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Published January 09, 2012, 12:08 PM

Farmland rental rates a hot topic

Determining farmland rental rates can be challenging, but knowing the land’s productivity and utilizing two electronic tools can make the job a little easier.

By: Jonathan Knutson, Agweek

DEVILS LAKE, N.D. — Determining farmland rental rates can be challenging, but knowing the land’s productivity and utilizing two electronic tools can make the job a little easier, a North Dakota State University Extension Service official said.

A willingness to see the other party’s side helps, too, said Willie Huot, an extension agent in Grand Forks County.

“When you think about land, whether you’re renting it or selling it, it’s really got to be the value that’s most profitable and equitable for both parties involved,” he said.

Huot spoke Jan. 3 at the annual Lake Region Extension Roundup in Devils Lake, N.D. The two-day event, which typically draws 600 to 700 people each day, concluded Jan. 4. It was sponsored by the NDSU Extension Service and the Crop Improvement associations in six counties.

High crop prices in the past few years have pushed up both land prices and cash rents, and farmland rental rates remain a hot topic on the Northern Plains this winter.

Going into the 2011 growing season, cropland in North Dakota was worth an average of $1,040 per acre, an increase of 70 percent from the 2006 number, according to information from the NDSU Extension Service.

Cash rent rose to $51.50 per acre, an increase of 32 percent in the same five-year period.

Cash rents have continued to rise in the past year. An Agweek cover story late last year found that renegotiated rental rates for North Dakota farmland in expiring contracts increased an average of 20 percent from what they had been.

“We’ve probably never been in an era where there’s been so much discussion about land prices, land values,” Huot said.

‘Next benchmark’

Sometimes, farmers and landlords hear that a piece of land in the region has sold at auction for a high price.

“That price becomes the new bar, the next benchmark. Whether it’s worth that or not isn’t the issue. The issue is, when you’re buying and selling land on the auction that (price) sets the tone” for other land values, Huot said

A better approach is for farmers and landlords to consider a parcel of land’s productivity when trying to determine its sales price or rental rate, he said.

Two useful tools

Two electronic tools can help farmers decide how much to offer for land, Huot said.

One is the Web Soil Survey, which provides soil data and information from the National Cooperative Soil Survey. The site is operated by the U.S. Department of Agriculture’s Natural Resources Conservation Service. NRCS has soil maps and data online for 95 percent of the nation’s counties and “anticipates having 100 percent in the near future,” according to the website.

The site — http://websoilsurvey.nrcs.usda.gov — provides a crop productivity index, on a scale of 1 to 100.

“It’s all based on soil types,” Huot said. “I urge you to find out what the numbers are for land you own or farm.”

The other electronic tool recommended by Huot is FairRent, software that allows farmers to evaluate cash rent and share rental agreements.

The University of Minnesota’s Center for Farm Financial Management offers the software, which costs $95.

Information: www.cffm.umn.edu.

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