Copyright @ 2012-13 University of Minnesota All Rights Reserved. What is a Fair & Profitable Rental Agreement ? 20 Location across Minnesota David Bau

Copyright @ 2012-13 University of Minnesota All Rights Reserved.

What is a Fair & Profitable Rental Agreement?

20 Location across Minnesota

David BauExtension Educator

Agricultural Business ManagementUniversity of Minnesota Extension

[email protected]


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?


FINBIN DATA


CORN BudgetSouthern MN FINBIN Data

Maximum Value

Minimum Value

Actual 2011

Average 2002-2011

Project2012

Project 2013

Forecast 2013

Yield per acre (bu.) 190.5 63.62 157.85 173.41 163 168 176Operators share of yield % 100 100 100 100.00 100 100 100Value per bu. 5.66 1.73 5.66 3.30 5.85 6.04 5.50Total product return per acre 893.43 143.38 893.43 572.72 935.10 976.77 968Miscellaneous income per acre 69.66 -1.81 36.19 14.20 34.33 32.47 10Gross return per acre 929.62 213.04 929.62 586.92 969.43 1,009.2

4978


Direct ExpensesMaximum

ValueMinimum

Value Actual

2011

Average 2002-2011

Project2012

Project 2013

Forecast 2013

Seed 102.11 25.96 102.11 65.25 $106.34 $110.57 120Fertilizer 158.46 32.15 148.36 90.64 $154.82 $161.27 200Crop chemicals 30.17 22.19 27.59 25.67 $27.78 $27.97 28Crop insurance 27.13 2.93 23.49 15.60 $24.63 $25.77 25Drying fuel 36.57 4.28 5.75 14.92 $5.61 $5.47 15Fuel & oil 34.03 8.74 34.03 20.79 $35.39 $36.75 37Repairs 45.87 18.27 45.87 29.56 $47.30 $48.72 49Custom hire 10.37 3.09 10.37 5.99 $10.69 $11.01 11Hired labor 3.47 0.15 1.71 1.20 $1.90 $2.09 2Land rent 169.32 78.76 169.32 130.49 $174.35 $179.38 220Machinery & bldg leases 3.25 0.32 2.14 1.88 $2.22 $2.30 2Utilities 1.20 0.22 0.00 0.41 $0.08 $0.16 1Marketing 3.32 0.30 3.32 1.56 $3.48 $3.64 4Operating interest 15.14 6.99 10.19 10.36 $10.34 $10.48 11Miscellaneous 5.88 0.96 3.51 2.93 $3.65 $3.79 4Total direct expenses per acre 587.76 216.2 587.76 417.40 $608.40 $629.04 729Return over direct exp per acre 349.7 -33.01 341.86 169.52 $361.03 $380.20 269


Overhead ExpensesMaximum

ValueMinimum

Value Actual

2011Average

2002-2011Project

2012Project

2013Forecast

2013

Custom Hire 3.04 1.74 0.00 2.32 $0.04 $0.07 2

Hired labor 12.02 4.74 12.02 7.38 $12.30 $12.58 13

Machinery & bldg leases 6.45 1.37 6.01 5.06 $6.27 $6.53 6

Farm insurance 7.37 2.13 7.37 5.24 $7.66 $7.95 8

Utilities 5.18 2.12 5.18 3.48 $5.34 $5.50 6

Dues & professional fees 3.40 0.42 3.40 1.67 $3.59 $3.78 4

Interest 8.28 4.10 7.97 6.92 $8.17 $8.37 8

Mach & bldg depreciation 49.09 18.05 49.09 31.16 $49.96 $50.82 51

Miscellaneous 9.09 3.91 9.09 5.94 $9.29 $9.48 10

Total overhead expenses per acre 100.11 43.6 100.11 68.08 $102.55 $105.00 108

Total dir & ovhd expenses per acre 687.88 263.91 687.88 485.48 $710.97 $734.05 837

