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Cash crop rent

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seia

02-25-2008 12:47:15

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My mother has been renting her farm for the past 9 years without an increase in cash rent. $75 an acre with ground that will grow 160 bu corn and 52 bu beans. She told the renter that she would probably be raising the rent. He said that due to the high cost of production that he felt $75 was fair enough. This land is located in NE Missouri. Would someone from that area tell me if that is about right for cash rent in that part of the state. I know production costs have increased but so have crop prices. I have heard that rent is going up in many areas of the state. Any information would be greatly appreciated.

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wildman from mo

02-26-2008 07:35:23

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

to add more to my last comment &to support john e.c.mi comment taking care of the farm can be worth more than high cash rent.If this tenant has been taking care of this farm like he owns it,ie ditching,mowing,grading drive,gen. upkeep of farm no johnson grass,sunflowers,night shade, burrs or any other noxious weeds,then that's worth something but I think he is probaly should be paying at least 125.00 but if we get back to 2.00 corn then it should be looked at . $$$250.00 cash rent don't work if he ruins the farm. My 2 cents.

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Keith in NW MO

02-26-2008 05:40:20

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

That sounds high enough to me if they take care of it. But I'm sure you could get more. If this thing is so profitable for the farmer why not share crop it and get in on the profit. With these high cash rents are you going to lower it if prices go down? Don't let greed run off a good renter if that is the case. I question if it will produce 160 bu corn and 52 bu beans very often in Mo. Mabe one out of five years.

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James22

02-26-2008 06:38:58

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Re: Cash crop rent in reply to Keith in NW MO, 02-26-2008 05:40:20

He certainly isn't my definition of a good renter. Assuming it made the mentioned yield averages last year and he is not a complete klutz at marketing, a killing was made last year which he apparently is unwilling to share with his landlord. Crop insurance is a way-of-life for renters unless they are very highly capitalized so why should the landlord take a hit if the the tentant doesn't want to protect himself? Rent should go up when prices are very profitable and will go down if prices fall, I don't see the reasoning for not raising the rent because prices might eventually fall. Assuming a conservative 140 bu acre/corn @ $4.50 bu that will gross this year $630/acre. My neighbor says it will cost him $360/acre to grow corn, which nets $270/acre. As a landlord I would expect at least half of that profit. Bottom line is that unless he learned to be more generous, I'd kick this tentant to the curb as soon as possible, or as Lewis Carroll's Alice in Wonderland's Red Queen said "off with his head".

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Keith in NW MO

02-26-2008 11:06:24

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Re: Cash crop rent in reply to James22, 02-26-2008 06:38:58

You need to go purchase some Missouri dirt and start collecting this get rich farming money. I going to call MFA, Monsanto, etc. and demand my half of the profits. This sure sounds good on paper or computer screen but gets harder out in the field.
Just my 2 cents.

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Keith in NW MO

02-26-2008 05:58:12

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Re: Cash crop rent in reply to Keith in NW MO, 02-26-2008 05:40:20

To some of the comments down below, you better stay where you are located to throw cash rents around with those figures. I dont care if it NW MO or NE MO its only rained one year since 2000 across a big area here. You rent land that high here there is only one way to make it and that is molesting crop insurance. There have been some outsiders come in and take this ground away at higher rates in recent years and about two years and there are gone. You could use the %5 figure but it would have to be based off real value, just because someone will give $7000 per acre doesnt mean that what the cash rent should be.

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Ray

02-26-2008 05:38:52

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

The local asc ag office keeps records of rent charged,you have to report it now.They can help you.

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8N'r--WI

02-26-2008 04:53:31

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Call the Univ. closest to where you live. They more than likely have an Ag. School that should be able to tell you what the Average Rent/Acre is in the county you live in.

Of course, that is only the "average". Consider some of the other good advice you have been given along with the average price.

