Transcript What is a Fair & Profitable Rental Agreement? 20 Location across Minnesota David Bau Extension Educator Agricultural Business Management University of Minnesota Extension [email protected] Copyright @ 2012-13

What is a Fair & Profitable Rental Agreement?
20 Location across Minnesota
David Bau
Extension Educator
Agricultural Business Management
University of Minnesota Extension
[email protected]
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
TODAY’S AGENDA:
• FINBIN DATA
• Increasing Input costs
• Minnesota Agricultural Statistic Information
• Farm Land Rental Rate Trends
• Land Values
• Landlord Worksheet
• Tenant Worksheet
• A Rental Rate That Works; Excel Spreadsheet
• Flexible Leases
• Rental Lease Examples
• What is a Fair Rental Agreement?
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
FINBIN DATA
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
CORN Budget
Southern MN FINBIN Data
Yield per acre (bu.)
Operators share of yield %
Value per bu.
Total product return per acre
Miscellaneous income per acre
Gross return per acre
Maximum Minimum
Value
Value
190.5
63.62
100
100
5.66
1.73
893.43
143.38
69.66
-1.81
929.62
213.04
Actual Average
Project Project Forecast
2011
2002-2011
2012
2013
2013
157.85
173.41
163
168
176
100
100.00
100
100
100
5.66
3.30
5.85
6.04
5.50
893.43
572.72
935.10
976.77
968
36.19
14.20
34.33
32.47
10
929.62
586.92
969.43 1,009.24
978
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Direct Expenses
Seed
Fertilizer
Crop chemicals
Crop insurance
Drying fuel
Fuel & oil
Repairs
Custom hire
Hired labor
Land rent
Machinery & bldg leases
Utilities
Marketing
Operating interest
Miscellaneous
Total direct expenses per acre
Return over direct exp per acre
Maximum Minimum
Value
Value
102.11
25.96
158.46
32.15
30.17
22.19
27.13
2.93
36.57
4.28
34.03
8.74
45.87
18.27
10.37
3.09
3.47
0.15
169.32
78.76
3.25
0.32
1.20
0.22
3.32
0.30
15.14
6.99
5.88
0.96
587.76
216.2
349.7
-33.01
Average
Actual
2002Project Project Forecast
2011
2011
2012
2013
2013
102.11
65.25 $106.34 $110.57
120
148.36
90.64 $154.82 $161.27
200
27.59
25.67
$27.78
$27.97
28
23.49
15.60
$24.63
$25.77
25
5.75
14.92
$5.61
$5.47
15
34.03
20.79
$35.39
$36.75
37
45.87
29.56
$47.30
$48.72
49
10.37
5.99
$10.69
$11.01
11
1.71
1.20
$1.90
$2.09
2
169.32
130.49 $174.35 $179.38
220
2.14
1.88
$2.22
$2.30
2
0.00
0.41
$0.08
$0.16
1
3.32
1.56
$3.48
$3.64
4
10.19
10.36
$10.34
$10.48
11
3.51
2.93
$3.65
$3.79
4
587.76
417.40 $608.40 $629.04
729
341.86
169.52 $361.03 $380.20
269
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Overhead Expenses
Maximum
Value
Minimum
Value
Actual
2011
Average
2002-2011
Project
2012
Project
2013
Forecast
2013
3.04
12.02
6.45
7.37
1.74
4.74
1.37
2.13
0.00
12.02
6.01
7.37
2.32
7.38
5.06
5.24
$0.04
$12.30
$6.27
$7.66
$0.07
$12.58
$6.53
$7.95
2
13
6
8
5.18
2.12
5.18
3.48
$5.34
$5.50
6
Dues & professional fees
Interest
Mach & bldg depreciation
Miscellaneous
Total overhead expenses per acre
3.40
8.28
49.09
9.09
100.11
0.42
4.10
18.05
3.91
43.6
3.40
7.97
49.09
9.09
100.11
1.67
6.92
31.16
5.94
68.08
$3.59
$8.17
$49.96
$9.29
$102.55
$3.78
$8.37
$50.82
$9.48
$105.00
4
8
51
10
108
Total dir & ovhd expenses per acre
Net return per acre
Lbr & mgt charge per acre
Net return over lbr & mgt
687.88
259.05
51.14
209.07
263.91
-81.89
24.18
-107.64
687.88
241.60
51.14
209.07
485.48
101.42
37.20
73.53
$710.97
$258.32
$52.64
$225.20
$734.05
$275.03
$54.14
$241.33
837
141
50
91
Government payments
Net return with gov’t payments
51.95
229.05
-7.85
-71.72
18.62
227.69
22.90
90.54
$18.37
$243.82
$18.12
$259.95
20
111
Custom Hire
Hired labor
Machinery & bldg leases
Farm insurance
Utilities
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Cost of Production
Total direct expense per bu.
