Ohio Farm Custom Rates 2018

Part 1: Soil Preparation, Fertilizer Application, Spraying Pesticides, Mechanical Weed Control, Aerial Applications, Planting Operations, Harvest Operations, Grain Drying and Storage, Hay Harvest

by: Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental and Development Economics & John Barker, Extension Educator Agriculture/Amos Program, County Director, Ohio State University Extension Knox County

Farming is a complex business and many Ohio farmers utilize outside assistance for specific farm-related work. This option is appealing for tasks requiring specialized equipment or technical expertise. Often, having someone else with specialized tools perform a tasks is more cost effective and saves time. Farm work completed by others is often referred to as “custom farm work” or more simply, “custom work”. A “custom rate” is the amount agreed upon by both parties to be paid by the custom work customer to the custom work provider.

Ohio Farm Custom Rates

This survey summary reports custom rates based on a statewide survey of 352 farmers, custom operators, farm managers, and landowners conducted in 2018. These rates, except where noted, include the implement and tractor if required, all variable machinery costs such as fuel, oil, lube, twine, etc., and the labor for the operation.

Some custom rates published in this study vary widely, possibly influenced by:

  • Type or size of equipment used (e.g. 20-shank chisel plow versus a 6-shank)
  • Size and shape of fields,
  • Condition of the crop (for harvesting operations)
  • Skill level of labor
  • Amount of labor needed in relation to the equipment capabilities
  • Cost margin differences for full-time custom operators compared to farmers supplementing current income

Some custom rates reflect discounted rates as the parties involved have family relationships or are strengthening a relationship to help secure the custom farmed land in a cash or other rental agreement. Some providers charge differently because they are simply attempting to spread their fixed costs over more acreage to decrease fixed costs per acre and are willing to forgo complete cost recovery.

The measures shown in the summary tables are the summaries of the survey respondents. The measures are the average (or mean), range, median, minimum, and maximum. Average custom rates reported in this publication are a simple average of all the survey responses. Range identified in the tables consists of two numbers. The first is the average plus the standard deviation, which is the variability of the data from the average measure. The second number of the range is the average minus the standard deviation. The median represents the middle value in the survey responses. The minimum and maximum reported in the table are the minimum and maximum amounts reported from the survey data for a given custom operation.

The complete summary of part 1 is available online at the Farmoffice website:

https://farmoffice.osu.edu/farm-management-tools/custom-rates-and-machinery-costs

 

 

 

Western Ohio Cropland Values and Cash Rents 2017-18

by: Barry Ward, Leader, Production Business Management, Director, OSU Income Tax Schools  OSU Extension, Agriculture & Natural Resources

Ohio cropland values and cash rental rates are projected to decrease in 2018. According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values in western Ohio are expected to decrease anywhere from 1.7 to 3.6 percent in 2018 depending on the region and land class. Cash rents are expected to decline anywhere from 1.2 percent to 3.0 percent depending on the region and land class.

Ohio Cropland Values and Cash Rent

Ohio cropland varies significantly in its production capabilities and, consequently, cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. The primary factors affecting these values and rates are land productivity and potential crop return, and the variability of those crop returns. Soils and drainage capabilities are the two factors that most influence land productivity, crop return and variability of those crop returns.

Other factors impacting land values and cash rents are field size and shape, population density, ease of access, market access, local market prices, potential for wildlife damage, field perimeter characteristics, and competition for rented cropland in a region. This fact sheet summarizes data collected for western Ohio cropland values and cash rents.

2018 Study Results 

The Western Ohio Cropland Values and Cash Rents study was conducted from February through April in 2018. The opinion-based study surveyed professionals with a knowledge of Ohio’s cropland values and rental rates. Professionals surveyed were farm managers, rural appraisers, agricultural lenders, OSU Extension educators, farmers, landowners, and Farm Service Agency personnel.

