NDSU Extension Service - Mercer County

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Putting a "True" Value on Land Cash Rent Rates

land cash rent rates, rent renewals, cash rent contract

Submitted by Craig Askim, Extension Agent, Agriculture and Natural Resources

It is February and farmers are planning what they are going to plant. It is also time for land cash rent renewals. I’m often asked, “What are the average land cash rental rates for cropland and pasture in Mercer County for 2016?”

This is a fair question. Landowners, loan officers, and producers need to have a number to work from when setting up budgets and preparing taxes for the coming year. The question, however, cannot simply be answered with just a dollar amount per acre.

When we look at what a person should charge or be willing to pay for cash rent, many factors need to be considered. This is what I call the “climate”.  Things like soil types, production history of the land, current stewardship practices, length of contract, type of contract, share agreements, fence conditions, water availability, land access, grass types, stocking rates, current land tax assessment values, current renter’s behavior, etc. need to be evaluated before price should be discussed.

The landowner should ask, “Am I satisfied with what is currently going on?” If not, what needs to change? Is it money or is it one or more of the factors listed above? If it is one of the factors listed above, money will likely not fix the problem.  The renter should ask “Is the landowner holding up his/her end of the contract or are they just a money collector.”  In any contract, communication is key. If either party is not holding up their end of the contract, the process can become messy when it comes time for renewal.

Communication is vital with rental contracts. Landowners need to talk to their renter from time to time, not just when the payment is due. Understand what is happening in the farming climate throughout the year and have a true understanding of current marketing issues and prices. On the flip side, renters need to talk to landowners throughout the year and inform them of the current climate and conditions. For example, if weather conditions are too dry, too wet, disease outbreaks, etc.

Many producers say there is not enough time to keep the landowner informed during the growing season. However, technology makes it quick and easy. Send pictures and updates by email or text with little or no added cost to either party.  Landowners could also email or text renters for a quick monthly update to get true, solid information of what is occurring.

A cash rental contract should be more than an agreed amount of money that will be paid to whom on a given date(s). If landowners are receiving rental payments from land it can affect their bottom line just as much as it affects the renter/producer. A land rental contract is a written agreement which should mean both parties are in agreement that they will work together to keep both parties in business in good years and bad, because one can’t survive without the other. Therefore, communication needs to have a greater value placed on a land cash rent contract than the actual dollar amount.

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