Tim

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wildman from mo

02-25-2008 17:24:44

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Not knowing the 5 year production ave. it's hard to judge but it sounds low.I pay $100 per acre on 26 acre's of fairly productive river bottom. Most of the 390 that I rent 1/3 landlord 2/3 for the operator an they pay the fertilizer for their share.This is the only fair way to do so no one get's shorted.Big crop big 1/3 small crop small 1/3 no crop no pay.The ground hog's around here will cut your throat to get an extra acre.Sounds like 75 way to cheap.I would pick the best farmer in my area rent to him on shares.Today's corn price is 5.31 in st.louis so 200.00 is probaly to low. $ Don't mean much if they don't take care of the land.Tell mom to check with her neighbor's see what other's are paying. Good luck

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730virgil

02-25-2008 17:18:23

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

have a rent auction. anyone interested in renting to ground shows and makes a bid. some ground just across state line rented for $185 this way. at ethanol stock holders meeting last week, general manger feels 5 dollar corn is realistic for all of 2008.

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Larry59

02-25-2008 16:58:35

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Have you seen some of this land in Missouri. I live here. Not far below is rocks.. and everytime that it rains. More grow out of the ground. lol Not the best farm land in Missouri like other places I have traveled.

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John e.c.MI

02-25-2008 16:39:03

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

I am going to go against the grain of the other posters. How has the current renter treated you mother? Rent paid on time? Plow the driveway in the winter? Treat the farm like he owns it? If the answer is no to any of these questions maybe your mom doesn't owe him anything. Maybe a modest increase or stair step it over a few years. This whole thing could go south in a hurry and someone who rented it for $150/acre but doesn't pay hasn't improved your situation any.

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paul

02-25-2008 16:20:05

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

I am in Minnesota so can"t relate directly to your local conditions, but, for those yields, your mom is getting taken advatage of. Land has slightly better yield potential here, but only slightly, and rens are $150-180 an acre this year, with "nice little old lady" rents of $120..... .

There is no rent that stayed the same unless it was a multi year contract....

And your mom will be in for much higher property taxes on her land, so she is losing money if she stays the same rent.

One caution, most states have laws that renters need to be notified by September or so if they will not be able to rent the land the following year, so if there is no documentation in hand, there can be issues.

--->Paul

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Scott in SF

02-25-2008 16:05:10

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Have you ever thought about offering it for bids in some ag related paper. Around my place (ND) that is how landowners get the highest rent. Put the legal description in the advertisement and mention that the 3 highest biders can raise their bids after opening. Owner can reject any and all offers. Commidity prices are soaring and so are cash rents. I don't know but I think that guy is taking advantage of your mom. No raises in 9 years ? For NE Missouri $75 an acre sounds real low.

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VADAVE

02-25-2008 15:40:24

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

I wonder how many farmers answered that question? Or is just farm owners? 5% of value is BS with land in the $6000+ range that comes to about $300/ac not considering the lay of the ground or the yield potential. In Virginia the rent is about $65/ac or less. There have been a few that paid $100/ac--you'll notice I said paid. Cause they an't farmin' no more. I know more then one that are paying between $10 and $30/ac just because their "good boys" and "I knew you when..".

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John (C-IL)

02-25-2008 18:39:51

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Re: Cash crop rent in reply to VADAVE, 02-25-2008 15:40:24

5% is VERY realistic here in central Illinois where recent land auctions have seen 160 to 640 acre parcels sell for $6000 to $7000 per acre and rented within 24 hours for 5% of the sales price.

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John (C-IL)

02-25-2008 18:39:23

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Re: Cash crop rent in reply to VADAVE, 02-25-2008 15:40:24

5% is VERY realistic here in central Illinois where recent land auctions have seen 160 to 640 acre parcels sell for $6000 to $7000 per acre and rented within 24 hours for 5% of the sales price.

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John (C-IL)

02-25-2008 18:41:46

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Re: Cash crop rent in reply to John (C-IL), 02-25-2008 18:39:23

I guess I over stated my case LOL! Sorry for the double post.