The study results are based on 108 surveys returned, analyzed, and summarized. Respondents were asked to group their estimates based on three land quality classes: average, top, and poor. Within each land-quality class, respondents were asked to estimate average corn and soybean yields for a five-year period based on typical farming practices. Survey respondents were also asked to estimate current bare cropland values and cash rents negotiated in the current or recent year for each land-quality class. Survey results are summarized for western Ohio with regional summaries (subsets of western Ohio) for northwest Ohio and southwest Ohio. See the entire summary at: https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents

 

Ohio Farmland Rental Information

by: Chris Zoller, Extension Educator, ANR & David Marrison, Extension Educator, ANR

How much to charge or pay for farmland rent is a common question among landowners and farmers.  Each party wants to receive or pay a ‘fair’ rate, but questions often arise in determining a ‘fair’ rate.  There are a number of factors involved with establishing a rate with which both parties are comfortable.

What Cash Rental Rate is Fair?

Land ownership costs are summarized using the DIRTI five acronym.  The ownership costs include:

Depreciation, Interest, Repairs, Taxes, and Insurance.  Most landowners would like to at least recover the property tax.  Your annual tax statement can help determine the amount of rent needed to cover the property taxes.  For instance, assume your property tax for 20 acres is $800 annually.  This translates into $40 per acre for the landowner to recover just the property tax.

In addition to the DIRTI five, the landowner should consider the value of the extra things the tenant might do for the landowner.  It is often difficult to assign a value, but consider the value of things a tenant does such as weed control, snow removal, and other tasks.  If you are happy with your present tenant, be cautious if approached by someone offering more money.  Will they do these ‘extra’ things for you?

From the perspective of the tenant, the costs of production, productivity, marketing, transportation, capital investment, and a return to labor and management must be covered.

What Factors Determine Land Rent Value?

All land is not of equal value and there are a number of factors to consider when negotiating a rental rate.  These include: productivity, site characteristics, previous crop, and supply and demand.

Land Productivity – Topography, soil type, pH, and fertility all influence productivity.  Your local Soil and Water Conservation District (SWCD) or Natural Resources Conservation Service (NRCS) can review with you the soil survey of your county.  “Don’t Guess – Soil Test” is an important slogan to remember.  A soil test will provide a baseline number for soil pH and nutrients.

Site Characteristics – Proximity to land already rented or owned is desirable, as are large tracts of land.  A field surrounded by houses or other development may diminish the rental value.

Previous Cropping History – Land that has been fallow for years is of less value.  High yielding land will bring a greater rental rate.

Supply & Demand – The greater the interest, the greater the value.

Sources of Land Rental Values

The Ohio Agricultural Statistics Service (OASS) maintains a database of county-level land rental information.  Most Ohio counties have cropland rental values recorded, with some counties having rental estimates for pasture land as well.

The OASS divides the state into nine districts and reports values for most counties, along with an average by district.  The district averages for cropland rental range from $62.00 per acre to $190.00 per acre.  The district averages for pasture land rental range from $16.50 per acre to $50.00 per acre.

OSU Extension completes a survey of Ohio land rents and publishes a report each year.  The latest report can be accessed at:

https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents

More specific questions about local and rental prices can be directed to your local OSU Extension office.

Lease Agreements

Some general legal requirements for lease enforceability that both a tenant and landlord should be aware of based on Ohio law are based on the length of the agreement.  We recommend that a written lease always be used when renting farm ground.

Term  & Legal Requirements

Up to 1 year –  Verbal can be enforceable

1-2 years – Must be in writing and signed by both parties

2-3 years- Must be in writing, signed by both parties, notarized,  and recorded in the county where the land is located

3 years or more- Must be in writing, signed by both parties before two witnesses, notarized, and recorded in the county where the land is located

Example Leases

It is recommended once the landlord and tenant agree on a rental price a written lease should be signed by both parties. The North Central Farm Management Extension Committee has developed a website “Ag Lease 101” which helps both land owners and land operators learn about alternative lease arrangements and includes sample written lease agreements for several alternatives.

