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Land Rental Rates

High Land Rental Rates

Cash corn and soybean prices have dropped significantly in the past few months, and the projected forward prices for the Fall of 2014 do not show much improvement, or could be even lower. This is causing some concern among farm operators, as they negotiate land rental rates for the 2014 crop year. Most of the Upper Midwest experienced some rather large increases in cash rental rates in recent years, reflecting the much higher levels of crop prices that existed in the past 2-3 years, prior to the last half of 2013. Some 2014 land rental rates may be set at levels that do not offer much opportunity for profit potential from crop production in 2014, or could even result in a net loss to the farm operator. [ read more ... ]

 

Flexible Lease Agreements For 2014

The strength in corn and soybean commodity prices in the past few years, and the resulting increases in gross crop income per acre, has caused many landlords to significantly increase cash rental rates in recent years. Many crop producers are now facing the prospects of much lower crop prices for the next few years, and fear that the gross income per acre in coming years may not be high enough to justify the higher cash rental rates that are currently being charged. In addition, crop input costs for seed, fertilizer, chemicals, fuel, and crop drying are not projected to decline much in 2014, as compared to the 2013 crop year, and in fact some expenses may even increase for 2014. An alternative to the proposed high cash rental rates for 2014 and beyond, may be for producers and landlords to consider a “flexible cash lease” rental agreement, which allows the final cash rental rate to vary as crop yields and market prices vary, or as gross revenue per acre exceeds established targets. [ read more ... ]

 

Flexible Cash Leases

We have received a large number of inquiries for information on the potential use of “flexible cash leases” for the 2013 crop year. Flexible leases also work well for newer or younger farm operators that may not be able to afford the higher cash rental rates for farm land. A flexible lease makes it easier to use a crop revenue insurance policy, along with some forward pricing of grain, as risk management tool for farm operators. Most Ag Lenders are quite supportive of the use of flexible leases by farm operators, as a risk management tool. A flexible lease, with a fair base rental rate, allows landlords the security of a solid base rental rate, while having the opportunity to share in added profits when yields and crop prices exceed expectations. Flexible leases are a nice alternative for Landlords that want to continue to work with long-standing farm operators with cash rental arrangements, without setting cash rental rates too high to keep the current tenants. [ more ... ]

 

Higher Land Rental Rates For 2013

The continued strength in corn and soybean commodity prices in the past few months, and the resulting increase in crop income per acre for 2012, has caused many landlords to consider significant increases in cash rental rates on farm land for 2013. This comes after substantial increases in most rental rates from 2008-2012. Many crop producers are concerned that the favorable crop prices may not last long term, and that the gross income per acre in future years may not be high enough to justify the higher cash rental rates that are being proposed for the 2013, or potential future rental rate increases. In addition, crop input costs for seed, fertilizer, chemicals, fuel, and crop drying are likely to be higher in 2013, after a rise of about 10-20 percent for the 2011 and 2012 crop years. [ read more ... ]

 

Flexible Cash Rental Leases

The continued strength in corn and soybean commodity prices in the past few months, and the resulting projected increase in crop income per acre, has caused many landlords to consider significant increases in cash rental rates on rented farm land for 2012. This comes after substantial increases in many rental rates from 2008-2011. Many crop producers are concerned that the favorable crop prices may not last long term, and that the gross income per acre in future years may not be high enough to justify the higher cash rental rates that are being proposed for the 2012, or potential future rental rate increases. In addition, crop input costs for seed, fertilizer, chemicals, fuel, and crop drying are likely to be higher in 2012, as compared to the 2011 crop year. An alternative to the proposed high cash rental rates for 2012, or potentially even higher rental rates in the future, may be for producers and landlords to consider a “flexible cash lease” rental agreement, which allows the final cash rental rate to vary as crop yields and market prices vary, or as gross revenue per acre exceeds established targets. [ read more ... ]

Use Caution on Cash Rental Rates

Cash corn and soybean prices have been strong for the past 12-18 months, which is spurring some very rapid and dramatic increases in annual cash rental rates. Cash corn prices in Southern Minnesota are near $5.75 per bushel as of 11-21-11, and cash soybean prices are near $11.00 per bushel; however, local corn prices were as high as $7.00 per bushel in early September, and were above $6.00 per bushel, until mid-November. Local cash soybean prices were above $13.50 per bushel in early September, before dropping back to the current price levels. Producers can still forward price their 2012 corn at a new crop local price near $5.00 per bushel, and 2011 soybeans near $11.00 per bushel, which are slightly below the current cash grain prices. These higher commodity price levels for 2011 corn and soybeans, as well as very good price prospects for the 2012 crop year, are definitely being reflected in higher land rental rates across the Midwest. [ read more ... ]