ST. PAUL, Minn. (8/27/2014)—The Center for Farm Financial Management, part of University of Minnesota Extension, 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 more than 20 years.
Land rent negotiations are going to be very challenging this year. At current commodity prices it is going to be important for producers to know their costs and look at options to limit downside risk.
"The common reaction we get to 'FairRent' is that there is no such thing," said Dale Nordquist, CFFM Extension economist. "And that will likely be true this year. It looks like there will be a large divide between break-even rental rates and the current market for cash rents. Given this divide, it will be even more important for everyone to be equipped with the numbers when they enter into this fall's negotiations."
One option to limit risk might be a flexible cash lease, one that shares the risk of low prices and/or yields with the landlord while rewarding the landlord with a portion of the gains if prices and/or yields exceed expectations. 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. Sign up at https://fairrent.umn.edu/ and begin creating rental plans. Also, FINBIN is a great source of information of crop production costs for rental plans. It is at http://www.finbin.umn.edu/.
Source: Dale Nordquist, University of Minnesota Extension economist.
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