We understand the specialized markets in which you operate and provide tailored solutions to meet your unique business needs.
Our comprehensive suite of business services combines industry expertise, market knowledge and professional insights.
MNP is a leading national accounting, tax and business consulting firm in Canada.
Suite 2000, 330 5th Ave. S.W.
MNP careers are Different by Design. As an entrepreneurial firm, we truly believe there are no limits to where your career can go.
This article was originally published in the Western Producer and has been reproduced with permission.
Over the past five years, the grain production industry in many areas of the prairies has seen some very lucrative harvests. This has improved cash flow, balance sheet strength and overall optimism in the industry. It has also pushed land rents higher, into ranges we have not seen before.
This seems to have upset a lot of producers and in some cases rightfully so. Many players in the industry tend to have short term memories and forget about the not so good years. However, the producers who are paying higher rents are not all going broke and many of them are enjoying great success.
Here are a few ways to look at land rent in my opinion, as to why certain producers are paying more and more, to the point where others are left scratching their heads:
A word of caution - Let’s say you currently rent 75% of the land you farm at $60 / acre. If you are bidding a new piece of land at $75 / acre you need to consider what that does to the overall operation. Let’s face it, all of us who grew up in small towns on the prairies know full well that your offer to pay $75 / acre will eventually end up in the coffee shop, and all over town. So you just gave your existing landlords an opportunity to ask for more the next time the renewal comes up. If you rent a large portion of your land, this can increase your cost of production significantly.
Overall, what should be of most concern to you as a producer, is how does renting more land at whatever rate you plan to offer or are required to pay, impact your bottom line? If you invest some time and money to meet with your agriculture business advisor and run the numbers, this should add some clarity to the decision. You might find that paying $75 / acre is devastating to your operation, and should not be done. You also might find that paying $100 / acre actually increases your bottom line, and therefore, is a good business decision. And, if you properly manage your involvement in the various farm income programs that are offered, you might also find the risks of paying higher rents are lower than you thought.
Contact Stuart Person, CPA, CA, Agriculture Business Advisor at 306.765.8581 or [email protected]
Find an office near me