Northland farmers focus on rental rates
WORTHINGTON, Minn. -- Negotiating farmland rental rates, often one of the most challenging tasks in agriculture, could be especially difficult this winter.
WORTHINGTON, Minn. - Negotiating farmland rental rates, often one of the most challenging tasks in agriculture, could be especially difficult this winter.
"I could make an argument for rates going up, staying the same or going down, depending on your circumstances," says David Bau, University of Minnesota ag business management educator.
Bau is leading a series of 42 farmland rental rate workshops across Minnesota. The free sessions, which began Nov. 2 in Waseca and end Dec. 14 in St. Peter, are designed for farmers, landowners and agribusiness professionals.
Most farmers and landlords have begun, or soon will begin, renegotiating cropland leases that expired after the 2016 growing season. Minnesota farm leases typically are for one or two years, ag officials say.
Farmland rental rates rose in Minnesota and elsewhere because of strong crop prices and farm profitability from 2008 to 2012. Now, rental rates are pressured downward by poor crop prices and declining farm profits.
But rates often are said to be "sticky," which means they rise slowly in good times and fall slowly in difficult economic conditions. Rising property taxes and good yields in much of Minnesota, which at least partially offset poor crop prices, further complicate negotiations on farmland rental rates.
The growing number of landlords will little or no direct connection to agriculture also can slow negotiations, Bau and others say.
Such landlords sometimes focus on what they consider an adequate return on their land, not what's financially feasible for farmers to pay, Bau says.
Bay's best estimate, for now, is that rental rates overall will decline 7 percent statewide. "That's what I'm going with, anyway," he says.
Rates in individual areas might fall more, hold steady or rise, depending on how much they rose in the past and the crops grown there, he says.
So-called flexible rates, or ones that reflect yields, prices of a combination of the two, are an option. They give landlords more money when times are good, less money when times are tough.
Interest in flexible rates appears to be growing, even though many landlords want the certainty of a fixed rate, Bau says.
For more information, visit extension.umn.edu/agriculture.