Net return per acre 259.05 -81.89 241.60 101.42 $258.32 $275.03 141

Lbr & mgt charge per acre 51.14 24.18 51.14 37.20 $52.64 $54.14 50

Net return over lbr & mgt 209.07 -107.64 209.07 73.53 $225.20 $241.33 91

Government payments 51.95 -7.85 18.62 22.90 $18.37 $18.12 20

Net return with gov’t payments 229.05 -71.72 227.69 90.54 $243.82 $259.95 111


Cost of ProductionMaximum

ValueMinimum

Value Actual

2011Average

2002-2011Project

2012Project

2013Forecast

2013

Total direct expense per bu. $3.72 $1.53 $3.72 2.40 $3.74 $3.76 4.14Total dir & ovhd exp per bu. $4.36 $1.83 $4.36 2.80 $4.36 $4.37 4.76With labor & management $4.68 $1.83 $4.68 2.87 $4.68 $4.68 5.04Total exp less govt & oth income $4.01 $1.64 $4.01 2.71 $4.06 $4.10 4.87Est. labor hours per acre 3.37 2.42 2.82 2.81 2.80 2.58 2.6


Increasing Input costs


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.

Input Cost Trends

www.finbin.umn.edu

Copyright © 2011-12. University of Minnesota. All Rights Reserved.

Land Rental Rates Ranged from $67.00 to $265.15 per acre

This is almost $200 range in 2011What will it be in 2013 in your area?

$300 -$400

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 PaymentAfter $663 per acre expenses including $70 labor charge


Price/Bu 130 145 160 175 190 215

$4.00 -143 -83 -23 37 97 197$4.50 -78 -10.5 57 125 192 305$5.00 -13 62 137 212 287 412$5.50 52 134.5 217 300 382 520$6.00 117 207 297 387 477 627$6.50 182 279.5 377 475 572 735$7.00 247 352 457 562 667 842$7.50 312 424.5 537 650 762 950$8.00 377 497 617 737 857 1057

Yield Per Acre


Minnesota Agricultural Statistic Rental Information


County2012 2011 2010 2009 2008 2012 2011 2010 2009

Cottonwood 204 160 146 137 135 NA NA 35 31Jackson 178 155 155 146 145 37 NA NA 28Lincoln 149 141 132 116 118 50 NA 43 28.5Lyon 174 146 146 132 121 5 30.5 47.5 32Murray 205 159 158 137 134 58 34.5 49.5 29.5Nobles 185 170 148 141 134 NA NA 50.5 40Pipestone 156 140 136 137 118 48 42 41.5 41Redwood 184 178 156 144 138 NA 42 NA 43Rock 213 182 172 161 149 51 NA NA 43

SOUTHWEST 183 159 149 139 NA 49 47 47 37

Cropland Rental Rates Pasture Rental Rates

Minnesota Cropland and Pasture Rental RatesData provided by the Minnesota Agricultural Statistic Service September 2011 and 2010 and May 2009

NASS.USDA.GOV


Cropland Rental Rates Pasture Rental Rates IrrigatedCounty 2012 2011 2010 2009 2008 2012 2011 2010 2009 2012 2011

NORTHWEST 81.5 75.5 62 61 NA 18.5 13.5 12 12.5 121 NA

NORTH CENTRAL NA NA 23.5 21.5 NA 14 12 13 12.5 133 NA

NORTHEAST NA NA 10.5 4.5 NA 38 5 8.1 NA NA NAWEST CENTRAL 128 118 108 100 NA 28.5 22.5 27.5 23 177 155

CENTRAL 164 151 132 119 NA 15 15.5 19 21 214 164

EAST CENTRAL 60 62.5 46 44.5 NA 12 12 13.5 NA NA NA

SOUTHWEST 183 159 149 139 NA 49 47 47 37 NA NA

SOUTH CENTRAL 216 181 162 154 152 NA 36.5 49 38 NA NA

SOUTHEAST 192 174 160 151 NA 30.5 34 31.5 36 NA 207

MINNESOTA 150 135 121 113 NA 34 21.5 24 22.5 200 160

Minnesota Cropland and Pasture Rental RatesData provided by the Minnesota Agricultural Statistic Service September 2011 and 2010 and May 2009