Some of the example leases available: Cash Farm Lease, Crop-Share Lease, Pasture Lease, Farm Building/Livestock Facility Lease, Farm Machinery Lease for Non-Commercial Transactions and Livestock Rental Lease. Ag Lease 101 can be accessed at:  https://aglease101.org/

Legal Questions & Answers

OSU Extension’s Agricultural & Resource Law Program helps to provide research and outreach on legal issues affecting agriculture.  A variety of Law Bulletins are available from the Farm Leasing Law Library and include the following discussions: What’s in Your Farmland Lease?, Creating an Enforceable Farm Lease, Protecting Interests in a Verbal Farm Lease Situation, Leasing Your Land for Hunting, Crop Share Leasing in Ohio, and Legal Aspects of Ohio Farmland Leases.  The Agricultural & Resource Law Program can be accessed at: https://farmoffice.osu.edu/

Resources

National Ag Statistics Service https://www.nass.usda.gov/Statistics_by_State/Ohio/Publications/County_Estimates/2017/Ohio%202017%20Cash%20Rent%20County%20Est.pdf

OSU Extension Land Rental Survey

https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents

Ag Lease 101

http://aglease101.com

Ohio State University Farm Management & Agricultural Resource Law

https://farmoffice.osu.edu/

Note

The authors are not attorneys and this publication is not intended to provide legal advice.  All legal questions should be directed to an attorney familiar with lease contracts.

Ohio Corn, Soybean and Wheat Enterprise Budgets Projected Returns for 2018

by: Barry Ward, Leader, Production Business Management, Ohio State University Extension

Production costs for Ohio field crops are forecast to be largely unchanged from last year with slightly higher fuel, fertilizer and interest expenses that will increase total costs for some growers. Variable costs for corn in Ohio for 2018 are projected to range from $359 to $452 per acre depending on land productivity.

Variable costs for 2018 Ohio soybeans are projected to range from $210 to $231 per acre. Wheat variable expenses for 2018 are projected to range from $179 to $219 per acre.

Returns will again be low to negative for many producers. Projected returns above variable costs (contribution margin) range from $175 to $348 per acre for corn and $192 to $371 per acre for soybeans. (This is assuming fall cash prices of $4 per bushel for corn and $10 per bushel for soybeans.) Projected returns above variable costs for wheat range from $135 to $249 per acre (assuming $5.20 per bushel summer cash price).

Returns to land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $23 to $182 per acre in 2018 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $84 to $254 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $28 to $135 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $760 per acre. This includes all variable costs as well as fixed machinery, labor, management and land costs. Fixed machinery costs of $65 per acre include depreciation, interest, insurance and housing. A land charge of $192 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $71 per acre. Returns Above Total Costs for trend line corn production are negative at -$93 per acre.

Total costs projected for trend line soybean production in Ohio are estimated to be $525 per acre. (Fixed machinery costs – $50 per acre, land charge: $192 per acre, labor and management costs combined: $48 per acre.) Returns Above Total Costs for trend line soybean production are also negative at -$23 per acre.

Total costs projected for trend line wheat production in Ohio are estimated to be $501 per acre. (Fixed machinery costs: $55 per acre, land charge: $192 per acre, labor and management costs combined: $42 per acre.) Returns Above Total Costs for trend line wheat production are also negative at -$110 per acre.

These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2018 have been completed and posted to the OSU Extension farmoffice website:

https://farmoffice.osu.edu/farm-management-tools/farm-budgets

2018 OSU Outlook Meeting Schedule

Source: Chris Bruynis, Associate Professor & Extension Educator

Ohio State University Extension is pleased to announce the 2018 Agricultural Outlook Meetings! In 2018 there will be seven locations in Ohio. Each location will have speaker addressing the topics of Free Trade Agreements: Why They Matter to US Agriculture, Grain Market Outlook, and Examining the 2018 Ohio Farm Economy. Additional topics vary by location and include 2018 Farm Bill Policy Update, Dairy Production Economics Update, and Farm Tax Update.