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1206SWMO

02-25-2008 17:10:59

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Re: Cash crop rent in reply to VADAVE, 02-25-2008 15:40:24

Dave, I got a question for you.How could someone buy ground in VA for $6000 per acre and then rent it out for $65 per acre?Thats a 1% return on your investment.$10 per acre rent barely pays the taxes. What kind of crop yields do you get in VA?

Here in the rural midwest when you get away from the big cities and the development ground,the 5% rule works.$1500 ground here rents for $70 per acre.Our land isnt as overvalued as it seems to be elsewhere.

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1206SWMO

02-25-2008 14:53:41

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Your Mothers renter is taking advantage of her..Is 160 bu corn and 52 bu beans the best its ever done or is that a 10 year average?We need to know this.I'm guessing the 10 yr average isnt quite that high as NE MO has had several bad droughts in the past 10 years.

It looks like he should be paying at least $125 acre.Most ground rents for at least 5% of its current value per acre.

Around here in SWMO 120 bu corn,50 bu wheat,and 30 bu soybean ground rents for $70-80 per acre which is on the cheap side.Ground is selling for $1500-2000 per acre here.Lots of places its rents for $1 or more per bushel on the corn x the 5 year average.

Even with high input costs theres lots of money to be made with $5 corn,$13 beans,and $9 wheat.150 bu corn at just $4 per bushel is $600 gross per acre which leaves plenty of room to pay $125 per acre rent..If the current renter doesnt want to pay that many others gladly will.

Some rents in central Illinois are in the $300-400 per acre range on 200 bu corn ground which is high in my opinion.

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Ray

02-25-2008 15:04:36

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Re: Cash crop rent in reply to 1206SWMO, 02-25-2008 14:53:41

"Most ground rents for at least 5% of it's current value per acre" That wouldn't work to well in ohio where farm ground locally sells in the $5000 to $9500 per acre range.That's just average farm ground. Farmers will always whine about rent cost,but it's not up to you to finance there farming operation.If the shoe was on the other foot would you expect the farmer to help you out,good luck.

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James22

02-25-2008 14:38:30

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Yes she is getting shafted. I'm not familiar with Missouri law, but unless she told him last year it is probably too late to change tentants without buying out his right to farm it this year. I would suggest somewhere around $150/acre, unless you are in a drought or flood prone area. Apply some pressure for an increase this year, but don't make too much of a fuss or he might just mine the soil this year knowing he is "toast". However be sure to tell him before the cut-off date this fall what the new rent will be or other arrangements will be made.

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glennster

02-25-2008 13:27:47

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

i think the rent is too low. if the tenant thinks the ground is only worth 75 an acre, have him buy some and farm it. i would put the ground up for sealed bids next year for cash rent, or have your mom ask other farmers in the area to make her written offers on renting the ground. its not hard to find someone that will pay a decent price and farm your ground correctly. there are a few shisters around in any community, but their reputation will preceed them.

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John (C-IL)

02-25-2008 13:12:14

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Around here that ground would bring $150 or a little more. Ask the tenant what average rent he is paying his other landlords. I have heard individual tenant ranges from $75 to $225 for similar ground.

Another unbiased way to set the rent is 5% of current land value. If the current land value is $2500 the rent would be $125. It would be worth asking and paying a certified appraiser what the compareable sales are for the area.

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ktheo1

02-25-2008 12:57:26

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

If this land is as productive as you claim and is in any sizable fields $150.00 -$200.00 would be more fair .Its probably too late to get a new tenent this year as the time for notice is past 11/1/07 but I would give him written notice and be looking for a new tenent for next year .

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flying belgian

02-25-2008 12:56:47

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Re: Cash crop rent in reply to seia, 02-25-2008 12:47:15

Get the CER (crop equivilant rating) rating from your FSA office and then ask your university or extension agent for the county averages.

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