Farm Land Rental Rate Trends


Average Rents Paid by

County '01 '02 '03 '04 '05 '06 '07

' 08 '09 ‘10 '11Est.'12

Est.'13

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

SouthwestCottonwood 93 93 97 96 101 107 108 143 139 148 164 185 204-210

Jackson 98 101 103 105 109 111 119 146 145 157 167 189 208-214

Lincoln 64 69 74 85 86 83 107 120 152 163 169 191 211-216

Lyon 79 80 82 85 89 92 94 119 137 140 168 190 209-215

Martin 106 108 110 114 119 121 133 158 177 181 210 238 262-269

Murray 81 82 86 87 89 94 100 120 143 154 168 190 209-215

Nobles 90 91 93 97 102 103 117 132 140 146 168 190 209-215

Pipestone 76 78 74 81 91 96 105 110 121 136 150 170 187-192

Redwood 90 89 93 92 99 98 104 122 140 158 173 196 216-221

Watonwan 95 93 96 101 110 114 122 148 146 165 177 200 221-226


Average 2011 2011 2013

2007 2008 2009 2010 Avg Median10th

Pctile 90th

PctileNASSEst. Est.

South Central

Cottonwood 108 143 139 148 164 152 116 207 160 ____Jackson 119 146 145 157 167 171 117 208 155 ____Lincoln 107 120 152 n/a n/a n/a n/a n/a 141 ____Lyon 100 119 137 140 168 154 101 207 146 ____Murray 100 120 143 154 168 169 100 207 159 ____Nobles 117 132 140 146 168 156 108 237 170 ____Pipestone n/a n/a n/a n/a n/a n/a n/a n/a 140 ____Redwood 104 122 140 158 173 175 113 222 178 ____Rock n/a n/a n/a n/a n/a n/a n/a n/a 182 ____Martin 133 158 177 181 210 189 137 242 190 ____Watonwan 122 148 146 165 177 162 136 222 176 ____


Average Annual Change in Land Rental Rates

2007-2011 2010-2011

Northwest 7.3% 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%


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/


Land Values


County 2011 2010 2009 2008 20075 yr ave 2011 2010 2009 2008 2007

5 yr ave

Cottonwood 165.

7 180.4 183.0170.

0 164.0 172.6 43.6 46.5 47.0 43.0 48.0 45.6

Jackson 164.

6 185.7 184.0172.

0 163.0 173.9 45.0 48.7 49.0 42.5 49.0 46.8

Lincoln 148.

0 161.9 163.0148.

0 153.0 154.8 34.4 44.8 40.0 35.0 46.0 40.0

Lyon 150.

6 168.5 174.0159.

0 150.0 160.4 34.6 48.2 41.0 37.0 47.0 41.6

Martin 175.

9 188.0 192.0179.

0 165.0 180.0 48.0 49.1 50.0 45.5 49.0 48.3

Murray 168.

5 186.3 183.0170.

0 153.0 172.2 45.5 50.3 47.0 42.5 46.0 46.3

Nobles 176.

0 179.8 180.0173.

0 157.0 173.2 45.1 50.8 47.5 41.5 48.0 46.6

Pipestone 154.

2 172.4 168.0162.

0 140.0 159.3 38.3 48.8 44.0 38.0 44.0 42.6

Redwood 151.

0 184.0 187.0173.

0 156.0 170.2 37.3 51.3 45.5 42.5 47.0 44.7

Rock 180.

6 189.2 179.0182.

0 160.0 178.2 48.8 54.3 49.5 47.0 51.0 50.1

Watonwan 178.

5 183.1 184.0175.

0 164.0 176.9 45.0 48.3 48.0 44.0 48.0 46.7

Southwest 162.

5 179.7 179.0169.

0 156.0 169.2 41.5 49.4 46.0 41.5 47.5 45.2Minnesota 156.0 177.0 174.0 164.0 146.0 163.4 38.5 45.0 40.0 38.0 42.5 40.8

Corn and Soybeans County Yields Yields from Minnesota Agricultural Statistic Service Annual Bulletins: 2011, 2010, 2009.