Join the faculty from Ohio State University Extension, Ohio State Department of Agricultural, Environmental, and Developmental Economics, and Industry Leaders as they discuss the issues and trends affecting agriculture in Ohio. Each meeting is being hosted by a county OSU Extension Educator to provide a local personal contact for this meeting. A meal is provided with each meeting and included in the registration price. Questions can be directed to the local host contact.

The Ag Outlook presentations will be recorded this year and be made available to farmers not living close to the meeting locations or those unable to attend. These will be posted in early February on the Ohio Ag Manager website located at https://u.osu.edu/ohioagmanager/resources/. For additional information on recording, please contact Chris Bruynis at bruynis.1@osu.edu.

The outlook meeting are scheduled for the following dates and locations:

Date: January 22, 2018
Time: 7:30 am – 10:30 am
Speakers: Barry Ward, Matt Roberts, Ian Sheldon
Location: Emmett Chapel, 318 Tarlton Rd, Circleville, OH 43113
Cost: $10.00
RSVP: Call OSU Extension Pickaway County 740-474-7534
By: January 15th
More information can be found at: http://pickaway.osu.edu

Date: January 22, 2018
Time: 5:30 pm – 8:30 pm
Speakers: Barry Ward, Matt Roberts, Ian Sheldon
Location: The Loft at Pickwick Place, 1875 N Sandusky Ave., Bucyrus OH 44820
Cost: $15.00
RSVP: Call OSU Extension, Crawford County 419-562-8731 or email hartschuh.11@osu.edu
By: January 15th
More information can be found at: http://crawford.osu.edu

Date: January 26, 2018
Time: 8:00 am – noon
Speakers: Barry Ward, Matt Roberts, Ian Sheldon
Location: Der Dutchman, Plain City
Cost: $15.00
RSVP: Call OSU Extension, Union County 937-644-8117
By: January 19th
More information can be found at: http://union.osu.edu

Date: January 29, 2018
Time: 9:00 am – 12:00 noon
Speakers: Mike Gastier, Matt Roberts, Ian Sheldon
Location: St Mary’s Hall 46 East Main St. Wakeman, OH 44889
Cost: No Charge; $20.00 if past deadline
RSVP: Call OSU Extension, Huron County 419-668-8219
By: January 22nd
More information can be found at: http://huron.osu.edu

Date: January 29, 2018
Time: 6:00 pm – 9:00 pm
Speakers: Barry Ward, Jim Byrne, Ian Sheldon
Location: Jewell Community Center,
Cost: $10:00 (after deadline $20.00)
RSVP: OSU Extension, Defiance County 419-782-4771 or online at http://defiance.osu.edu
By: January 22nd
More information can be found at: http://defiance.osu.edu

Date: January 31, 2018
Time: 9:30 am – 3:30 pm
Speakers: Ian Sheldon, Jim Byrne, Ben Brown, Barry Ward, Dianne Shoemaker, David Marrison
Location: Fisher Auditorium
Cost: $15.00
RSVP: Call OSU Extension, Wayne County 330-264-8722
By: January 24th
More information can be found at: http://wayne.osu.edu

Date: March 23, 2018
Time: 11:00 am – 4:00 pm
Speakers: Barry Ward, Matt Roberts, Chris Bruynis
Location: Chamber Ag Day / Ag Outlook meeting, Darke County
Registration Flyer: http://go.osu.edu/2018darkeagoutlook
Cost: $20
RSVP: Darke County Extension office at 937-548-5215
By: March 16th
More information can be found at: http://darke.osu.edu

Tax Webinar for Farmers and Farmland Owners

by Barry Ward, OSU Extension, Director, OSU Income Tax Schools

Are you getting the most from your tax return? Farmers and farmland owners that wish to increase their tax knowledge should consider this webinar that will address tax issues important to them. Mark your calendars for January 29th, 2018 to participate in this 2 hour webinar from 10 am to noon.

