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Cash rent may still be best option for adding farmland

Cash rent may still be best option for adding farmland
Most land that changes tenants in Indiana does so before December 1.

If you are starting farming or early in your career, no doubt you would probably rather own than rent land. It eliminates total dependence on others in terms for knowing you can farm from year to year. However, Craig Dobbins, Purdue University Extension ag economist, says that may not always be practical.

Related: How do you start farming without owning land?

"If you are starting out, I think it makes more sense to rent," he said. "As you build your equity, there will come a point in time where you decide you want to buy some land, and you will be in the position to do that better."

Land for rent? Some landowners may prefer renting to someone who will no-till their land. If you do that well, consider using it as a bargaining chip.

As land prices rise, so do renting prices. While buying is a way to guarantee that farmers will not be paying more and more each year for land, renting is cheaper and more immediate. However, choosing the right time to rent is not a straight-forward decision.

"Renting land should be cheaper next year," Dobbins said. "But when's a good time to rent? When is that going to be? I have no idea, there is no way to predict that accurately."

Dobbins says small farm operations and large farmers are in the same boat when thinking of expanding or starting their operations. While buying more land – for instance, 100 acres at $7,000 apiece – is a lot of money, smaller farmers may have to put in more effort to find a market for their lesser quantity of product.

"It's easier to become economically sustainable by renting than it is by owning," he said. "But you probably want some mix, and that is going to vary widely based on you and your farm—whether you are beginning or expanding."

Related: USDA designs new web tool for beginning farmers and ranchers

There are also a few extra responsibilities that come with renting land such as keeping the land owner informed, letting them visit and keeping the land visually appealing.

All these factors are a lot of pressure on a beginning farmer, which is why Dobbins says the Farm Service Agency has special programs for farmers such as low interest loans and loan guarantees. In addition, a Purdue-led National Institute of Food and Agriculture initiative, which is a grant program to support beginning farmers in Indiana, has resources available to beginning farmers in particular.

Find information on Purdue's beginning farmer grant program and FSA's beginning farmer program online.

Hopkins is a senior in Purdue University ag communications

TAGS: Extension
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