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What Direction will 2019 Farmlands Rents Go? Stay the Same? Up? or Down?

by David Bau, Extension Educator

Each year I put together tables listing actual farmland rental rates by county from Adult Farm Management Records.  Unfortunately farmers and landlords are starting to negotiate 2019 farmland rental rates and the last actual numbers available are for 2017 so I am forced to estimate figures for 2018 and 2019.  When I did this last year I used an estimate of a 2.5% decline and the actual figure came in at 3.9% decline statewide.  For 2017 I heard many times that rents were down, although some rents went up and some remained the same, in table 1 below I estimated a 4% decline in 2018 from 2017.

But what direction should 2019 farmland rental rates go?  How do I determine an estimate for 2018 farmland rental rates?

Should they stay the same? 
Landlord property taxes continue to increase. While the state legislature help with some of the school referendum costs, they still increase taxes.  If rents stay the same, a landlord’s income will go down if taxes increase. If taxes are not increasing, the revenue to the landlord will remain constant, when they have grown accustomed to significant increases since 2007.

Should they go up?
Landlord expenses increase as property taxes increase and they want to pass this cost increase onto the farmer and increase the rental rate.  Another example might be where there has been a long term lease in place where the rental rate has not changed for many years and this rate might be considered low today and due for an increase.

Should they go down?
Farmers have experienced decreasing corn and soybean prices since record high prices in
2012 for corn and 2013 for soybeans and current prices offered for 2019 corn and beans are below what farmers sold their grain for in 2007, when rents were $125 per acre.  Average production budgets for 2019 indicate losses for farmers if rents are above $112.50 per acre.
With the average rents in Table 1 in 2017 averaging $205 per acre, to go down to $112.50 per acre would be 45% reduction in average rents.  The average Southwestern Minnesota corn farmer has lost money for four consecutive years and soybeans lost money in 2014 and 2015 and made money in 2016 and 2017.  The results for 2019 corn and soybeans look to be negative again.

So you could make an argument for all three scenarios, but looking at the economics for corn and soybean production in 2019 using 190 bushels per acre yield and $3.20 price per bushel, for corn and 52 bushel yield and $8.00 price for soybeans, income would be $623 for corn per acre with $15 government payment and $416 for soybeans with no government payment. With average cost projected to be $528 for corn and $285 for soybeans before rent and labor, this would leave $95 per acre for corn and $131 per acre for soybeans to be shared between the landlord as rent and the farmer and income. This would be an average of $113 per acre to be shared.

So I projected a 4% decline in rental rates from 2018 to 2019 for figures listed in Table 1.
But from earlier examples 2019 farmland rates could go down by over 42% or increase from 2017 rates depending on the individual situations.  It will be a very challenging year for both the landlord and farmer to determine where the 2019 farmland rental rate should be.

Counties 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Est. 2019 Est.
Brown 148 154 176 207 208 211 205 210 207 199 191
Cottonwood 139 148 164 174 196 200 192 196 184 177 170
Jackson 145 157 167 209 219 223 213 214 195 187 180
Lincoln 152 163 167 168 165 168 159 155 175 168 161
Lyon 137 140 168 185 218 223 222 197 202 194 186
Martin 177 181 210 254 274 272 255 245 234 225 216
Murray 143 154 168 237 265 268 238 230 225 216 207
Nicollet 161 169 197 223 251 263 245 231 223 214 206
Nobles 140 146 168 182 207 202 200 201 191 183 176
Pipestone 121 136 150 223 219 236 213 229 202 194 186
Redwood 140 158 173 187 211 213 207 198 197 189 182
Rock 168 180 193 232 202 205 195 190 190 182 175
Sibley 172 192 203 245 262 263 250 252 237 228 218
Watonwan 146 165 177 218 256 239 238 225 215 206 198
Average 149 160 177 210 225 228 217 212 205 197 189

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