NASS report shows variable rental rates
By Janet Kubat Willette
jkubat@agrinews.com
Date Modified: 07/01/2010 9:11 AM
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A recently released report from the United States Department of Agriculture National Agricultural Statistics Service Minnesota field office finds that cash rents across Minnesota are highly variable.
Cash rents range from a low of $7.90 per acre in Carlton County to a high of $177.00 per acre in Dodge County.
The numbers are the averages for counties, said Doug Hartwig, director of the USDA NASS Minnesota field office. He emphasizes that the data does not include land that is share rented nor land that is rented using a hybrid rental agreement that utilizes a base price and allows for flexibility depending on different factors.
Land rent is a tough thing to measure and evaluate, he said, because there are so many variables. It all boils down to what a landowner is willing to take and what a renter is willing to pay.
Gary Hachfeld, University of Minnesota Extension educator specializing in agricultural business management, said he wishes there were a simple computer program where he could punch in some numbers and get a rental rate in return. But it's not that easy, he said.
"It's not a science, it's an art," Hachfeld said of determining land rental rates.
"Elementarily it boils down to whatever the traffic will bear."
In general, the rental rate trend in Minnesota has been upward, said Kent Thiesse, vice president of MinnStar Bank in Lake Crystal. There has been a variation, especially in areas with livestock, he said.
He predicts rental rates will be somewhat steady in 2010, given projections for tighter cash flows and profit margins for crop producers.
Thiesse said the numbers in the NASS report correspond fairly close to numbers found in FINBIN, a farm financial database.
Hartwig said the data presented by NASS should not be used to set rental rates, rather as a discussion point in negotiations between the renter and the landlord.
One of the challenges for both landlords and renters is to get a handle on average rental rates, Thiesse said. It's a way to offer comparison.
There is always a spread in the data, and there is likely a story behind the numbers, Thiesse said. Perhaps the land is rented to a family member — those rents tend to be lower. Perhaps other services are provided to the landlord by the renter or perhaps the renter is willing to pay a bit more because the land is convenient.
"I think it's good that NASS is putting this out," Thiesse said.
NASS first collected land rental rate data in 2008 as directed in the farm bill, Hartwig said. NASS has funding to continue the data collection until 2012 when the 2008 farm bill expires.
The data was collected from July through December 2008 and the response rate was 70 percent to 80 percent, he said.
University of Minnesota Extension will be releasing a rental rate report of its own later this month, Hachfeld said. The report uses data collected submitted by producers enrolled in farm business management programs.
All the reports are benchmarks, he said, a starting point in discussions and landlords and renters should use their best judgment to move on from there.
"I think too often we get hung up on what I call coffee shop rent talk," Thiesse said. That isn't always accurate, he said. In his experience, those who receive high rents are more eager to talk at the coffee shop or grain elevator than those who have a "normal" rental rate.
Whatever the rental arrangement, Thiesse encourages people to put it in writing.