Cash rents are on the riseThough commodity prices are sluggish, the region’s farmers and ranchers continue to pay more to rent land, the U.S. Department of Agriculture says.
By: Jonathan Knutson, Agweek
Though commodity prices are sluggish, the region’s farmers and ranchers continue to pay more to rent land, the U.S. Department of Agriculture says.
Cash rents for cropland and pasture generally were higher in 2009 than in 2008 in Minnesota, North Dakota, South Dakota and Montana, according to a survey by the National Agricultural Statistics Service, an arm of USDA.
The 2007 farm bill mandated that all states collect state and county estimates of cash rents. Producers nationwide are asked to report rental rates based on current agreements in which they were involved.
The regional exception to higher cash rent was Montana pastureland. The average per-acre cash rent for it tumbled to $4.70 in 2009 from $6.50 in 2008.
Montana cattle producers are struggling because of drought and pressure from conservation groups, and a number of ranches have gone out of business recently, says Kim Baker, a Hot Springs rancher and president of the state Cattlemen’s Association.
“You can’t believe how tough it’s been,” she says.
Her group has lowered its annual membership dues to $20 from $50 to help retain and attract members.
But cash rents rose for cropland and pastureland in the rest of the region.
In Minnesota, cash rent for nonirrigated cropland rose 3.7 percent, even though prices for prominent crops fell. For instance, the average per-bushel price for corn in state fell from $4.13 in December 2008 to $3.55 in December 2009, with the average per-bushel price of wheat plunging from $7.03 to $4.74 in the same period.
Many factors influence how much farmers pay to rent land, says Kevin Paap, president of the Minnesota Farm Bureau and a Garden City, Minn., farmer.
Farmers might pay more than they otherwise would if rentable land is near or adjacent to their own farm, he says.
“Those opportunities don’t always come along very often,” he says.
Cash rents also rose in South Dakota, despite a drop in the price of prominent crops.
“It’s a little hard to understand. Commodity prices aren’t so great; they’re just above the break-even point,” says Monty McCuen of Citizens State Bank in Castlewood, S.D.
“The only explanation I have is that land values keep going up,” pulling up cash rents, he says.
In a separate survey, the North Dakota field office of the National Ag Statistics Service asked producers in the state for their estimate of average cash rents in their local area, regardless of whether the producer was involved in a rental agreement.
Similar surveys were not conducted in Minnesota, South Dakota and Montana.
The North Dakota survey found that average cash rents in the state rose about 2 percent from early 2009 to early 2010.
Increases in southwestern North Dakota and in the northern Red River Valley offset flat and lower rates in most other regions of the state.
The survey also found that the value of rented land in the state rose about 5 percent from early 2009 to early 2010.
That’s down from the 12 percent average annual increase over the previous six years, says Andrew Swenson, North Dakota State University Extension Service farm management specialist.
It will be more difficult for producers to make money in 2010 than in recent years, which slowed the growth in land values, he says.
But low interest rates —which make land easier to buy and alternative investments less attractive — help boost land values, he says.