COUNTY 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012CHIPPEWA NA NA NA $2481 $2582 $2615 $3776 $3,932 $3,605 $3,892 $6,024 COTTONWOOD $1467 $1625 $1854 $2439 $2853 $3005 $4423 $2,798 $3,699 $5,424 $7,807 JACKSON $1930 $1790 $2111 $2671 $2969 $3332 $4425 $3,999 $4,100 $6,453 $5,981 LAC QUI PARLE

$1032 $1220 $1461 $1742 $1933 $2217 $2474 $3,138 $3,326 $4,052 $4,174

LINCOLN $1029 $1223 $1172 $1509 $1624 $2401 $2343 $2,917 $2,830 $3,464 $4,253 LYON $1144 $1676 $1878 $2012 $2303 $2207 $3912 $2,908 $3,373 $5,057 $6,284 MARTIN $1930 $2091 $2476 $2871 $3092 $3478 $3783 $4,446 $4,634 $4,509 $8,359 MURRAY $1501 $1672 $2039 $2183 $2286 $2500 $3523 $3,700 $3,919 $3,859 $5,678 NOBLES $1762 $1928 $2238 $2411 $2882 $3393 $4126 $3,939 $5,037 $4,850 $6,109 PIPESTONE $1168 $1334 $1851 $1880 $2127 $2409 $3386 $3,680 $3,511 $4,433 $5,615 REDWOOD NA NA NA $2705 $2743 $2880 $3759 $4,158 $4,259 $5,445 $7,479 ROCK $2066 $1926 $2139 $2369 $2992 $3912 $5052 $5,221 $4,783 No Sales $7,839 WATONWAN $1858 $1842 $2193 $2337 $3112 $3103 $3642 $4,000 $4,107 $4,983 $6,349 YELLOW MED. NA NA NA $2055 $2537 $2429 $3203 $3,425 $3,595 $4,515 $5,481 AVERAGE $1535 $1666 $1947 $2262 $2574 $2849 $3702 $3,733 $3,913 $4,687 $6,245

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.


Cottonwood 3934 9 5454 4378 6510Jackson 4317 9 5870 3545 7325Lincoln 2914 6 3037 1712 4166Lyon 4003 19 4437 1832 6452Martin 5384 9 5085 2553 6499Murray 3935 15 3552 1172 5074Nobles 5196 12 4878 2832 6998Pipestone 3511 4 4611 2026 6950Redwood 4179 9 5367 3843 6451Rock 4506 4 5592 3007 7911Watonwan 4056 5 4577 3562 5553

CountyAverage 2010Per-Acre Price

Number of Sales 2011

Average 2011Per-Acre Price

Minimum 2011Per-Acre Price

Maximum 2011Per-Acre Price

Minnesota Farmland Sales 2011 and 2010 Average Farmland Sales from Minnesota Land Economics

Steve Taff, University of Minnesota http://www.landeconomics.umn.edu/


Landlord Worksheet


Landowner’s Cash Rent Worksheet Example Your Farm(A) Farm Size in Acres (tillable acres) 156___76______(B) Value per Acre $6,500 __ $7000___(C) Total Farm Value (A x B) $1,014,000 __$560,000_(D) Desired Return on Investment (C x 3.5%) $35,490 __$19,600__(E) Real Estate Taxes (A x $28.00) $4,480 ___$2,240__(F) Liability Insurance $200____$200___(G) Other Cash Costs (repairs, pump, Etc.) 0_____0_____(H) Total Desired Return (D+E+F+G) $40,170 __$22,040___DESIRED RENT PER ACRE (H/A) $257.50 __$282.50*__


Tenant WorksheetOperator’s Cash Rent Worksheet


OPERATOR’S CASH RENT WORKSHEET Prepared by: David Bau – Regional Extension Educator, Ag Business Management (August, 2012)