Total dir & ovhd exp per bu.
With labor & management
Total exp less govt & oth income
Est. labor hours per acre
Maximum
Value
Minimum
Value
Actual
2011
$3.72
$4.36
$4.68
$4.01
3.37
$1.53
$1.83
$1.83
$1.64
2.42
$3.72
$4.36
$4.68
$4.01
2.82
Average
2002-2011
2.40
2.80
2.87
2.71
2.81
Project
2012
Project
2013
$3.74
$4.36
$4.68
$4.06
2.80
$3.76
$4.37
$4.68
$4.10
2.58
Forecast
2013
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
4.14
4.76
5.04
4.87
2.6
Increasing Input costs
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Input Cost Trends
Input costs for corn have been increasing
at rate of 9% for corn since 2003.
Input costs for soybeans have increased at
a rate of 7% per year since 2003.
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
www.finbin.umn.edu
Land Rental Rates Ranged
from $67.00 to $265.15 per acre
This is almost $200 range in 2011
What will it be in 2013 in your area?
$300 -$400
Copyright © 2011-12. University of Minnesota. All Rights Reserved.
Acceptable Price Worksheet:
Southwest Research and Outreach website
http://swroc.cfans.umn.edu/SWFM/farm_mgmt.html
Excel spreadsheet to calculate your breakevens
Ranges: $4.50 to $5.20 for corn
$10.00 to $13.00 for soybeans
Corn Cash Rental Payment
After $663 per acre expenses including $70 labor charge
Yield Per Acre
Price/Bu
130
145
160
175
190
215
$4.00
-143
-78
-13
52
117
182
247
312
377
-83
-10.5
62
134.5
207
279.5
352
424.5
497
-23
57
137
217
297
377
457
537
617
37
125
212
300
387
475
562
650
737
97
192
287
382
477
572
667
762
857
197
305
412
520
627
735
842
950
1057
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
$7.50
$8.00
Copyright © 2011-12. University of Minnesota. All Rights Reserved.
Minnesota Agricultural Statistic
Rental Information
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Minnesota Cropland and Pasture Rental Rates
Data provided by the Minnesota Agricultural Statistic Service
September 2011 and 2010 and May 2009
NASS.USDA.GOV
Cropland Rental Rates
County
Cottonwood
Jackson
Lincoln
Lyon
Murray
Nobles
Pipestone
Redwood
Rock
SOUTHWEST
Pasture Rental Rates
2012
2011
2010
2009
2008
2012
2011
2010
2009
204
178
149
174
205
185
156
184
213
183
160
155
141
146
159
170
140
178
182
159
146
155
132
146
158
148
136
156
172
149
137
146
116
132
137
141
137
144
161
139
135
145
118
121
134
134
118
138
149
NA
NA
37
50
5
58
NA
48
NA
51
49
NA
NA
NA
30.5
34.5
NA
42
42
NA
47
35
NA
43
47.5
49.5
50.5
41.5
NA
NA
47
31
28
28.5
32
29.5
40
41
43
43
37
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Minnesota Cropland and Pasture Rental Rates
Data provided by the Minnesota Agricultural Statistic Service
Cropland Rental Rates
Pasture Rental Rates
County
2012
NORTHWEST
81.5 75.5
NORTH CENTRAL
NA
NA
23.5 21.5 NA
NORTHEAST
NA
10.5
4.5
NA
118
151
SOUTHWEST
NA
128
164
60
183
SOUTH CENTRAL
216
SOUTHEAST
192
62.5
159
181
174
108
132
46
149
162
160
100
119
44.5
139
154
151
NA
NA
NA
NA
152
NA
MINNESOTA
150
135
121
113 NA
WEST CENTRAL
CENTRAL
EAST CENTRAL
2011
September 2011 and 2010 and May 2009
2010
2009
2008
2012
2011
62
61
NA
18.5 13.5
12
14
2010
2009
2012
2011
12
12.5
121
NA
13
12.5
133
NA
NA
177
155
214
NA
NA
164
NA
NA
NA
NA
207
5
8.1
38
28.5 22.5 27.5
15 15.5 19
12 13.5
12
47
47
49
NA 36.5 49
30.5 34 31.5
34
21.5
Irrigated
24
NA
23
21
NA
37
38
36
22.5
NA
200
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
NA
160
Farm Land Rental
Rate Trends
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Average Cropland Rental Rates paid in Adult Farm Management FINBIN database.
