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"Don't quote the price"By Ken Root That's what a farmer said to me on the phone this week after I had reported the rental rate on 2,700 acres of farmland in central Iowa. "When my brother and sister who live in the city hear that, they will expect more money than I'm now paying Dad to rent the farm." Farmers are now dealing with a new problem--prosperity. For many it is worse than poverty. At least when you are poor people don't want much from you. Now, in the new world of record grain prices, farmers with limited communication skills are crying out but they don't know what to say. The sale price, or rental rate, for land has become both an economic and emotional issue. Parties on both sides of land ownership are keenly aware that the rates need to reflect the value of the crops that are being grown. At a time of $15 soybeans, $10 wheat and $5.50 corn, the land owners are trying to establish rental rates that are higher while the farmers who lease the land are appealing that their costs are high and this period of profitability may be short. The land I quoted went for $400 per acre with all money paid up front. The total is a staggering $1,080,000 for the right to farm the acres for one season. Last year at this same time I quoted a figure of $280 per acre on a smaller tract and had the same reaction. The feedback to the mid day radio show was quick and intense. Some called to inquire about the exact location and the Corn Suitability Rating (CSR) of the property and any idea I had of the level of soil fertility. Others called to let me know that such a number should not be given on the radio because it wasn't realistic and it was going to do them damage. Three days later, the calls came again about the land that rented for $410 or $415 per acre and where was it since they hadn't heard the show the day it was mentioned. Again human nature is to react to this type of information and to exaggerate it as it goes from person to person. The ultimate was a call asking me to stop quoting the futures prices as they were higher than the farmer received at his local elevator. "They think I'm getting that price," was his logic. I assured him that I knew he had to deduct basis and transportation to get his real delivery price but that I had an audience in five states so the only accurate price for everyone was the future's price. The challenge is communicating what is happening at the farm level to those who see the price of food in the supermarket or a story in the newspaper about a foreign country that is blaming ethanol production for its starving people. This week, the American Baker's Association marched on Washington, D.C. protesting high prices for flour. That is the first food related protest since before World War II. (You can hear a podcast at www.whofarm.com.) The bakers are disaffected by the high price and limited availability of a commodity they took for granted. The same might be said for land owners and consumers who had the luxury of taking farmers for granted for generations. Quoting Dr. Barry Flinchbaugh for the second week in a row: "Farmers are having the best of times and the worst of times." Prices are high but they have brought with them higher costs for inputs, adverse reaction from the general public and greater expectations from landowners. The best defense is active communication to all parties of the reality of the moment and the trends through history. Prices are high due to worldwide demand for food and fuel, worldwide crop disasters and acreage shifting to produce the most profitable crop. Increased income has caused farmers to buy machinery and inputs to meet the opportunities of the day and this has caused input costs to skyrocket. Fertilizer is two to three times as high as it was a year ago. Check the fertilizer stocks in the marketplace to see how well they are doing. Finally, farm prices traditionally don't stay high. The twenty-year trend has one spike in 1996 and one spike in 2005. This last uptrend has been exceptionally good but the health of the U.S. economy looks shaky and world demand is notoriously fickle. It can be argued that the weakness of the U.S. dollar has inflated exports with no real increase in value. Farmers are also eager to produce large quantities to capture the highest value and that may well dilute prices significantly, before year's end. All this information needs to be conveyed to land owners before new lease negotiations begin. The new generation of farmland heirs is even further removed from the culture of rural America and many want to maximize the return like any other investment. State universities have rental rate averages to more realistically assign a price that both parties can live with for more than one year. Is it irresponsible for me to quote the high prices for farm land sale or rental? It is sensational; I will give you that. But it is also newsworthy to know real numbers from reliable sources, rather than the gossip that inflates prices that may or may not have been paid. If you think this kind of information doesn't get passed along, you haven't been in a local café or senior center lately. If a landowner is really pushing hard for more money, invite them into the game on a crop share lease. One year of experiencing the vagaries of nature, uncertain government programs and daily reaction to rising and falling prices is often enough for them to gain respect for the farmer who ventures forth each year hoping to make a profit. "I'd rather have $2 corn than all this publicity," said the farmer on the telephone. Don't kid yourself. The hand to mouth, government supported, old machinery days were not that good. But if you really liked them, just hunker down, remain silent and they'll be back. Editor's note: This is Ken Root's 34th year as an agricultural reporter. He grew up on a small farm in central Oklahoma and started his career as a vocational agriculture teacher. He worked in Oklahoma, Kansas and Missouri as a broadcaster and was the original host of AgriTalk. He has also been the executive director of the National AgriChemical Retailers Association in Washington, D.C. and the National Association of Farm Broadcasters in Kansas City. Ken is now the lead farm broadcaster at WHO and WMT Radio based in Des Moines, Iowa. He has been a columnist for HPJ and Midwest Ag Journal for seven years. 3/17/08 Date: 3/13/08
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