Crop Land Rental

[DaveFromMi]

Hello,
I am looking for some advice on crop land rental prices. The farmer that is renting the property raises corn and soybeans every other year. The land has some slope to it, so it dries out faster than flatland. The soil types are clay loam and sandy loam. The corn yield has been close ~195 bushels/acre.
I haven't raised the rental price since 2005, when I inherited the land. Currently, the farmer is paying $188/acre. I think the use of the land is worth way more than that. What are your thoughts?

 

[skeets]

Is that 188 a month or per year? What is the going rate for anyone else renting out the land around you. And if you think the land is worth WAY more than that sell it off for homes. Dont forget his costs are going up which means his profits are going down and if that happens he doesnt need your land to farm. It aint all about your pocket book,, Just MHO

 

[lynnmor]

It is about the pocketbook, rent too high and he is out of the rental business. Price too low and he would be a fool.

 

[Trapper Bob]

In my area, splitting the costs & gross sales, 1/3 owner & 2/3s renter is common. That captures costs going up in bad times & high crop prices in good times.

 

[DaveFromMi]

Is that 188 a month or per year? What is the going rate for anyone else renting out the land around you. And if you think the land is worth WAY more than that sell it off for homes. Dont forget his costs are going up which means his profits are going down and if that happens he doesnt need your land to farm. It aint all about your pocket book,, Just MHO

$188 per acre per year

 

[hagrid]

Keep the land and set up a $50 Chinese Golden Finger massage parlor on it.

You'll print your own money.

 

[MapleLeafFarmer]

IMHO much too cheap... but many factors come into play like is your tenant improving/good for the land, do you have other options to rent to others, is it just a few acres hard to rent or a nice full contiguous section, is it a long term agreement so "friendship" involved, kinda the wrong time of year to look for a new renter, etc....

But with his corn yield at about 10% more than average and farmland increasing 12-15% EVERY YEAR asking for an increase to at least an average level doesn't seem out of the question especially since no change in last 15+ years.

Best advice would be to check with your local Ag. Rep or extension office and they will know for sure and this gives you some ammunition to negotiate with. Also do not know if you are from MI or IND. as your signature says one and name says another.

I will guess top shelf/premium offerings should be closer to $250/acre.... at $188 you are in the bargain basement (or below) kinda range.

land prices are going through the roof and inflation all around us so not unrealistic to ask for more.

 

[ccoon520]

One thing to ask yourself as well is what is the going market value, what is a fair and reasonable price to you (this could very well be under market value depending on your relationship with the current tenant), and what is the price that you would settle for (if this is over market value then you might be better off selling the land). Negotiate with the farmer at the end of the season and see if you can reach an agreement. If an agreement is reached get it in writing with signatures and give him a copy so both of you are covered.

You can also try a crop sharing agreement as was mentioned above, however unless you have a way to validate the harvest (which could cost more money than you make from the share) it'll depend on how much you trust your tenant. For trustworthy parties it works great, if there is any mistrust then it is only downhill.

As much as I understand Skeets' sentiment of the guy is trying to make a living, it isn't your responsibility to be taken for a ride so the other guy can make more money. You aren't pulling his farm out from under him, he isn't forced to pay you anything he doesn't agree to, and he is more than able to walk away from the deal. You run the risk of no one renting the land and taking the hit and the farmer risks losing however many acres you currently rent him.

 

[Borane4]

For information to guide you, the extension agency should have going rates. In Texas for instance, Texas A&M publishes the grazing and crop lease rates (Hi, low, avg, irrigated or not, etc.) for every county in the state. It is very detailed. Does Perdue do something similar in IN?

 

[DaveFromMi]

I am in SE Indiana, about 10 miles north of the Ohio River.
Thanks for the replies.
I will check with the County Extension Service, run by Purdue.
I like the current farmer; he raises about 4000 acres and does a good job keeping the weeds out.

 

[JimmyJazz]

The USDA tracks and makes available data on this matter. Rents are highly variable based on soil productivity . Soil science is a fascinating subject. Using the USDA data you can compose a detailed soil map of any parcel for free. I would start there. Here in the Allegheny Plateau region of Pennsylvania $188 might be considered fair or even high. A good farmer not only farms the land but also maintains its viability to the owners benefit. A two way street so to speak. I let my neighbors farm my 37 acre farm in return for their maintaining the place. This includes cutting the very large yard regularly. Their presence may also serve to deter would be "curious types". They make hay and pasture horses. A perfect arrangement for me and a not uncommon one for we "City Slickers". In the book Knowledge Rich Ranching by Allan Nations the dynamics of these arrangements are explored. Its a great book that I have recommended here before. I have found cultivating a friendly/symbioic relationship extremely beneficial in my circumstance.

 

[RCW]

How many acres are we talking?

Is it near the farmer, or other properties he leases?

Are you looking to modify the lease in 2022, 2023, or other?

Others mentioned it, but given the economic times we have right now worth reiterating.

You and the farmer have had a long-term relationship.

His costs/acre are very unknown for the near- or long-term today....may not have been the case 120-180 days ago.

To add insult to injury may not be received well.

Not taking a side here.

It's just that it could be tough pill to swallow for the farmer with seed, fertilizer, fuel, finance, and equipment incremental increases he may already be dealing with.

I can only think he may take it as "kick me when I'm down..."

 

[DaveFromMi]

The total tillable acres here is 52. The farmer is about 12 miles away, but raises crops on other farms near here.
Here is his equipment, set up for soybeans.

 

[Kurtee]

May I suggest that you discuss this with the renter. An honest farmer knows the rental rates in his area. He may not have brought it up because you have not either. A person who takes care of the weeds and is a good steward of the land is a good thing. In my area rents are substantially more than what you are getting. Lots of things factor in rents. Is the land drained? Is it 52 acres in a nice square plot or all chopped up in little chunks. The equipment is getting so large that larger plots are more desirable. I would check the county rents for reference. Good luck.