Land rental rates need to reflect risk management plan
Farmland rental rates continue to increase in 2011. That creates the need to manage the increased risks in crop production and rental contracts.
September 23, 2011 - Author: Dennis Stein, Michigan State University Extension
New farmland rental rate information for the 2011 crop year is now available.
You can also find a summary of the past four years data for the Michigan’s Saginaw Valley counties on my website under “USDA Farm Land Rental Information”. This summary contains the information that many landowners request from their local MSU Extension office. This report reflects data collected by the local Farm Service Agency offices from actual farm operators each growing season. As an average it is important for individuals to remember that their farmland may generate values that are higher or lower than the numbers in this report. It is recommended that landowners consider evaluating their farmland using the Rental Issues – Renter’s Checklist. This checklist gives the landowner or renter some recommendations and points to consider in review or development of a solid farmland rental arrangement.
It is always important to get any agreement into a written format that lays out some of the major points that protect both the land owner and land renter during the period of time covered by the agreement. More often, making sure that the rental agreement covers terms that relate to your rights and risks in any land rental agreement is just as, if not more important, than the dollars of cash rent exchanged. Farm operators now have much more financial risks than they have ever had before as their cost of inputs and operational overhead costs have never been higher than they are today. In general, we continue to see higher and higher input costs to produce the food and fiber that our country and world depend on today. Every farm producer must work diligently to keep all their costs under control to manage the risk, thus leading many landowners and farm operators to move toward the use of flexible farm land rental agreements.
Conversation at the local coffee shop in most farm towns this time of year will often focus on farmland rental rates. Rumors of who is getting top dollar values for their farmland increase each time a story is told. If part of the group is actual landowners, they compare who they think is getting the highest cash payments and where they think the cash will get spent or invested. If the table is loaded with farmers, the discussion focuses on the huge risk farms are taking with higher and higher cash payments for land rent. What is important is that all parties in a one-year or multi-year land rental arrangement are protected and have the potential of mutual benefit from their actions, giving them a win/win outcome!