Friday, November 16, 2007

The conventional wisdom trap...

It is solemn pronouncements like this...
Land leases. Luc Valentin believes the ability to pay rent must be taken into account when signing a lease because higher crop prices and higher production costs will create thin margins. Leases will be renegotiated to provide higher payments to land owners even with financial uncertainty. Land owners have the least risk with a cash rent lease should not expect more than a crop share land owner with higher risk. [More] [my emphasis]
...that create competitive advantages for operators who are learning to manage risk alone. After telling landowners repeatedly what they are allowed to expect, what happens when someone offers them more?

The insistence by the farm operator on risk-sharing will, I believe, create numerous roadkill as those who "want it more" turn those entitlement demands into laments from First Runner-ups in the Rent Pageant.

Advice like this simply empowers the wolves among the sheep. [I continue to wonder what would happen if ag economists had to negotiate for their jobs every 3 years or so like producers do.]

I can appreciate the concept that if all farmers simply refuse to accept more risk, none will have to. But with $4 corn and $10 beans, we're not going to convince all farmers to buy into this tacit conspiracy. When high prices simply accelerate consolidation, I predict academicians will document carefully it was because the winners embraced and mastered risks.

This sheep is changing species.

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