The longer I farm, the more I begin to realize the information about how I farm is a valuable commodity in itself. Yet, for the most part, we all cheerfully provide these numbers and ideas to anyone who will listen. Even more unusual, on the face of it, is how the government and even casual onlookers feel free to walk into my field at random and measure my crop.
Is this practice in our best interests?
Consider the cash rent survey laying on my desk. This year for the first time county level cash rent information is easily available from NASS. I have grave doubts about how representative the number is, and also since it is voluntary, whether I should participate.
Some arguments for truthfully filling out the survey:
- The reported averages will more closely reflect actual cash rents, allowing some analysis and comparison for both renters and landowners.
- Variable rent formulas could be devised based on a "basis" ($50 over average) or percentage (125%).
IfSince I am paying way above the average, in some cases I may be able to convince landowners rents should come down.
- Farmers paying far below the market (to poorly informed owners, as a rule) would be vulnerable to simple revelation by competitors with less moral outrage. It is public information, after all.
- There is the appearance, at least, of a valid "comp", which is the basis for almost all value appraisals.
- We could tell (too late, of course) when rent trends were changing or accelerating.
- There is little assurance guys are reporting these numbers accurately. In fact, I would bet real money the rents are shaded down, since who wants to see rents rise? That could even be the best choice for my strategy.
- The upside for high payers is to appear to be way over the market. If they throw their (real) numbers in, the average will rise, lowering their apparent premium value provided.
- Any formula based on these averages will likely become less workable as farmers work to game the system. While this could go both ways, there is a risk as reported rents approach reality (most likely rise as reporting improves), premium calculations become much more expensive, despite what actual economic conditions justify.
- Although I can't quite offer hard math, I suspect one byproduct will be a ratchet mechanism that promotes rent increases almost automatically, and certainly much faster than occurs now as rent numbers leak out slowly.
- The NASS number would be a huge help to farm managers and realtors. Making their work easier is not my job.
- NASS does not report the range and standard deviation to get some sense of what the data distribution looks like. This would also allow all involved to judge the value of the average.
- It is an unwarranted invasion of the privacy of a deal between a willing renter and owner.
- The enduring official idea of farmers as a homogeneous collection of test subjects also rankles me. Cash rent numbers are skewed by things like family relationships, externalities not captured on the 1099-Misc such as tiling (which we do), and unique values farmers deliver for specific parcels. The reported number does not capture the term payment schedule, for example.
- Oddly the publication of this number could also hasten the switch to cash rent, as the appearance of "market information" would eliminate the difficult task of farm-by-farm negotiation, as well as offer a hard number for owners to compare to.
It is likely I have not considered all the angles here. What am I missing or thinking backwards?