– Dr. Andrew Griffith, Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee
A few of weeks ago, a question concerning hay ground rent was asked. In essence, the question was what is the appropriate way to value such ground from either the owner’s or renter’s perspective?
A good place to start is with the USDA Cash Rents survey information. Depending on the specific piece of land, an owner can lease the ground for row crops, hay, or pasture or choose to do nothing with it. Ground that can be row cropped generally has a higher value than hay and pasture, but if an owner does not want the land to be cropped then they should expect a lower lease rate.
From the standpoint of a person renting the land, it is important to have a grasp on cost of production and compare that to what it would cost to purchase hay of similar quality. After accounting for input costs including fertilizer, herbicides, and actual hay harvest expenses, what is the difference in purchasing hay and producing it on the rented ground? That difference provides the maximum that could be paid.