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As 2019 rapidly approaches, farmers around the world are starting to think about what the leases on their new year leases are going to look like; most notably when it comes to land. As row crop production continues to decline causing lease rates to drop, many farmers are thinking of moving things around.
However, when choosing the land you want to work with, whether you’re buying new land to enhance your rotation, or letting or selling land to others if you’re looking to take a different approach, you’ll need to negotiate prices, which means you need to be on the ball with what’s going on.
Today, we’re going to take a look at the three rules you need to know when it comes to negotiating farmland, ensuring you have everything you need to make the best decisions.
#1 – Think About Risk & Reward
The first and most important, thing you’re going to want to think about is the risk of the land you’re thinking about using compared with the reward you’ll get back. Of course, if the risk is high and the reward is low, you’re not going to want to invest in a lease of it.
Ideally, you’re going to want the landowner to define the level of risk tolerance for each piece of land you’re interested in; however, that doesn’t mean you shouldn’t be asking questions to identify the land entirely and to learn everything you want to know.
Get as much information as possible/as you need in order to make the best decisions for you.
#2 – Look at the Bigger Picture (Research)
Before you jump straight into a lease with a landowner, it’s a good idea to set back and not only see what other options are available to you but also to research the local area and see what’s going on and what numbers are being advertised.
Just because a landowner is stating a high price, that doesn’t mean that the rest of the land in the area is the same price, and the landowner might just be stating high prices to get as much money as possible.
Even if you’re a landowner, you might have a tenant asking for the lowest price possible, simply because they don’t want to pay as much. Whichever party you’re a part of, the best way to move forward is to stick with using the real numbers, in addition to the assistance offered by our attorneys.
#3 – There Doesn’t Have to be an Agreement
When entering a lease agreement, both the farmer and the landowner need to make sure they’re like-minded people who have similar interests. It’s far better to have a long-term relationship with each party than to keep switching and changing around.
However, during the negotiation stage, if you’re asking for the prices to be higher, or the prices to be lower and this is an ongoing concern, it’s best just to leave and not continue the agreement. If you feel like the prices are too high, the only way they’ll drop if when you stop paying them.
As you can see, there are some key ground rules to follow when it comes to negotiating the prices, terms, and leases for farmland. No matter which approach you’re taking, clear and concise communication is vital from both parties to ensure the best result.