Look into Flexible Rental Agreements for 2010

February 4, 2010 06:00 PM

Rachel Duff, AgWeb Contributing Editor
Cropland rental prices have continued to climb with record farm prices, high farm incomes in 2008 and increases in land values. Crop prices have fallen off, so many farmers can't afford the rental rates at the current corn and bean prices, says David Bau of University of Minnesota Extension. He says that if landlords lock into a $200 rental rate, they'll lock into a loss.
A flexible rental agreement allows some of the risk to be shared between the farmer and landlord, he says. With rents likely to increase this year and the prices of crops unknown, flexible rental agreements would prevent a rental profit loss. There are many different ways to do a rental agreement, Bau says. Some of the ways are to do a base plan, based on yields, based on price or a combination.
In 2009, the break-even prices were from $4.25 to $4.50 for corn and $9.20 to $9.60 for soybeans, Bau says. His budget for 2010 shows 170 bu. corn at $3.50 and 46 bu. beans at $9, which would balance out at $155 per acre rental for farming half beans and half corn. If the landlord is locked into $200, farmers would need either better yield or better prices than what's expected to prevent a loss, Bau says.
Flexible rental agreements mean both the farmer and landlord are sharing the risk. These agreements usually contain a base rent set at a place where a farmer won't lose money with good crop insurance. If a farm does well, they share a profit, Bau says. Sharing the risk could mean larger profits for everyone.
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You can e-mail Rachel Duff at rduff@farmjournal.com

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