By David Bau
What are the trends in farmland rental rates and where are they going in 2015? I have just completed 45 workshops across the state and asked this question multiple times to each audience. What direction should rents go in 2015? I had three possible answers, they could stay the same, they could go up or they could go down. How you answer this depends on your circumstances.
Many farmers are looking at losses in 2015 for both corn and soybeans, but need to maintain their current farm size and are going to pay the same rate as last year even if it creates a loss at current prices hoping commodity prices will rise. Below is a table showing farmland rental rates in southwest Minnesota. In the FINBIN data base for the last five years from 2009 to 2013 rental rates have increased at a yearly rate of 11.8 percent. Commodity prices started declining from record highs in 2012 and continued lower in 2013 and 2014. The table includes half of this average increase or 5.9 percent to get the estimate for 2014 average county rental rates. For 2015, commodity prices continue lower. In the table a 2.95 percent increase was applied to 2014 rates to get an estimate for 2015 farmland rental rates.
There will be pressure for higher farmland rental rates to go down in 2015 due to the steep decline in corn prices and lower a smaller decline in soybean prices. As I traveled the state, four counties had conducted farmland rental surveys and in each county rents declined in 2015 from 2014. One county declined by 7.7%, another 8.9%, another $9 per acre and another from an average of $290 in 2014 to $264 average for 2015.
Can farmland rents continue the increasing trend in 2015? The projected 2015 corn and soybean total income and expenses would indicate a loss at current cash forward contract prices available using historic yields and 2014 rents and expenses. This could cause lower or flat farmland rental rates in 2015 as compared to 2014. To find more rental information go to University of Minnesota Extension's home page www.extension.umn.edu, click on "Agriculture" Icon, then "Agricultural Business Management" and then click "Land Economics" Icon. Here you will find a wealth of information.
Source:umn.edu