The webinar, which focuses on tax issues specific to farmers and farmland owners will offer insight into topics such as new and proposed tax legislation as well as buying and selling farmland.

OSU Income Tax Schools which are a part of OSU Extension and the College of Food, Agricultural and Environmental Sciences will offer this webinar on January 29th from 10-noon.

The two-hour program, which will be presented in a live webinar format, is targeted towards farmers and farmland owners who file their own farm taxes or simply wish to arm themselves with more tax information that will help them to better plan for tax filing.

Topics to be discussed during the webinar include:

  • New and Proposed Tax Legislation
  • Ag Income and Expenses
  • Net Operating Losses
  • Buying and Selling Farmland
  • Rental Property
  • Demolition of Structures

The cost for the webinar is $35. To register for this live webinar, go to https://farmoffice.osu.edu/osu-income-tax-schools

Registration will be open on December 15th.

The OSU Income Tax School Program is a part of OSU Extension and the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

Retreat Empowers Women to be Better Farm Managers

by: Amanda Douridas & Emily Adams, OSU Extension Educators

Female farmers, whether farming on their own or in a partnership, realize the importance of the business side of farming. Annie’s Project provides education and a support network to enhance business skills of women involved in all aspects of agriculture.

Annie spent her lifetime learning to be an involved farm business partner with her husband. Annie’s life experiences inspired her daughter, a university Extension agent, to create a program for women living and working in the complex, dynamic agriculture business environment. Annie’s Project fosters problem solving, record keeping, and decision-making skills in farm women.

Two weekend retreats are being offered in Ohio this winter. Women will receive training in five areas of agricultural risk management: financial, marketing, production, legal, and human resources. Most importantly women are able to network and develop relationships with other women in agriculture.

Past participants have had this to say about the program:

“I changed my mind about how to approach communication with my in-laws as business partners.”

“I have gained tools to help improve management of our farm and insight on how to communicate the resources to other members of the farm.”

“I appreciated getting to meet others with a shared interest.”

“I encourage any woman to attend one of these great programs!”

The firs retreat will be held Dec 1-3 at Salt Fork State Park Lodge and Conference Center, 14755 Cadiz Road, Lore City, OH 43755. The participant fee is $105 per person, which includes all materials and meals. Lodging is $99 per room per night with up to four people per room. Registration deadline is November 17. For questions about this program, please contact Emily Adams at adams.661@osu.edu or 740-622-2265.

The second retreat will be Feb 2-4 at Western Buckeye Christian Camp, 5455 Roeth Rd, Houston, OH 45333. The cost is $95 per person and includes all lodging, materials and meals. Please bring bedding and towels. The registration deadline is January 19. For questions about this retreat, please contact Amanda Douridas at Douridas.9@osu.edu or 937-484-1526.

Registration for both workshops can be found at: https://u.osu.edu/ohwomeninag/.

 

Sharpen Management Skills through Farm Management School

by: Amanda Douridas: Extension Educator

Managing your farm business is always important but the difference in just doing it and doing it well can be big during challenging times. When commodity prices are down, it is crucial to understand your balance sheet, maintain a good relationship with your lender and carefully consider budgets for next year. These topics will be covered during a 5 night Farm Management School in Urbana, Ohio beginning in December.

During the first session, learn how to properly complete your end of year balance sheet from Greg Knight with Civista Bank and Chris Bruynis, OSU Extension, will provide tips on tax issues that make the most sense for your farm business. During the next session, a panel of agricultural lenders will talk about what they would like to see from farmers before making a loan and will answer questions from the participants.

Legal issues can be very specific to agriculture and also very complicated. Peggy Kirk Hall, OSU Extension Agricultural Law Specialist, will discuss the legal issues that are most important to the class. Another complicated issue that can be difficult to make a decision on is healthcare. The fourth session will focus on the issues farmers face with healthcare and a healthcare professional will cover any changes and updates to the current system.

