An increase in 2014 farmland rent in Minnesota may indicate a loss for producers at current corn and soybean cash forward contract prices available.
ST. PAUL, Minn. (11/11/2013)—An increase in 2014 farmland rent in Minnesota may indicate a loss for producers at current corn and soybean cash forward contract prices available.
This calculation factors in other expenses and projected total income with historical yields. If corn or soybean prices increase--or if yields are better than expected in 2014--producers may be able to pay higher rental rates.
Based on the current corn and soybean prices for 2014, however, there is a real potential for farmers to lose money. If this occurs, it should cause lower or flat farmland rental rates in 2014 compared to 2013.
The Minnesota Agricultural Statistic Service reported an 11.1 percent increase across Minnesota from 2011 to 2012 and an 18 percent increase from 2012 to 2013.
The continual high prices in the grain markets had put pressure on rental rates to increase in 2013. Now the current prices for 2013 and 2014 corn are much lower than one year ago, but land rents continue to increase. For example, on Oct. 11, 2012 in Lamberton, the cash bid for 2012 corn was $7.38 and for 2013 corn it was $5.79 per bushel. As of Oct. 9, 2013, the cash bid for 2013 corn was $4.18 and for 2014 corn it was $4.35 per bushel.
Cropland rental rates can vary significantly. Factors include crop returns based on current grain prices and projected yields, land quality, tile and drainage on the farmland, the federal farm program, previous crops, herbicides and fertility, use of facilities, and length of contract.
Extension workshops "What is a fair and profitable farmland rental agreement?" taught by Extension Educator David Bau are available in central and southern Minnesota in November and December. The workshops will cover farmland rental rate trends, land values, increasing input costs, flexible leases, and rental lease examples. For details, visit the Agricultural Business Management blog.
The "Cropland Rental Rates for Minnesota Counties" publication prepared by Gary Hachfeld, William Lazarus, Dale Nordquist and Rann Loppnow, which uses the FINBIN database, is a helpful resource. View the publication on the Center for Farm Financial Management website: http://z.umn.edu/hgr.
Source: David Bau, University of Minnesota Extension Educator.
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