Calculated 2012 and 2013 based on FINBIN rents increased 10.2 percent from 2010 to 2011 multiplied by 2011 rates
to estimate 2012 and 15 percent from 2011 to determine 2013 rental rates
Average Rents Paid by
County
Southwest
Cottonwood
Jackson
Lincoln
Lyon
Martin
Murray
Nobles
Pipestone
Redwood
Watonwan
'01
93
98
64
79
106
81
90
76
90
95
'02
'03
'04
'05
'06
'07
93 97 96 101
101 103 105 109
69 74 85 86
80 82 85 89
108 110 114 119
82 86 87 89
91 93 97 102
78 74 81 91
89 93 92 99
93 96 101 110
107
111
83
92
121
94
103
96
98
114
108
119
107
94
133
100
117
105
104
122
' 08
143
146
120
119
158
120
132
110
122
148
'09
‘10
'11
Est.
'12
139
145
152
137
177
143
140
121
140
146
148
157
163
140
181
154
146
136
158
165
164
167
169
168
210
168
168
150
173
177
185
189
191
190
238
190
190
170
196
200
Est.
'13
204-210
208-214
211-216
209-215
262-269
209-215
209-215
187-192
216-221
221-226
Copyright @ 2011-12 University of Minnesota All Rights Reserved.
Average
2011
10th
90th
2011
2013
Est.
____
____
____
____
____
____
____
____
____
____
____
2007
2008
2009
2010
Avg
Median
Pctile
Pctile
NASS
Est.
108
119
107
100
100
117
n/a
104
n/a
133
122
143
146
120
119
120
132
n/a
122
n/a
158
148
139
145
152
137
143
140
n/a
140
n/a
177
146
148
157
n/a
140
154
146
n/a
158
n/a
181
165
164
167
n/a
168
168
168
n/a
173
n/a
210
177
152
171
n/a
154
169
156
n/a
175
n/a
189
162
116
117
n/a
101
100
108
n/a
113
n/a
137
136
207
208
n/a
207
207
237
n/a
222
n/a
242
222
160
155
141
146
159
170
140
178
182
190
176
South Central
Cottonwood
Jackson
Lincoln
Lyon
Murray
Nobles
Pipestone
Redwood
Rock
Martin
Watonwan
Copyright @ 2011-12 University of Minnesota All Rights Reserved.
Average Annual Change
in Land Rental Rates
2007-2011
Northwest
7.3%
2010-2011
13.3%
West Central
8.6%
10.9%
Central
12.1%
15.2%
East Central
n/a
n/a
Southwest
11.9%
11.1%
South Central
10.8%
12.8%
Southeast
10.3%
13.7%
State
10.2%
13.1%
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Ag Lease 101
•Home Document Library FAQ For Educators About Ag Lease 101 Contact
Ag Lease 101 helps both land owners and land operators learn about
alternative lease arrangements and includes sample written lease agreements
for several alternatives. Ag Lease 101 was created by and is maintained by the
North Central Farm Management Extension Committee.
.
http://www.aglease101.org/
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Land Values
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Corn and Soybeans County Yields
Yields from Minnesota Agricultural Statistic Service Annual Bulletins: 2011, 2010, 2009.
