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Published April 15, 2013, 09:43 AM

ND cropland rental rates go higher

North Dakota farmland rental rates continue to climb, with some counties seeing an annual increase of more than 20 percent, a newly released survey says.

By: Jonathan Knutson, Agweek

North Dakota farmland rental rates continue to climb, with some counties seeing an annual increase of more than 20 percent, a newly released survey says.

“It’s a pretty explosive market. The survey captures that,” says Andy Swenson, a North Dakota State University farm management specialist who analyzed the survey.

The widely watched annual survey, used by some farmers and landowners in the state to help set rental rates, was conducted in late January by the National Agricultural Statistics Service, an arm of the U.S. Department of Agriculture. The North Dakota Department of Trust Lands commissioned the survey.

Generally strong farm profits have caused farmland rental rates in North Dakota to increase sharply since 2007. An Agweek cover story last fall found that the trend was continuing, with farmland rental rates being negotiated for the 2013 growing season substantially higher than in the previous year.

A few highlights from the newly released survey:

LaMoure County, in south-central North Dakota saw one of the biggest increases, on average, in rental rates. The average rate this year was $105.60 per acre, up 22 percent from $86.10 per acre a year earlier and double the $52.80 per acre in 2007, according to the survey.

The increase reflects LaMoure County’s switch from wheat and sunflowers to corn and soybeans, which generally are more profitable, says Al Ulmer, county extension agent.

Rental rates also have been affected by the retirement of some older farmers and the desire of some younger operators to expand, he says.

Ulmer cautions that the 2013 average of $105.60 is an average, with some farmland in the county renting for much more and some renting for much less.

The survey found that the lowest reported rental rate in LaMoure County was $48 per acre and the highest was $160 per acre.

Other factors are at work elsewhere in the state.

In Mountrail County, in west-central North Dakota, the average farmland rental rate rose to $39.90 from $38 in 2012 and $31.70 in 2007, the survey found.

The oil industry is booming in Mountrail County, which helps to push up farmland prices, says Jim Hennessy, county extension agent.

Another factor is that some ag producers, who had raised both livestock and crops, have gotten out of livestock and are concentrating on crops. Those producers want more farmland, increasing competition for it, he says.

The likely loss in 2014 of direct payments in the U.S. farm program would have “a dampening effect” on increases in rental rates, Swenson says.

But crop prices will continue to play the dominant role in the direction of rental rates, he says.

Though farmland rental rates have risen sharply in recent years, they haven’t increased nearly as much as land values, or the cost of buying land, Swenson says.

In LaMoure County, for instance, where farmland rental rates have doubled since 2007, land values soared from $911 in 2007 to $3,181 in 2013, a 3½-fold increase.

Swenson is uncertain whether land values will continue to rise, but doesn’t think they’ll drop sharply in the near future.

Pasture rates higher, too

Rental rates for pasture also have increased across North Dakota, the survey found.

High crop prices have caused some ag producers to begin raising crops on what had been pasture, Swenson says.

“So there’s a little less pasture, which increases demand for it,” Swenson says. “I don’t think it has a huge impact, but it has to contribute (to higher pasture rental rates) somewhat.”

Higher cropland rental rates also are a factor because they encourage some owners of pastureland to put a higher value on it, Swenson says.

The National Ag Statistics Service will issue a state-level survey of cropland rental rates for North Dakota and other states on Aug. 2.

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