FARM FACTS GOVERNMENT PROGRAM

EXAMPLE YOUR FARM EXAMPLE YOUR FARM (A) Corn Acres 100 (D) Direct Payment 0 (B) Soybean Acres 100 (E) Expected Counter-cyclical Payment 0 (C) TILLABLE ACRES 200 (F) EXPECTED PAYMENT (mid D & E) 0 (A + B) (G) ADDITIONAL PAYMENTS 0

CROP BUDGET CORN SOYBEANS

EXAMPLE YOUR FARM EXAMPLE YOUR FARM INCOME (per acre) (H) Crop Yield 170 46 (I) Crop Price 5.50 11.50 (J) TOTAL INCOME (H x I) $935 $529

EXPENSES (per acre) - Seed 110 55 - Fertilizer 180 25 - Chemicals & Insecticides * 28 30 - Crop Insurance 25 25 - Fuel and Oil 37 24 - Repairs 49 32 - Crop Drying 25 0 - Machine Lease/Hire 8 6 - Hired/Custom Labor 28 17 - Crop Marketing 4 2 - Miscellaneous Crop Expenses 5 4 - Operating Interest 11 8 (K) TOTAL DIRECT EXPENSES $510 $228 - Utilities 6 4 - Farm Insurance 8 6 - Miscellaneous Farm Expenses 10 7 - Interest 8 6 - Non-Cash Depreciation 51 34 - Operator Labor/Management 70 70 (L) TOTAL OVERHEAD EXPENSES $153 $127 (M) TOTAL EXPENSES (K + L) $663 $355 (N) NET RETURN (per acre) (J – M) $272 $174

RENT CALCULATION

EXAMPLE YOUR FARM (O) TOTAL CROP RETURN - CORN (A x N) 27,200 - SOYBEANS (B x N) 17,400 (P) EXPECTED GOVERNMENT PAYMENT (F) 0 (Q) ADDITIONAL PAYMENTS (G) 0 (R) TOTAL RETURN (O + P + Q) $44,600 AVAILABLE FOR RENT PER ACRE (R / C) $223


A Rental Rate That Works


In a fair and profitable rental agreement the farmer makes a profit and the landlord receives a fair rental payment.






Flexible Leases


Table 1. Average Southern Minnesota Cash Rent as a Percentage of Gross Revenue

Average Cash Rent Paid Per Acre

Average Gross Revenue, Dollars per Acre

Average Cash Rent as % of Gross Revenue

Corn Price

Soybean Price

Year Southern Minnesota

Corn Soybeans Corn Soybeans

1995 84.51 $330.47 $246.69 26% 34% $2.74 $5.781996 91.17 $329.89 $282.20 28% 32% $2.46 $6.84

1997 94.89 $321.49 $272.32 30% 35% $2.37 $6.371998 97.04 $287.29 $254.93 34% 38% $1.77 $5.151999 95.61 $269.76 $228.68 35% 42% $1.73 $5.10

2000 98.31 $267.31 $237.56 37% 41% $1.75 $5.112001 97.89 $228.38 $208.52 43% 47% $1.75 $5.152002 101.57 $344.09 $258.52 30% 39% $2.18 $5.31

2003 103.74 $358.05 $246.81 29% 42% $2.23 $6.85

2004 105.90 $351.40 $228.30 30% 46% $2.00 $5.452005 110.40 $375.47 $300.10 29% 37% $2.03 $5.652006 114.83 $511.27 $316.05 22% 36% $2.90 $6.052007 125.44 $611.21 $472.76 21% 27% $3.68 $9.52

2008 146.55 $681.06 $432.32 22% 34% $3.89 $9.652009 158.86 $716.55 $474.32 22% 33% $3.74 $9.662010 168.25 $884.41 $564.02 19% 30% $4.68 $10.87

2011 169.32 $929.62 $493.04 18% 34% $5.66 $11.40Average 28.11% 36.72%


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.