5 yr
ave
5 yr
2011 2010 2009 2008 2007 ave
County
2011 2010 2009 2008 2007
Cottonwood
165.7 180.4 183.0 170.0 164.0 172.6 43.6
46.5 47.0
43.0
48.0
45.6
Jackson
164.6 185.7 184.0 172.0 163.0 173.9 45.0
48.7 49.0
42.5
49.0
46.8
Lincoln
148.0 161.9 163.0 148.0 153.0 154.8 34.4
44.8 40.0
35.0
46.0
40.0
Lyon
150.6 168.5 174.0 159.0 150.0 160.4 34.6
48.2 41.0
37.0
47.0
41.6
Martin
175.9 188.0 192.0 179.0 165.0 180.0 48.0
49.1 50.0
45.5
49.0
48.3
Murray
168.5 186.3 183.0 170.0 153.0 172.2 45.5
50.3 47.0
42.5
46.0
46.3
Nobles
176.0 179.8 180.0 173.0 157.0 173.2 45.1
50.8 47.5
41.5
48.0
46.6
Pipestone
154.2 172.4 168.0 162.0 140.0 159.3 38.3
48.8 44.0
38.0
44.0
42.6
Redwood
151.0 184.0 187.0 173.0 156.0 170.2 37.3
51.3 45.5
42.5
47.0
44.7
Rock
180.6 189.2 179.0 182.0 160.0 178.2 48.8
54.3 49.5
47.0
51.0
50.1
Watonwan
178.5 183.1 184.0 175.0 164.0 176.9 45.0
48.3 48.0
44.0
48.0
46.7
Southwest
162.5 179.7 179.0 169.0 156.0 169.2 41.5
49.4 46.0
41.5
47.5
45.2
Minnesota
156.0 177.0 174.0 164.0 146.0 163.4 38.5
45.0 40.0 38.0 42.5
40.8
Copyright @ 2011-12 University of Minnesota All Rights Reserved.
SW MINNESOTA COUNTY FARM LAND PRICES 2001-2011
Prepared by David Bau, Jim Nesseth 2002-2003 and Erlin Weness 2001
The amounts listed below are the prices paid per acre for total farmland (not tillable acres) in each listed county. The data is from farm sales recorded from
January 1st through June 30th of the respective years. The data includes only bare land sales. No land and building combination sales are included. The information
is from actual arms length sales reported to county authorities and collected by personnel of the University of Minnesota Extension. Sales data was not weighted for
acres, each sale on a per acre basis was averaged to get the average price paid per acre. In 2005 added counties Chippewa, Lac qui Parle, Redwood and Yellow
Medicine to study.
COUNTY
CHIPPEWA
COTTONWOOD
JACKSON
LAC QUI PARLE
LINCOLN
LYON
MARTIN
MURRAY
NOBLES
PIPESTONE
REDWOOD
ROCK
WATONWAN
YELLOW MED.
AVERAGE
2002
NA
$1467
$1930
$1032
$1029
$1144
$1930
$1501
2003
NA
$1625
$1790
$1220
$1223
$1676
$2091
$1672
2004
NA
$1854
$2111
$1461
$1172
$1878
$2476
$2039
2005
$2481
$2439
$2671
$1742
$1509
$2012
$2871
$2183
2006
$2582
$2853
$2969
$1933
$1624
$2303
$3092
$2286
2007
$2615
$3005
$3332
$2217
$2401
$2207
$3478
$2500
2008
$3776
$4423
$4425
$2474
$2343
$3912
$3783
$3523
2009
$3,932
$2,798
$3,999
$3,138
$2,917
$2,908
$4,446
$3,700
2010
$3,605
$3,699
$4,100
$3,326
$2,830
$3,373
$4,634
$3,919
2011
$3,892
$5,424
$6,453
$4,052
$3,464
$5,057
$4,509
$3,859
$1762
$1168
NA
$2066
$1858
NA
$1535
$1928
$1334
NA
$1926
$1842
NA
$1666
$2238
$1851
NA
$2139
$2193
NA
$1947
$2411
$1880
$2705
$2369
$2337
$2055
$2262
$2882
$2127
$2743
$2992
$3112
$2537
$2574
$3393
$2409
$2880
$3912
$3103
$2429
$2849
$4126
$3386
$3759
$5052
$3642
$3203
$3702
$3,939
$3,680
$4,158
$5,221
$4,000
$3,425
$3,733
$5,037
$3,511
$4,259
$4,783
$4,107
$3,595
$3,913
$4,850 $6,109
$4,433 $5,615
$5,445 $7,479
No Sales $7,839
$4,983 $6,349
$4,515 $5,481
$4,687 $6,245
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
2012
$6,024
$7,807
$5,981
$4,174
$4,253
$6,284
$8,359
$5,678
Minnesota Farmland Sales 2011 and 2010
Average Farmland Sales from Minnesota Land Economics
Steve Taff, University of Minnesota http://www.landeconomics.umn.edu/
County
Cottonwood
Jackson
Lincoln
Lyon
Martin
Murray
Nobles
Pipestone
Redwood
Rock
Watonwan
Average 2010 Number of
Per-Acre Price Sales 2011
3934
4317
2914
4003
5384
3935
5196
3511
4179
4506
4056
9
9
6
19
9
15
12
4
9
4
5
Average 2011
Per-Acre Price
5454
5870
3037
4437
5085
3552
4878
4611
5367
5592
4577
Minimum 2011
Per-Acre Price
4378
3545
1712
1832
2553
1172
2832
2026
3843
3007
3562
Maximum 2011
Per-Acre Price
6510
7325
4166
6452
6499
5074
6998
6950
6451
7911
5553
Copyright @ 2011-12 University of Minnesota All Rights Reserved.