Lastly, Barry Ward, OSU Extension, will talk about commodity budgets for 2018 and take a look at cash flow to help you prepare for the 2018 season.

The session dates are Dec 6, 20, and Jan 3, 17 and 31. They begin at 5:30 pm with dinner and the program will run 6-8:00 pm. The cost to attend is $50 per farm and RSVPs are due Nov 27. Class space is limited so register early. Download the registration flyer at http://go.osu.edu/agevents. Childcare is available for $10 for the first child and $5 for each additional per night due day of. For questions about the program or to register with a credit card, please contact Amanda Douridas at 937-484-1526 or douridas.9@osu.edu.

Workshop Designed to Teach Women Landowners Negotiation Skills

by Tracy Turner

COSHOCTON, Ohio – Women landowners and tenants can learn the art of negotiation, drawing up lease contracts and other facets of land-lease agreements during a workshop offered by the College of Food, Agricultural, and Environmental Sciences at The Ohio State University.

The Ladies on the Land workshop is Oct. 20 from noon to 4:30 p.m. and will be held simultaneously in two locations: at the Frontier Power Community Room, 770 South 2nd St. in Coshocton; and at the Putnam County Extension Office, 1206 East 2nd St., in Ottawa.

The event is targeted toward female landowners and renters, said Emily Adams, an Ohio State University Extension educator and co-organizer of the event. OSU Extension is the outreach arm of CFAES. The goal of the workshop, she said, is to provide women landowners with the confidence, skills and resources necessary to successfully interact with tenants and also help both tenants and landowners develop and negotiate land-lease arrangements.

“Some women will find themselves in a situation where they haven’t been the primary landowners, but with the death of their parents or husband or other life experiences, they now are,” Adams said. “This will help them learn how to talk to tenants about what goes into a lease, how to feel confident in their abilities as a manger of their properties and to give them the tools they need to have those tough conversations.

“They may not have had the prior experience in negotiating tenant or land-lease agreements, so this workshop can help them understand the leasing process and what expectations they should have of their tenants from a land stewardship and economic standpoint.”

Statewide, some 31,413 women are reported as principal operators of farms. Combined, those farms cover some 3.8 million acres and contribute $230 million in economic impact, according to the 2012 U.S. Department of Agriculture’s Census of Agriculture.

The workshop will focus on:

  • The risks of leasing
  • Verbal leases versus written leases
  • The nuts and bolts of a lease
  • Communications with your tenant
  • The negotiation process and negotiation skills
  • Factors that affect the rental rate

Registration is $20 and includes lunch and any handouts. Information is available at u.osu.edu/ohwomeninag/or by calling Adams at 740-622-2265 or Beth Scheckelhoff at 419-592-0806. The registration deadline is Oct. 13.

Western Ohio Cropland Values and Cash Rents 2016-17

by: Barry Ward, Leader, Production Business Management & Director, OSU Income Tax Schools OSU Extension

Ohio cropland values and cash rental rates are projected to decrease in 2017. According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values in western Ohio are expected to decrease from 4.4 to 8.2 percent in 2017 depending on the region and land class. Cash rents are expected to decline from 1.4 percent to 4.2 percent depending on the region and land class.

Ohio Cropland Values and Cash Rent

Ohio cropland varies significantly in its production capabilities, and consequently cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. The primary factors affecting these values and rates are land productivity and potential crop return and the variability of those crop returns. Soils and drainage capabilities are the two factors that most influence land productivity, crop return and variability of those crop returns.

Other factors impacting land values and cash rents are field size and shape, population density, ease of access, market access, local market prices, potential for wildlife damage, field perimeter characteristics, and competition for rented cropland in a region. This fact sheet summarizes data collected for western Ohio cropland values and cash rents.

