August 2009

Rented farmland benefits owners and tenants

By Kathy Dixon

A $133,000 tractor was delivered to Kermit Thomas on the exact same day he received a termination letter.

Thomas had bought the tractor to help him work a 1,000-acre piece of rented farmland, but the letter terminated the rental lease.

“When I lost that piece of property, I wasn’t sure if I’d quit farming or what,” said Thomas, a Caroline County vegetable and grain producer.

He had been growing grains on larger tracts of rental land and planting vegetables on farmland that he owns. After he lost the lease on the 1,000 acres, he decided to cut back on grain production and focus on vegetables since they don’t require as much land.

Four years ago, he received an offer to rent 145 acres from Bill and Phyllis Carpenter—5 of which are catty-corner from Thomas’ Port Royal produce stand.

“We love being able to rent from Bill,” said Thomas’ wife, Audrey Thomas. “And we like Bill’s land, because it’s here close to the farm stand.”

The Carpenters own Edmont of Port Royal Bed and Breakfast, which overlooks the 5-acre piece of land on which Thomas grows produce. Their property was inherited by Phyllis and her sister after the death of their mother. It had been a working farm, but the Carpenters were ready to retire and didn’t want to farm.

Instead, they decided to open a bed and breakfast and rent the rest of the land to a farmer to keep it in production.

As part of the rental agreement, the Carpenters are allowed to pick as much produce as they want.

“Every meal has some of the ingredients from the farm,” said Phyllis Carpenter. “Especially when the cantaloupes come in. We serve them to our guests for breakfast.”
From the front porch, the Carpenters and their guests can watch as Thomas and his employees farm the land. “It’s so interesting to sit here and watch the process,” Carpenter said.

Rental rates hard to determine

When the Carpenters offered the rental land to Thomas four years ago, they didn’t know what to charge. They asked other landowners what they were charging and then came up with what they deemed to be a fair price. Thomas agreed. So far their verbal contract, which is renewed annually, has worked out well for both families.

Virginia Cooperative Extension and the National Agricultural Statistics Service both provide some ballpark rental rates that people can use as guidelines, but there are no hard and fast rules.

“The rates can be competitive, because so much of the land is rented,” said Keith Balderson, an agricultural and natural resources Extension agent in Essex County. “In this area probably well over half” the farmland is rental land.

In the Shenandoah Valley, the farm business management staff of Virginia Cooperative Extension conducts a biennial land rent survey and recently published their 2008 findings. Rental rates vary widely, but some of that can be explained, said Bill Whittle, Page County’s ANR Extension agent.

“In some of these cases it could be a son taking care of momma and the son pays rent to mom and it’s high, or the son could be trying to start farming and mom decides to keep the rent low,” Whittle said. “If a renter finds land closer to land that they already own, they’re willing to pay more.

“No two pieces of land are the same, and no two leasing agreements are the same.”

Reasons to rent are as varied as rates

Landowners rent land for a variety of reasons, but the two main incentives are paying lower taxes and keeping the land in production. Farmers rent land because they can’t afford to buy their own land or because none is available for sale.

Whittle said he knows a cattle farmer who is so good at controlling Johnsongrass, which can take over a corn or hay field, that landowners sought him out. The cattleman was able to rent land for free or for a nominal fee in exchange for controlling the pesky weed.

There aren’t many agreements like that anymore, but sometimes rental land is inexpensive if a farmer agrees to help maintain fences and control weeds.

“There’s every variation (of rental agreement) out there you can conceive of,” Whittle said. “People don’t like to make written agreements, but they should.

“The further you get away from a handshake agreement, the better.”

In Appomattox County, Matt Wilkerson and his wife rent 175 acres of pastureland and land on which they grow hay from six different landowners. “We’ve been really fortunate with our rental agreements,” Wilkerson said. “Most of our agreements are written ones, which helps us set terms to allow for recovery costs such as fencing and fertilizing.”

Farmers who rent land often help maintain the property by repairing fences, keeping fields mowed or cutting back trees along wooded edges of the property.

Wilkerson said that although his family owns 200 acres of farmland, renting the additional 175 enables him to farm more land at a lower overall cost. The downside is that often the rental land is spread throughout the county, which means more work when moving equipment or feed.