Landlord Worksheet
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Landowner’s Cash Rent Worksheet
Example Your Farm
(A) Farm Size in Acres (tillable acres)
(B) Value per Acre
(C) Total Farm Value (A x B)
(D) Desired Return on Investment (C x 3.5%)
(E) Real Estate Taxes (A x $28.00)
(F) Liability Insurance
(G) Other Cash Costs (repairs, pump, Etc.)
(H) Total Desired Return (D+E+F+G)
DESIRED RENT PER ACRE (H/A)
156 ___76______
$6,500 __ $7000___
$1,014,000 __$560,000_
$35,490 __$19,600__
$4,480 ___$2,240__
$200 ____$200___
0 _____0_____
$40,170 __$22,040___
$257.50 __$282.50*__
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Tenant Worksheet
Operator’s Cash Rent Worksheet
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
OPERATOR’S CASH RENT WORKSHEET
Prepared by: David Bau – Regional Extension Educator, Ag Business Management (August, 2012)
FARM FACTS
(A) Corn Acres
(B) Soybean Acres
(C) TILLABLE ACRES
(A + B)
EXAMPLE
100
100
200
GOVERNMENT PROGRAM
YOUR FARM
CROP BUDGET
(D) Direct Payment
(E) Expected Counter-cyclical Payment
(F) EXPECTED PAYMENT (mid D & E)
(G) ADDITIONAL PAYMENTS
CORN
EXAMPLE
EXAMPLE
0
0
0
0
YOUR FARM
SOYBEANS
YOUR FARM
EXAMPLE
YOUR FARM
INCOME (per acre)
(H) Crop Yield
(I) Crop Price
(J) TOTAL INCOME (H x I)
170
5.50
$935
46
11.50
$529
- Seed
- Fertilizer
- Chemicals & Insecticides *
- Crop Insurance
- Fuel and Oil
- Repairs
- Crop Drying
- Machine Lease/Hire
- Hired/Custom Labor
- Crop Marketing
- Miscellaneous Crop Expenses
- Operating Interest
(K) TOTAL DIRECT EXPENSES
110
180
28
25
37
49
25
8
28
4
5
11
$510
55
25
30
25
24
32
0
6
17
2
4
8
$228
- Utilities
- Farm Insurance
- Miscellaneous Farm Expenses
- Interest
- Non-Cash Depreciation
- Operator Labor/Management
(L) TOTAL OVERHEAD EXPENSES
(M) TOTAL EXPENSES (K + L)
6
8
10
8
51
70
$153
$663
4
6
7
6
34
70
$127
$355
(N) NET RETURN (per acre) (J – M)
$272
$174
EXPENSES (per acre)
RENT CALCULATION
(O) TOTAL CROP RETURN - CORN (A x N)
- SOYBEANS (B x N)
(P) EXPECTED GOVERNMENT PAYMENT (F)
(Q) ADDITIONAL PAYMENTS (G)
(R) TOTAL RETURN (O + P + Q)
AVAILABLE FOR RENT PER ACRE (R / C)
EXAMPLE
27,200
17,400
0
0
$44,600
$223
YOUR FARM
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A Rental Rate
That Works
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In a fair and profitable rental
agreement the farmer makes a
profit and the landlord receives a
fair rental payment.
