CSP. For example, where the CSP pays for soil sampling, the landlord doesn't have any cost. But where the government has a payment for a permanent road and the landlord built the road, I hate to say this, but he should probably get all of that.”

Goode has also seen an increased trend for landlords to take land out of production to put it in WRP. “In the past, those landowners have been leveling land.”

Goode is very concerned about where agriculture appears to be headed if the trend continues. “We need money to go in production agriculture instead of non-production agriculture. We have to quit taking land out of production. When a piece of land goes into CRP or WRP, there's no diesel fuel spent on it, no labor spent on it, no parts bought for it. And most of the landlords into CRP and WRP don't even live here. That money is not turned locally at all.

“The people in Congress say you can't sustain the subsidies,” Goode added. “But you can sustain the subsidies a lot easier than you can unemployment on the Grand Prairie if you weren't raising rice on it.”


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