Farmland Leasing Considerations for 2020

By Ned M. Birkey, MSU Extension Educator Emeritus/ Spartan Ag; January 31, 2020; birkey@msu.edu.

This time of the year farmers and landowners are inquiring about farmland cash rents and making farmland leasing arrangements for the 2020 crop year. I receive inquires on a regular basis from landowners about farmland values and cash rents, particularly if they plan to negotiate the price, terms or conditions with an existing tenant farmer, or because they are thinking about making a change. 

Past farm leasing surveys have consistently shown that there are many variables, most tangible, and some intangible, which usually result in the final negotiated cash rent to be higher or lower than the USDA Census county average rate. The USDA average cash rent for non-irrigated farmland Monroe County for 2019 was $131 per tillable acre, down $9 per acre from the last survey of 2017. The average price per acre in Lenawee County in 2019 was $138 and for Washtenaw County was $83.50 per tillable acre. Irrigated farmland in southeast Michigan had an average cash rent of $205 per acre. 

According to a July 2019 Report No. 652 by Dr. Christopher Wolf at MSU, the average value of agricultural land for southeast Michigan was $4,237 per acre for tiled farmland and $3,564 for non-tiled farmland.

All farm leases, whether fixed cash, variable cash, crop-share, building or pasture leases should be in writing. This should not be viewed by either party as a lack of trust, but to ensure that both parties know what all the terms of the lease are. There have been disputes over even simple matters, such as the landowner expecting the farmer to walk soybean fields and pull weed escapes. 

There are several free, sample generic lease forms that landowners and farmers can use or modify or an attorney can draw up a lease as well. The Midwest Plan Service based at Iowa State University has various lease forms that have been written, reviewed and edited by members of the North Central Farm Management Extension committee. These include cash, crop share, pasture, farm building or livestock facility and machinery lease forms. All sample forms are available free of charge at; www.mwps.sws.iastate.edu/free-lease-forms.     

Some of the many variables that can affect crop land rent include;

·      Size and location of the tract of land and the distance to the “home” farm.

·      Soil type, soil fertility level, weed history, presence of rocks, ditches or other nuisances or hindrances.

·      Surface and subsurface drainage, a tile map, soil erosion characteristics or any landowner restrictions of crops or tillage.

·      Past crop and yield history and the presence of soil pathogens, such as Soybean cyst nematodes, Sclerotinia white mold, Sudden Death Syndrome, Phytophthora root rot, etc.

·      Proximity of non-farm neighbors, schools, home gardens, organic farms or other factors that can affect pesticide or anhydrous ammonia use, night-time farm work with lights or dust, or if the land has the potential for trespassing or crop damage.

·      Width of roads, bridges, amount of traffic, bordering trees or other hindrances.

·      Payment schedule and the length of the lease.

·      Neighboring weedy fields or the requirement to keep non-farm ditches or other non-tillable areas mowed and clean, or restrictions of crops grown, such as no corn or low height crops.

·      Availability of buildings or electricity and driveways suitable for modern farm equipment.

An intangible but nevertheless real factor affecting land rental price is the integrity of the tenant farmer. There is a real value to the landowner of having a trustworthy tenant, especially for an absentee landowner. Though this factor is hard to quantify in terms of dollars per acre, this should result in a lower cash payment than if the landowner is constantly worried about getting paid on time, regular communication with the farmer, and the status of the crops. A good tenant will keep weeds under control, make payments on time, control soil erosion, soil test on a regular basis, and do other things that will not run down the farm or erode the topsoil. They will also keep the landowner informed and provide them with a copy of soil tests, yields and other farm information.    

Landowners simply interested in securing the highest possible cash rent have no idea of all the little things that a “good” farmer does to look after the soil and farm. A tenant paying very high cash rent may cut corners to keep their overall costs down, such as running down the soil fertility level, and could be negligent of important details that the landowner assumed would be done.