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Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
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Flexible Leases
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Table 1. Average Southern Minnesota Cash Rent as a Percentage of Gross Revenue
Average Cash Rent
Average Gross Revenue,
Average Cash Rent as %
Corn
Soybean
Paid Per Acre
Dollars per Acre
of Gross Revenue
Price
Price
Year
Southern
Corn
Soybeans
Corn
Soybeans
Minnesota
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Average
84.51
91.17
94.89
97.04
95.61
98.31
97.89
101.57
103.74
105.90
110.40
114.83
125.44
146.55
158.86
168.25
169.32
$330.47
$329.89
$321.49
$287.29
$269.76
$267.31
$228.38
$344.09
$358.05
$351.40
$375.47
$511.27
$611.21
$681.06
$716.55
$884.41
$929.62
$246.69
$282.20
$272.32
$254.93
$228.68
$237.56
$208.52
$258.52
$246.81
$228.30
$300.10
$316.05
$472.76
$432.32
$474.32
$564.02
$493.04
26%
28%
30%
34%
35%
37%
43%
30%
29%
30%
29%
22%
21%
22%
22%
19%
18%
28.11%
34%
32%
35%
38%
42%
41%
47%
39%
42%
46%
37%
36%
27%
34%
33%
30%
34%
36.72%
$2.74
$2.46
$2.37
$1.77
$1.73
$1.75
$1.75
$2.18
$2.23
$2.00
$2.03
$2.90
$3.68
$3.89
$3.74
$4.68
$5.66
$5.78
$6.84
$6.37
$5.15
$5.10
$5.11
$5.15
$5.31
$6.85
$5.45
$5.65
$6.05
$9.52
$9.65
$9.66
$10.87
$11.40
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Flexible Rents based on gross revenue:
This is a rental agreement where rental payments are based on gross revenue of the farmland. It can include a
base payment in the crop year and a final payment after the actual yield and price are determined.
Base rents plus a bonus:
This is a rental agreement where a base rent is paid and then a bonus may or may not be paid determined if yields
exceed a base goal. Then these additional bushels would be shared between landlord and tenant. The bonus can
also be determined by yield and price together or price alone as well.
Flexible rent based on yield only:
This is a rental agreement where the landlord receives a set base number of bushels with additional bushels if
yields are higher than was determined for the base payment. This can also be done with a cash payment based on
yield and then price at an elevator.
Flexible rent based on price only:
This is a rental agreement where the rental payment is based on crop prices. Often it is an average price of the
previous twelve months or a quarterly price which is multiplied times the bushels agreed to. Rental payments can
be made at the quarterly price setting times or half and half or after harvest.
Profit sharing flexible rent agreements:
This is a rental agreement where the landlord and the tenant share the profit from the farmland. This agreement is
similar to a 50-50 crop share lease where they share crop yields 50% to landlord and 50% to the tenant and some
of the expenses are paid by each party.
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Worthington Yearly Average Cash Prices
Calendar Year
2011
2010
2009
2008
2007
2006
2005
2004
2003
Average
Corn
$6.62
$3.84
$3.40
$4.92
$3.38
$2.15
$1.68
$2.32
$2.10
$2.38
Soybeans
$12.83
$10.01
$9.89
$11.59
$7.78
$5.39
$5.80
$7.53
$6.07
$6.27
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
2013 Corn Using 67% of Net
Income before Rent & Labor
Assumes corn input costs of $567 per acre
Cash Price
$ 5.00
$ 5.50
$ 6.00
$ 6.50
$ 7.00
170
$190
$247
$304
$360
$417
175
$206
$265
$324
$382
$441
180
$223
$283
$344
$404
$464
185
$240
$302
$364
$426
$488
190
$257
$320
$384
$448
$511
200
$290
$357
$424
$491
$558
Copyright © 2011-12. University of Minnesota. All Rights Reserved.
