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Rental rates increased by double digits from 2010 to 2011

By Janet Kubat Willette
jkubat@agrinews.com

Date Modified: 10/10/2012 3:45 PM

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MANKATO, Minn. — There are few surprises in a cropland rental rate report released this summer by University of Minnesota Extension.

The report shows a double digit increase in land rental rates from 2010 to 2011 and cumulative double digit increases from 2007 to 2011 for several regions of the state.

Unprecedented profitability in grain production has driven land rents up, said Gary Hachfeld, a regional Extension educator, and an author of the report.

"The percentage figures are not meant to predict future increases, but are merely to document how regional and state rental rates have changed over the years," the report says.

The report, Cropland Rental Rates for Minnesota Counties, relies on FINBIN data to look at historical rents from 2007 to 2011. It also includes USDA National Agricultural Statistics Service rental rate data.

The FINBIN data is compiled from farmers who participate in the Minnesota State Colleges and Universities Farm Business Management program and the Southwestern Minnesota Farm Business Management Association. It is the actual rent paid by farmers enrolled in the program.

While a starting point for discussions, Hachfeld emphasizes that the report is only a guide.

"The information and data is not meant to establish, determine, set, fix or even hint at what actual rents should be," it says in the report.

The report is divided into USDA districts and includes 2011 NASS estimated average rent for every county. FINBIN data is available only in counties where there are 10 or more reports available. The NASS sample is statically valid, while the FINBIN data is not, Hachfeld said.

For each county where there are 10 or more reports in the FINBIN database, there is an average, median, 10th percentile and 90th percentile listed. The average is adding up all the rental rates and dividing by the number reported. The median is the number in the middle. The 10th percentile is the number where 10 percent of rents are less than that number and likewise, 10 percent of the rates are greater than the 90th percentile number listed. The 10th and 90th percentile could also be considered the lower and upper range for rents in a particular county.

For example, the average rental rate in Lac qui Parle County is $127 per acre, the median is $126 per acre and the range is $75 to $178 per acre. The NASS estimate is $127 per acre.

Four counties have average rents topping $200 per acre: Freeborn at $216; Martin at $210; Sibley at $203; and Mower at $201.

Ten counties have average rents less than $100 per acre: Norman at $93; Douglas at $85; Otter Tail at $80; Mahnomen at $75; Polk at $70; Morrison at $63; Becker at $62; Todd at $52; Marshall at $48, and Mille Lacs at $37.

There isn't enough data reported to generate any data for 26 counties.

Hachfeld said there are numerous reasons for lower than average rental rates, including long-term contracts and rental agreements between family members.

He adds that the FINBIN numbers aren't reported by the same people as farmers enter and exit the program and their operations change.

It will be interesting to see how this year's spotty rainfall in some locations impacts land rental rates next year, Hachfeld said. He also wonders if land rental rates will decline when profits decline in grain production.