Calendar Year Corn Soybeans2011 $6.62 $12.832010 $3.84 $10.012009 $3.40 $9.892008 $4.92 $11.592007 $3.38 $7.782006 $2.15 $5.392005 $1.68 $5.802004 $2.32 $7.532003 $2.10 $6.07

Average $2.38 $6.27

Worthington Yearly Average Cash Prices

2013 Corn Using 67% of Net Income before Rent & Labor


Cash Price 170 175 180 185 190 200 $ 5.00 $190 $206 $223 $240 $257 $290 $ 5.50 $247 $265 $283 $302 $320 $357 $ 6.00 $304 $324 $344 $364 $384 $424 $ 6.50 $360 $382 $404 $426 $448 $491 $ 7.00 $417 $441 $464 $488 $511 $558

Assumes corn input costs of $567 per acre


Cash Price 40 43 46 49 52 55 $ 10.50 $102 $123 $144 $165 $186 $207 $ 11.50 $129 $152 $175 $198 $221 $244 $ 12.50 $155 $181 $206 $231 $256 $281 $ 13.50 $182 $209 $237 $264 $291 $318 $ 14.50 $209 $238 $267 $296 $326 $355

2013 Soybean Using 67% of Net Income before Rent & Labor

Assumes soybean input costs of $268 per acre


40,170 42,175 44,180 46,185 48,190 50,200$146 $165 $184 $203 $221 $249$188 $208 $229 $250 $271 $301$229 $252 $275 $297 $320 $353$271 $296 $320 $345 $369 $405$313 $340 $366 $392 $418 $456

2013 Corn and Soybean Average Using 67% of Net Income before Rent & Labor

Soybean and Corn Yields


Rental Lease Examples


Corn Soybeans

Estimate Your Farm Estimate Your FarmYield Bushel/Acre 180 ________ 48 ________Price $/Bushel $ 5.50 $________ $ 12.50 $ ________Gross $/Acre $ 990 $________ $ 600 $ ________

USDA Transition Payment $ 0 $________ $ 0 $ ________Total Counter-cyclical Payment $ 0 $________ $ 0 $ ________Total Income Per Acre $ 990 $________ $ 600 $ ________

Seed $ 110 $________ $ 55 $ ________Fertilizer $ 180 $________ $ 25 $ ________Herbicide/Insecticide $ 28 $________ $ 30 $ ________Crop Insurance $ 25 $________ $ 25 $ ________Drying Fuel $ 25 $________Fuel/Oil $ 37 $________ $ 24 $ ________

Machinery Repairs $ 49 $________ $ 32 $ ________Machine Leases/Machine hire $ 10 $________ $ 8 $ ________Interest on Operating $ 12 $________ $ 8 $ ________

Overhead ExpensesOperator Labor $ 70 $________ $ 70 $ ________Hired Labor $ 25 $________ $ 17 $ ________Depreciation on Machinery $ 51 $________ $ 34 $ ________

Other Expenses $ 41 $________ $ 35 $ ________Total Expenses per Acre $ 663 $________ $ 363 $ ________

Net Return to Land or the $ 327 $________ $ 237 $ ________

Amount Available to Rent Ave:$282

2013 Crop Budgets for Southwest Minnesota Prepared by David Bau, Regional Extension Educator, Ag Business Management August 2012


What is a Fair Rental Agreement?


$90

$120

$150

$180

$210

$240

$270

$300

$330

$360

$390

$420

$450

$480$510

What is a fair rental rate?


In a fair and profitable rental agreement the farmer makes a profit and the landlord receives a fair rental payment.


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


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.

Poor Fair Neutral Good Excellent

1. Please rate today’s program

2. Please respond to the following statements:

After today’s workshop … Strongly Disagree Disagree Neutral Agree Strongly

Agree

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 the following group: __Under 20 __21 – 30 __31 – 40 __41 – 50 __51 – 60 __61 – 70 __71 +

4. County in which I live:

___________ 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 +


• 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


Questions??

David BauRegional Extension Educator

Agricultural Business ManagementUniversity of Minnesota Extension

[email protected]

Documents

Copyright @ 2012-13 University of Minnesota All Rights Reserved. What is a Fair & Profitable Rental Agreement ? 20 Location across Minnesota David Bau