2013 Soybean Using 67% of Net
Income before Rent & Labor
Assumes soybean input costs of $268 per acre
Cash Price
$ 10.50
$ 11.50
$ 12.50
$ 13.50
$ 14.50
40
$102
$129
$155
$182
$209
43
$123
$152
$181
$209
$238
46
$144
$175
$206
$237
$267
49
$165
$198
$231
$264
$296
52
$186
$221
$256
$291
$326
55
$207
$244
$281
$318
$355
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
2013 Corn and Soybean Average Using
67% of Net Income before Rent & Labor
Soybean and Corn Yields
40,170 42,175
$146
$165
$188
$208
$229
$252
$271
$296
$313
$340
44,180
$184
$229
$275
$320
$366
46,185
$203
$250
$297
$345
$392
48,190 50,200
$221
$249
$271
$301
$320
$353
$369
$405
$418
$456
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Rental Lease Examples
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
2013 Crop Budgets for Southwest Minnesota Prepared by David Bau, Regional Extension Educator, Ag Business Management August 2012
Yield Bushel/Acre
Price $/Bushel
Gross $/Acre
USDA Transition Payment
Total Counter-cyclical Payment
Total Income Per Acre
Corn
Estimate
Your Farm
180
________
$ 5.50
$________
$ 990
$________
$
0
$________
$
0
$________
$ 990
$________
Seed
Fertilizer
Herbicide/Insecticide
Crop Insurance
Drying Fuel
Fuel/Oil
Machinery Repairs
Machine Leases/Machine hire
Interest on Operating
$
$
$
$
$
$
$
$
$
110
180
28
25
25
37
49
10
12
$________
$________
$________
$________
$________
$________
$________
$________
$________
$
$
$
$
55
25
30
25
$ ________
$ ________
$ ________
$ ________
$
$
$
$
24
32
8
8
$ ________
$ ________
$ ________
$ ________
Overhead Expenses
Operator Labor
Hired Labor
Depreciation on Machinery
Other Expenses
Total Expenses per Acre
$
$
$
$
$
70
25
51
41
663
$________
$________
$________
$________
$________
$
$
$
$
$
70
17
34
35
363
$ ________
$ ________
$ ________
$ ________
$ ________
$
327
$________
$
237
$ ________
Net Return to Land or the
Amount Available to Rent
Estimate
48
$ 12.50
$
600
$
0
$
0
$
600
Soybeans
Your Farm
________
$ ________
$ ________
$ ________
$ ________
$ ________
Ave:$282
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
What is a Fair
Rental Agreement?
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
$360
$90
$240
$120
$390
$270
What is a fair rental rate?
$150
$510
$300
$330
$420
$450
$480
$180
$210
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
In a fair and profitable rental
agreement the farmer makes a
profit and the landlord receives a
fair rental payment.
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Initially: Base Rent with a flexible
component, farmer makes a profit and the
landlord receives a fair rental payment.
Then: Devise an agreement where share
extra based on yield, price, gross, net.
You decide what works for both parties
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
What is a Fair & Profitable
Rental Agreement?
Please give us you feedback on today’s Extension program. Your comments will help us evaluate this program and improve future
programming. Thank you.
1.
Please rate today’s program
2.
Please respond to the following statements:
Poor
Fair
Neutral
Good
Excellent





Disagree
Neutral
Agree
Strongly
Agree
Strongly
Disagree
After today’s workshop …
a.
I better understand corn and soybean input costs
for 2013 and places to find county information.





b.
I better understand how to calculate breakeven
prices for 2013.





c.
I better understand farm land rental rates and
where to find information.





d.
I better understand farm land values and where to
find county information.





e.
I better understand how to use a flexible farm
rental agreement.





f.
I better understand how to negotiate a fair and
profitable farm land rental agreement.





Tell us about yourself.
3. My age falls in
4. County in
the following
which I live:
group:
___________
__Under 20
__21 – 30
__31 – 40
__41 – 50
__51 – 60
__61 – 70
__71 +
My Zip Code:
___________
Total Acres
Rented/Farmed
_____________
5. Gender:
___ Female
___ Male
6. Occupation:
___ Farmer/Operator
___ Landowner
___ Ag Professional
___ Other
7. What monetary value
would you place on the
information obtained at this
meeting?
___ None
___ $0 - 50
___ $51 - 100
___ $101 - 500
___ $501 - 1,000
___ $1000 +
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
•
•
•
•
•
•
Over 1200 people attend workshops
Roughly 1/3 farmer and 2/3 landlords
Rated workshop 4.22 on 1-5 scale.
Farmers averaged 793 acres
Landlords 177 acres Group Total 387,226 acres
This accounts for over 2.5% of corn and beans
planted in Minnesota in 2011.
• Attendees stated average value of workshop
$139 for total of $158,738
Copyright @ 2012-13 University of Minnesota All Rights Reserved.
Questions??
David Bau
Regional Extension Educator
Agricultural Business Management
University of Minnesota Extension
[email protected]
Copyright @ 2012-13 University of Minnesota All Rights Reserved.