Ben Waterman of UVM-Extension posted some excellent info about determining farmland lease rates:
As the end of year approaches, farmers might be renewing their land leases. “WHAT SHOULD THE ANNUAL PER-ACRE RENT BE?” Landowners might be wondering if 2012 is the right time to start leasing their land to a farmer. They also wonder, “WHAT SHOULD THE ANNUAL PER-ACRE RENT BE?” In renting farms and farmland, with no easy way to judge going market rates, it tends to be the number one question on people’s minds.
There are many considerations that factor into setting the appropriate cash rental rate for leasing a field or farm. Generally, the rate usually depends on three things:
1. Type of land in question. For example, pasture land vs hayland vs prime crop land. All else being equal, rent for tillable land is usually higher than for hayland. Hayland is usually higher than pasture land.
2. Type of operation that is leasing. For example, hoophouse vegetables vs corn/soybeans. A farmer engaged in intensive vegetable production is likely to pay a higher cash rent per acre than a farmer sowing annual commodity crops. A hay farmer or a grass farmer grazing livestock usually pays the least.
3. Whether or not there are buildings and/or other infrastructure being leased. Having buildings presents a greater risk and a higher cost of ownership for the land owner, and these properties usually are rented for more money.
With that said, there are other nuances that come into play when determining rent. The most fair rental rate, in the end, is one that’s determined by landowner and farmer as result of transparent and informed communication.
This article presents two useful online tools that might come in handy when determining baselines for cash rent. Neither tool should serve as the sole determinant for a rental rate, but rather as objective data alongside other information that assists in making a decision. Both tools are based on data on average cash rents collected by USDA as part of the agricultural census or other surveys.
1. The USDA National Agricultural Statistics Service (NASS) is in the process of updating “Quickstats,” its online query tool for filtering USDA census and survey data. The interactive database contains average annual cash rental rates for land categories in VT counties. To use the NASS Quick Stats Query Tool, Highlight “RENT” in the “commodity category.” You’ll see that the page automatically reloads to fill the other menus with appropriate information. For continuing with a search for cash rent, in the “data item category,” choose “EXPENSE, MEASURED IN $/ACRE” for the appropriate land category.
The New England division of NASS publishes a monthly “Agricultural Review” which compiles some interesting statistical reports. Land prices are featured from time to time. Page 6 of this recent report compares land rent rates for New England States. Rhode Island is by far the highest at $142/acre/yr for cropland.
2. The other online tool that can be used as a reference is the FSA Conservation Reserve Program (CRP) Soil Rental Rates (SRR). CRP is a program that pays farmers cash rent to take their land out of production and put it into conservation practices. The Soil Rental Rate is the price that USDA FSA will pay farmers per acre per year to enroll in CRP.
Click here to get to the FSA Soils Data Management System website, where you can access the SRR reports
Once entered into the Soils Data Management System webpage, click on “View Soil” under “Soils Data.” Choose the state and county and a list of SRRs will appear.
The SRR reports are based on the USDA NASS average rental rates. They are unique in that a specific rental rate is listed for every NRCS soils map unit (soil type). Soil types with fewer limitations to cultivation and that are more productive get a higher cash rent. Again, just like the NASS query tool, the the SRR tool should NOT be used as a single determinant for cash rent. FSA bases SRR on NASS market rental rates, but marks them up using certain factors to incentivize participation in CRP. The SRR tool is most useful as a reference for comparing two different parcels or plots of land with different soil types to determine which might be deserving of a higher cash rent.
Contact UVM Extension New Farmer Project at email@example.com for assistance with sorting through considerations in setting a fair and appropriate cash rental rate. We can also serve as an objective third party facilitator for the lease negotiation process between farmers and land owners.