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Extension > Agricultural Business Management News > January 2016

Tuesday, January 19, 2016

Southwestern Minnesota Farmland Values Decline 8 Percent in 2015

By David Bau, Extension Educator

At the end of each year for the last twenty-one years, a survey has been conducted of farm land sales in fourteen southwestern Minnesota counties. Land values had been on a steadily increasing until 2014.  The survey reports bare farm land sales to non-related parties for the first six months of each year.  After reaching record high prices in 2013, the upward trend was broken as prices declined in 2014.  This trend continued in 2015.  Data collected in this survey is available at the county extension offices in Chippewa, Cottonwood, Jackson, Lac qui Parle, Lincoln, Lyon, Martin, Murray, Nobles, Pipestone, Redwood, Rock, Watonwan and Yellow Medicine Counties.  This year the decline across the fourteen counties averaged 8.3%.  Average land values had not declined since 1996 when the average SW Minnesota land prices were $1,175 per acre in 1995 to a high in 2013 to $8,466 then declined in 2014 and again to $6,929 in 2015.

Data from these counties indicate prices decreased from an average of $7,556 in 2014 to $6,929 in 2015 or a decrease of 8.3%.  This is only the second percent decrease as far back as this data has been collect since 1995.  In 2013 was the largest year to year increase of 35.6%.  Farmland prices decreased in ten counties and while increased in four counties including Chippewa, Lac qui Parle, Nobles and Rock from 2014 to 2015.  There was a lot of variability in the numbers from 2014 to 2015.  The largest increase was in Rock County with an increase of 19.2% while Cottonwood experienced the largest decrease of 27.2% for the sales that met the bare farmland to non-related party transaction.

Farm Resource Guide Available

By David Bau, Extension Educator

The Farm Resource Guide for 2016 is now available upon request at many University of Minnesota Extension County offices across the state.  It includes a variety of very useful farm business management information.  The front of the Guide has the most frequently requested information on Custom Rates, Rental Rates for various ag commodity, forages, bins and buildings, Farmland Sales and Rents and Pasture Rental rates.  There are lease forms for Cash Rent and Share Rent arrangements.  There is flexible rental arrangement information.  Marketing information including the cash price probabilities for cash corn and soybeans for Worthington, Minnesota, since 1974. Information from the Southwest Farm Business Management Association includes trends in costs, family living and net worth changes.  At the end of the Guide is a section on Feedlot Rule Highlights and information on Manure Agreement and Easements, including examples of Manure Spreading Lease and Land Application Agreement forms.

Included are the average cash prices for corn and soybeans to use as a benchmark along with statewide listing by county of the last five year average yields for corn and soybeans.  Statewide cropland rental information is available for counties with significant farm numbers in Adult Farm Management. Farmland sales information is available for all counties across Minnesota.  A second study lists bare farmland sales from 14 counties in southwest Minnesota.  There are many pages of information and forms which would be of benefit to the entire state including: custom rates; lease forms; commodity price probabilities for corn, soybeans, alfalfa hay, straw, grass hay, hogs and cattle.

This Resource Guide is available for a $25 fee plus postage and sales tax if you would like to have your own copy.  I can provide you the information in your preferred format: (e-mail cost $25 plus sales tax, CD cost $28.50 or hard copy cost $30.00).  The small $25 fee will help fund continued Extension efforts in Agricultural Business Management and will allow me to continue with the project and update the Resource Guide for 2017.  

If you would like your own copy of the Farm Resource Guide, please e-mail me at bauxx003@umn.edu or give me a call at 507-372-3900 ext. 3906 and let me know what form you would like to receive the Farm Resource Guide in.  I will send out the materials and an invoice as soon as possible.  I hope you find the Resource Guide useful and would welcome your feedback on what you would like to see included in next year’s Guide.

Wednesday, January 6, 2016

Women in Agriculture Conference


By: Pauline Van Nurden, Extension Educator


University of Minnesota Extension is hosting a Women in Agriculture Conference on February 18, 2016 at the Kelly Inn, St. Cloud.  This inaugural event  will be a day of learning and networking for women involved in agriculture in the region.  Registration begins at 9 am, with the conference convening from 9:30 am to 3:00 pm.

Keynote Speaker for the day is Dr. Robert Milligan, Cornell Professor Emeritus and Senior Consultant with Dairy Strategies, LLC.  Milligan is a popular and frequent ag leadership speaker.  His message for the day will challenge participants to proactively and aggressively address the future of their farm business. 

Monday, January 4, 2016

Where should 2016 Farmland Rental Rates be?

By David Bau, Extension Educator

The answer to the question depends upon who is answering.  Landlord property taxes continue to increase while farmer’s profit margins have turned negative.  The agribusiness management team just completed a state tour completing 47 workshops on what is a fair farmland rental agreement.  It seems this year determining what is fair, is a very challenging process.

There were a lot of frustrated people in the workshop audiences, with a composition of two-thirds landlords and one-third farmers.  Neither party is happy with the current situation and with the economics in farming.   What the farmer can afford to pay for rent and what landlords want to receive for rent.

Good times occurring in the recent past are still on many landlord’s minds, while the current low prices offered for 2016 are on the farmer’s mind.  Through the first nine months of 2015 the average cash price in Worthington for corn was $3.52 and soybeans $9.32 continuing the change to lower prices as is indicated on Table 1 below.

Table 1. Cash Prices for Corn and Soybeans, Worthington Minnesota by calendar year.



The fourth column is the average rent paid by farmers in southern Minnesota in adult farm management Programs as part of the FINBIN data base.

The last column is the average property tax paid on owned land in Minnesota in FINBIN data base each year.

As the table indicates, the high prices for corn, when above $6.00 cash, occurred in 2011, 2012 and 2013. While for soybeans high prices, above $12.00, occurred in 2011, 2012, 2013 and 2014.  Prices did start going lower in 2014 from 2013 and rents started falling slightly.  Now in 2015 prices continue lower, dropping by about one-third as compared to the higher prices. The 2015 average prices are comparable to 2010 when farmland rents averaged $168.25.

The last column shows the average real estate tax paid per acre on owned land again in the FINBIN data base for Minnesota.  You can see that property taxes have more than doubled from 2006 through 2014.  This is one reason landlords continue to seek an increase in rental rates. Another variable in rent negotiations is the farmer’s profit.  This increased from 2006 to 2008, then declined from 2008 to 2009 and then grew to each year to a record for income in 2012 and has been falling since.

There is some delayed reaction to increasing and decreasing prices which account for the challenge in determining what is a fair rental rate, as rents and land values adjust to current grain prices.  I stated at the workshops, rents could be staying the same, increasing or decreasing depending on the individual circumstances.  They could have had a long term lease that has yet to benefit from the recent high prices.  The fall in price and the basic economics of the 2016 crop outlook would encourage lower rental rates; if rents are lowered maybe a flexible component could be added to account for potential increased prices. Many landlords will want them to stay the same, but at current prices this will cause many farmers to lose money.

If 2016 grain prices were to improve, the frustrations for both landlord and farmers would decline.

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