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Farmland renters may enjoy added growth and opportunities

Not only is renting farmland a necessity for most farmers, but done right, it can create more opportunities.

The most recent FCC Farmland Values Report revealed land values have reached record highs.

“Owning land uses a ridiculous amount of cash,” says farmer and chartered accountant Kristjan Hebert.

Renting land, however, can allow for better cash flow management and growth, he says.

It can also open doors of opportunity, Hebert adds. By farming rented land, producers can take off profits that enable them to pay down any debts, and either buy land or invest in other areas, including off-farm, he says.

What’s more important than owning the land they farm is controlling the land they farm — such as through long-term leases and options to buy — in order to match equipment, inputs and manpower to their land base, Hebert says.

When those don’t match, that’s when farm businesses experience cash flow troubles. Hebert warns that farmers overextended on land might find themselves without adequate funds for inputs, equipment or people.

Rental rates

Lance Stockbrugger, also a farmer and chartered accountant, stresses farmers need to be aware that the one expense they have control over is land rent costs.

“Sometimes we as farmers get so used to be being price-followers that we forget we do have some control over some of these costs. And land rent is one of them, because we don’t necessarily have to pay that price,” Stockbrugger says.

He advises against renting just for the sake of getting bigger or to keep land out of someone else’s hands. Any new rental intentions need to be weighed against the various risks, as well as how those added acres fit into your business plans.

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