2017 Study Results 

The Western Ohio Cropland Values and Cash Rents study was conducted from February through April in 2017. The opinion-based study surveyed professionals with a knowledge of Ohio’s cropland values and rental rates. Professionals surveyed were farm managers, rural appraisers, agricultural lenders, OSU Extension educators, farmers, landowners, and Farm Service Agency personnel.

The study results are based on 120 surveys returned, analyzed and summarized. Respondents were asked to group their estimates based on three land quality classes: average, top, and poor. Within each land-quality class, respondents were asked to estimate average corn and soybean yields for a five-year period based on typical farming practices. Survey respondents were also asked to estimate current bare cropland values and cash rents negotiated in the current or recent year for each land-quality class. Survey results are summarized for western Ohio with regional summaries (subsets of western Ohio) for northwest Ohio and southwest Ohio.

Factors Affecting Cash Rental Rates

Ultimately, supply and demand of cropland for rent determines the cash rental rate for each parcel. The expected return from producing crops on a farm parcel and the variability of that return are the primary drivers in determining the rental rates. Many of the following factors contribute to the expected crop return and the variability of that return. Secondary factors may exist and could affect potential rental rates. These secondary factors are also listed.

Expected Crop Return

Rent will vary based on expected crop return. The higher the expected return, the higher the rent will tend to be.

Variability of Crop Return

Land that exhibits highly variable returns may have rents discounted for this factor. For example, land that is poorly drained may exhibit variability of returns due to late plantings during wet springs.

Factors Affecting Expected Crop Return and Variability of Crop Return:

Land (Soil) Quality: Higher quality soils translate into higher rents.

Fertility Levels: Higher fertility levels often result in higher cash rents.

Drainage/Irrigation Capabilities: Better surface and sub-surface drainage of a farm often results in better yields and higher potential cash rent. Likewise, irrigation equipment tied to the land will allow for higher yields, profits and rents.

Size of Farm/Fields: Large farms/fields typically command higher average cash rent per acre due to the efficiencies gained by operators.

Shape of Fields: Square fields with fewer “point rows” will generally translate into higher cash rents as operators gain efficiencies from farming fields that are square.

Previous Tillage Systems or Crops: Previous crops and tillage systems that allow for an easy transition for new operators may enhance the cash rent value.

Field Border Characteristics: Fields surrounded by tree-lined fencerows, woodlots or other borders affecting crop growth at the field edge will negatively impact yield and therefore should be considered in rental negotiations.

Wildlife Damage Potential: Fields adjacent to significant wildlife cover including woodlots, tree lined fencerows, creeks, streams, and such may limit production potential to border rows and should be considered in rental negotiations.

Secondary Factors Affecting Rental Rates:

Buildings and Grain Storage Availability: Access to machinery and grain storage may enhance the value of the cropland rental rate.

Location of Farm (Including Road Access): Proximity to prospective operators may determine how much operators are willing to bid for cash rents. Good road access will generally enhance cash rent amounts.

USDA Farm Program Measurables: Farms that participate in the USDA Farm Program and have higher “program yields” may command higher cash rents than non-program farms.

Services Provided by Operator: Operators that provide services such as clearing fence rows, snow removal and other services may be valued by the landowner. This may even be a partial substitute for cash rent compensation.

Conditions of Lease: Conditions placed on the lease by the landowner may result in fewer prospective operators and a lower average cash rent.

Payment Dates: Leases that require part or all of the rent to be paid early in the year (up-front) may result in lower rental rates due to higher borrowing or opportunity costs for the operator.

Reputation of Landowner/Operator: Reputations of the parties may play a part in the cash rental negotiations. A landowner with a reputation of being difficult to work with may see cash rents negatively affected by this reputation. Farmers with a similar negative reputation may have to pay higher rents.

Special Contracts: Farms with special contract commitments may restrict the operator from changing crops based on market conditions. This may negatively impact cash rents. There may also be contracts that positively affect cash rents such as high value crop contracts or contracts for receiving livestock manure.

 

To access the complete summary go to:

https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents