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By David Bau, Extension Educator

Negotiating a fair rental agreement that satisfies the land owner and the farmer is a challenge. In these Rent Workshops, Extension Educator David Bau will provide examples, fact sheets and worksheets to determine a fair farm land rental rate for both parties.

The workshop will cover:

  • Farmland rental rate trends
  • Land values
  • Increasing input costs
  • Landlord worksheet
  • Tenant worksheet
  • Fair rent program
  • A rental rate that works
  • Flexible leases
  • Rental lease examples
  • What is a fair rental agreement?

Who should attend?

  • Landlords and farm land owners
  • Farmers and tenants
  • Agri-businesses
  • Ag professionals

Rent Workshop Schedule

11/5/14 North Mankato 9:30 am South Central College Conference Center
1920 Lee Blvd, North Mankato 56003
11/5/14 St. Peter 2:00 pm

Community Center
600 S. 5th street, St. Peter, MN 56082

11/6/14 Cologne 9:30 am

Carver County Public Works Building
11360 Us Hwy 212, Cologne, MN  55322

11/6/14 Shakopee 2:00 pm

Scott County Law Enforcement Center
301 Fuller St. S., Shakopee, MN  55379 

11/7/14 Worthington 9:30 am Extension Regional Office
1527 Prairie Drive, Worthington, MN 56187
11/10/14 Farmington 9:30 am

Dakota County Extension Center Conference Room
4100 220th St. W, Farmington, MN 55024

11/10/14 Northfield 2:00 pm Northfield Public Library
210 Washington Street, Northfield, MN 55057
11/13/14 Le Center 9:30 am 4-H Building Le Sueur County Fairgrounds
Hwy 99, Le Center, MN 56057
11/13/14 Lake Crystal 2:00 pm American Legion Post 294
County Road 20 South, Lake Crystal, MN 56055
11/14/14 Alexandria 9:30 am Douglas County Public Works Building
526 Willow Drive, Alexandria, MN 56308
11/14/14 Alexandria 1:30 pm Douglas County Public Works Building
526 Willow Drive, Alexandria, MN 56308
11/17/14 Winona 9:30 am Winona County Office Building Room 102B
202 W. 3rd St., Winona MN 55987
11/17/14 Preston 2:00 pm Fillmore County Office Building
902 Houston St. NW, Preston, MN 55965
11/19/14 Willmar 9:30 am Mid Central Research & Outreach Center
1802 18th St. NE, Willmar, MN 56201
11/19/14 Madison 2:00 pm Lac qui Parle County Annex
422 5th Ave., Madison, MN 56256
11/20/14 Winthrop 9:30 am United Farmers Coop Main Office
705 E. 4th St., Winthrop MN 55396
11/20/14 Sleepy Eye 2:00 pm Brown County Extension Office
300 2nd Ave. SW, Sleepy Eye, MN 56085
11/21/14 Greenwald 9:30 am Greenwald Pub
310 1st Ave. N., Greenwald, MN 56335
11/21/14 Foley 1:30 pm Mr. Jim's
840 Highway 23, Foley, MN 56329
11/24/14 Caledonia 9:30 am Criminal Justice Center
306 South Marshall St., Caledonia, MN 55921
11/24/14 St. Charles 2:00 pm St. Charles City Hall
830 Whitewater Ave., St. Charles, MN 55972
12/1/14 Marshall 9:30 am Lyon County Government Center
607 West Main St. Rooms 4 & 5, Marshall, MN 56258
12/1/14 Pipestone 2:00 p.m. Minnesota West Room 127
1314 North Hiawatha, Pipestone, MN 56164
12/3/14 Jordan 9:30 a.m. Scott County Extension Office
7151 190th West, Jordan, MN 55318
12/3/14 Chaska 2:00 p.m. Carver County Government Center EOC
606 E. 4th St., Chaska, MN 55318
12/4/4 Austin 9:30 a.m. Mower County Courthouse East View Room 201
1st St. NE, Austin, MN 55912
12/4/14 Albert Lea 2:00 p.m. Freeborn County Government Building
411 S. Broadway, Albert Lea, MN 56007
12/5/14 Morris 9:30 a.m. West Central Research and Outreach Center
46352 State Hwy 329, Morris, MN 56267
12/5/14 Willmar 2:00 p.m. Mid Central Research & Outreach Center
1802 18th St. NE, Willmar, MN 56201
12/8/14 Slayton 9:30 a.m. Murray County Fairgrounds 4-H Building
3048 S. Broadway Ave., Slayton, MN 56172
12/8/14 Lamberton 2:00 pm Southwest Research & Outreach Center
23669 130th St., Lamberton, MN 56152
12/9/14 Hutchinson 9:30 am Hutchinson Event Center
1005 Hwy 15 S Plaza 15, Hutchinson, MN 55350
12/9/14 Gaylord 2:00 pm Sibley County Courthouse Annex Basement
400 Court Ave., Gaylord, MN 55334
12/10/14 Blooming Prairie 9:30 am Blooming Prairie City Center
138 Hwy Ave. S., Blooming Prairie, MN 55917
12/10/14 Rochester 2:00 pm Auditorium UCR-Heintz Center
1926 College View Road SE, Rochester, MN 55904
12/11/14 Little Falls 9:30 am Initiative Foundation
405 1st Street SE, Little Falls, MN. 56345
12/11/14 Browerville 1:30 pm Browerville Community Center
Main St. & W. 2nd St., Browerville, MN 56438
12/12/14 Waseca 9 a.m. Starfire Event Center
204 2nd Street, SW, Waseca, MN 56093
12/17/14 Rochester 9:30 am Auditorium UCR-Heintz Center
1926 College View Road SE, Rochester, MN 55904
12/17/14 Owatonna 2:00 pm Steele County Community Center
1380 S. Elm St., Owatonna, MN 55060
12/18/14 Buffalo 9:30 am Wright County Courthouse Room 120
10 2nd St. NW Room 402, Buffalo, MN 55313
12/18/14 Litchfield 2:00 pm Family Services Building
114 North Holcombe Ave. Room 200, Litchfield, MN 55355
12/19/14 Olivia 9:30 am Renville County Government Service Center
Rooms 116 & 117, 105 South 5th St., Olivia, MN 56272

Land rent negotiations are going to be very challenging this year. At current commodity prices it is going to be very important for producers to know their costs and look at options to limit downside risk. The Center for Farm Financial Management, University of Minnesota has just released a tool to help producers and landlords evaluate alternative land rental arrangements. FairRent for the Web is a new and improved web version of the FairRent desktop software that CFFM has distributed for over 20 years.

The new web version of FairRent includes the option to evaluate seven different flex lease options as well as traditional cash rent and share rental returns. Another improvement is the inclusion of crop insurance in the analysis to show how insurance limits downside risk.

FairRent is free to use. Just sign up at and begin creating rental plans. Also, check out FINBIN, a great source of information of crop production costs for your rental plans.

Searching for a Fair Rent for 2014

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After the recent years of high crop prices and low interest rates, land prices and rents have risen to new heights. But now, with the recent drop in crop prices and the stickiness of land rents not falling as quickly as crop prices, many farmers are feeling the squeeze once again between revenue, costs, and rent. This is painting an unhappy, perhaps tense picture for both tenants and landowners as rents are discussed and negotiated for 2014.

As a first step in rent negotiation, let's look at what each side sees from their viewpoint.

As a base, we'll start with the projected returns and costs for growing corn in 2014 in west central Minnesota (Table 1). This projection is based on the 2012 production records for west central Minnesota, recent NASS data on prices paid by farmers for inputs, and CBOT futures prices. (Details are in the footnote for the table.)

Based on this projection, an owner-operator is projected to face a loss of $180 per acre. This may be a "paper" loss. The owner-operator does not necessarily face financial trouble immediately, but they would not receive their desired returns for labor, management, and equity in land.

To understand what a tenant and a landowner face individually, we split the owner-operator revenue and costs into two columns: one for the tenant and one for the owner.

In a traditional cash rent lease, tenants receive all the revenue and pay for all direct expenses of growing the crop, their overhead costs, and rent to the landowner - plus they have an expectation of receiving some income for unpaid labor and management ($70 per acre in this example). In the tenant's column for cash rent, the tenant's share of revenue and expenses is projected to provide a net return of $108 per acre before any land rent is paid. Thus, these cost and revenue projections indicate the maximum cash rent the tenant can pay (and still pay all other expenses plus their expectation for labor and management) is $108 per acre.

The astute reader who knows the current land rent market can already see a problem coming.

Landowners do not receive any revenue from production in a traditional cash lease and do not pay for any production costs. Landowners do have overhead expenses such as real estate taxes and insurance plus they have an expectation of a return to the value of the land from production ($240 per acre in this example). In the owner's column for cash rent, the landowner is projected to have expenses of $288 per acre before receiving any rent revenue. Thus, these projections indicate the minimum cash rent the landowner wants is $288 per acre in order to pay all expenses plus their expectation of a return to their land.

There is a large difference between the tenant's negotiating position and the landowner's negotiating position in this projection. The tenant has a maximum of $108 per acre for land rent, and the landowner wants at least $288 per acre for land rent. This does not create an easy negotiation situation--perhaps a mild statement.

Current land rents are much closer to what the landowner wants and not near what the tenant is projected to be able to pay. Even if the tenant was willing to receive no income for his or her labor and management (instead of $70), the tenant's maximum cash rent would be $178. So what do the tenant and landowner do?

One quick answer is for this landowner to look for a tenant willing to pay $288 or more. Given the financial position of many farms, some tenants may be willing to pay a rent this high or higher in 2014. I hear some have. This projection says they will be losing money in 2014 on this rented land. But this loss may not create financial devastation for the farm if they have sufficient cash reserves. Perhaps their long run view says this loss is necessary in 2014 in order to increase the farm size for future years. Perhaps these farms have already priced their crops at prices higher than current future prices indicate.

But crop price projections do not indicate a foreseeable return to levels to the levels of recent years. So, how long can (or should) a tenant continue to pay a cash rent higher than the tenant is able to sustain into the future?

The current tenant may not want to lose acreage so signs the owner's lease agreement for the high rent even though they know they are losing money ($180 per acre in this projection). Again, how long can this be sustained? When should the tenant decide to pursue other income alternatives because the expected returns to labor, management, and equity are greater in those alternatives?

Another answer (for 2014 or a subsequent year) is for the tenant and landowner to accept that crop price levels have changed and both the land market and land rental market are likely to change or have changed. Then the two parties can negotiate over what their expectations are.

The tenant will have to change their expectation for returns to labor and management to less than $70. The landowner will have to adjust their estimated land value and expected rate of return to less than $240 per acre. These are the residual returns after other expenses are paid. The amount of adjustment each party has to make will depend on the competitiveness of the rental market and which party has more bargaining power.

The negotiation centers on these two expectations because they are the "softer" numbers in the budget compared to the "harder" estimates of what the cost of the fertilizer will be, for example. The tenant and landowner will likely not talk openly between them about these expectations, but they are what they will be adjusting as they negotiate.

We could say the tenant should adjust production practices (and thus costs) or increase yield to be more economical. But farmers know their land and are choosing cropping practices that are economically optimal or close to that. Some lax management may have crept in during the recent years of high prices, but it's not the $180 difference in this projection. I don't know any farmers who do recreational tillage or recreational fertilizer applications.

Another answer to this current situation may be to change the form of lease.

Instead of a cash lease, the landowner and tenant could choose to sign a share lease or some form of flexible cash lease. In a share lease, if the production and the direct production costs (including drying) were shared 50-50, the tenant paid all machinery costs, and both parties paid their overhead costs, the projection in shows the tenant paying 48% of the total costs and the landowner paying 52%. So, a 50-50 share lease is probably fair given the uncertainty of prices and yields.

However, if these projections became the actual numbers in 2014, both parties would have losses under a share lease. The tenant would not receive any return to labor and management and lose another $6. The landowner would not obtain the desired return to the value of land.

Moving to a share lease or other form of flexible lease may be needed to provide both parties the ability to survive this period of adjustment to new market conditions.

Join University of Minnesota Extension for this workshop designed to assist land owners, farmers, and agri-business professionals with farm financial issues related to farmland rental rates, ownership, management, leasing agreements, and other matters.

Meetings will be held throughout southern and central Minnesota at no cost. View meeting dates and locations for central Minnesota and southern Minnesota.

The meetings are sponsored by the University of Minnesota Extension and will last approximately two hours.

Presenter: Dave Bau, Ag Business Management, Extension Educator


  • Farmland rental rate trends

  • Land values

  • Increasing input costs

  • Landlord worksheet

  • Tenant worksheet

  • A rental rate that works, Excel spreadsheet

  • Flexible leases

  • Rental lease examples

  • What is a fair rental agreement?

Who should attend:

  • Landlords and farm land owners

  • Farmers and tenants

  • Agri-businesses

  • Ag professionals

Make plans now to attend one of these free informative meetings.

In case of inclement weather, please contact the Farm Information Line at 1-800-232-9077.

For more information, please contact Dave Bau at 507-360-0664 or

View meeting dates and locations on our calendar.

Trends in farmland rental rates for 2014

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By David Bau, Extension Educator
University of Minnesota Extension

What are the trends in farmland rental rates and where are they going in 2014? There are many places to find relevant information. The "Cropland Rental Rates for Minnesota Counties" publication prepared by Gary Hachfeld, William Lazarus, Dale Nordquist, and Rann Loppnow utilizes the FINBIN data base with historic information from an adult farm management data base. You can find the publication at two different websites: the Center for Farm Financial Management website under publications, and the Southwest Research and Outreach Center website under research and outreach.

The Minnesota Agricultural Statistic Service cropland rental information is included in the annual bulletin. It can be found online (once the federal government shutdown ends). Another annual publication by the Minnesota Agricultural Statistic Service on cash rent (167 K PDF) is released in September each year.

Iowa completes a statewide survey of farmers and landlords that can be found at the Iowa State University Extension website.

In the "Cropland Rental Rates for Minnesota Counties" publication, the average annual change in rental rates by region from 2011 to 2012 from FINBIN data indicated a 8.9% increase in Northwestern Minnesota, 18.4% increase in West Central, 13.4% increase in Central, 18.0% increase in Southwest, 19.9% increase in South Central and 18.6% increase in Southeast Minnesota. Combining the regions, it would be a 17.8% increase in farmland rental rates across Minnesota from 2011 to 2012, up from the 13.1% increase the previous year.

The Minnesota Agricultural Statistic Service indicated an 11.1% increase across Minnesota from 2011 to 2012 and an 18.0% increase from 2012 to 2013. The Iowa survey data indicated in 2013 the average Iowa farmland rent increased to $270 up from the $252 average in 2012 and from $214 per acre in 2011, with all 9 districts recording an increase in average rental rates.

Cropland rental rates can vary significantly due to many factors including crop returns based on current grain prices and projected yields, land quality, tile and drainage on the farmland, the federal farm program, previous crops, herbicides and fertility, use of facilities, length of contract and other factors. In the "Cropland Rental Rates for Minnesota Counties" publication, you can also see the average rents for the bottom 10 percent and the top 10 percent to give you a range of rents paid in the county along with the median rent for each county. This publication is a helpful tool to use when determining rental rates.

The continued high prices in the grain markets continue to put pressure on rental rates to increase for 2013 but the current prices for 2013 and 2014 corn are much lower than one year ago. On October 11, 2012 Lamberton, MN cash bid for 2012 corn was $7.38 and for 2013 corn $5.79 as of October 9, 2013 the cash bid for 2013 corn was $4.18 and for 2014 corn $4.35. Assuming 175 bushels of corn produced in each year, with all crop sold out of field, the gross revenue would be $1,291.50 for 2012, $731.50 for 2013 and $761.25 for 2014.

Southern Minnesota actual yields were lower than 175 in 2012 and maybe higher in 2013, but yet to be determined for 2014. The total expense, including direct and overhead expenses, to produce an acre of corn in 2012 for over 1000 southern Minnesota farmers was $778.63 per acre paying $200 per acre rent. If a farmer achieves 200 bushels in 2013, gross revenue per acre would be $836, if expenses stayed constant, the farmer would make $57.37 profit. But for the last 10 years input costs have increased 9 percent per year, so the $778.63 expense for 2012 would increase to $848.71 in 2013, below the total revenue projection. If you apply the 9 percent again for 2014 total expenses would be $925.09 with total revenue projected at $761.25 for 2014. This would indicate a loss of $163.86 per acre.

Soybeans expenses in 2012 were $472.23 with rents at $192 per acre. Using a 7 percent increase in input costs, the average increase for past 10 years for soybeans, 2013 expenses project to $505.28 in 2013 and $540.66 in 2014. Lamberton, MN soybean prices on October 11, 2012 were $14.72 for 2012 soybeans and $12.68 for 2013 beans, while on October 9, 2013 prices were $12.43 for 2013 and $11.06 for 2014. Using these prices with assumed yield of 48 bushels per acre, gross revenue would be $706.56 in 2012, $596.64 in 2013 and $530.88 in 2014. So beans make a profit in 2012, 2013 but have a loss of $9.78 for 2014.

The average rents for the fourteen counties in Southwest Minnesota were $160 in 2010, $177 in 2011 and $209 in 2012. For the previous five years, rents in Southwest Minnesota have increased an average of 12.1 percent each year. If you apply a 12.1% increase for 2013 the average goes up to $234 and for 2014 using 12.1% percent increase again, applied to 2013 rate, the average rent for Southwest Minnesota would project to $263 for 2014.

Can farmland rents continue this increasing trend in 2014? The projected 2014 corn and soybean total income and expenses would indicate a loss at current cash forward contract prices available using historic yields. If prices increase or farmers are able to get better yields in 2014 than projected, it would be possible to pay these trending higher rental rates, but based on the current corn and soybean prices for 2014, there is a real potential for farmers to lose money. If this occurs it should cause lower or flat farmland rental rates in 2014 as compared to 2013.

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