Schmidt: What’s the average rental rate for pasture, cropland in Pierce County?
This is a question I get asked several times a week throughout the year by both landowners and renters. While I can’t personally recommend rental rates, there are a number of publications provided by the NDSU Extension Service and others which provide some good guidelines and benchmarks to use. However, in addition to these there are a number of other factors landowners and renters need to consider when negotiating a cash rental price. There is no “one size fits all” definite answer.
Let’s review the publications available to help guide rental negotiations before outlining the other factors to consider which can also play a role in negotiating rental rate. These publications are based on a collection of survey data collected from producers. They are not based on actual sales or contracts and therefore are only as accurate as the information provided by producers surveyed.
The first publication I look at and offer to the caller is the current “North Dakota County Rents and Values” which is available online at land.nd.gov/docs/surface/ctyrent14.pdf. (Historical ND County Rents and Values going back as far as 1989 can be found online at nass.usda.gov/statistics_by_state/north_dakota/publications/land_values_and_farm_numbers/ )
Some points of caution to keep in mind when reading the County Rents and Values publication is that values are reported on a countywide basis only. They are not broken down by township this is to preserve the anonymity of landowners. Another figure to pay attention to is the number of reports that were collected. If there were only a few responses collected as noted in the Number of Reports column then what we are seeing may not be a true representation of average prices. The rule of thumb is to use discretion when we see less than 15 reports were tabulated for a particular county. To minimize the variability that can occur from year to year, a 3-year average is also included in the survey.
In Pierce County cropland quality, soil type and texture, and yield production history varies greatly from east to west and sometimes even from section to section. Therefore it is important for landowners and renters to also study these factors in addition to the values published in the County Rents and Values when negotiating a fair rental rate. Additionally, topographical information such as field size, configuration, presence of rocks, water drainage, water holding capacity, previous land management (Ex: no-till, fallow, CRP, chemical applications, etc.) and field access should also be taken into consideration when calculating a fair cash rent price.
Landowners should also consider their land taxes which sometimes get overlooked. Land values in our region as well as regions across the state have increased greatly in the last 5 years. Therefore, land taxes have likely increased as well. The only way to cover that increase is for landowners to increase their rental rates if the current rate isn’t covering this increase.
Both landowners and renters will also want to take time to look at future market prices and determine where the breakeven point is for the crops they wish to grow based on crop yield history. This is in the best interest of both parties because if the renter is not making money the landowner probably won’t get paid either.
The County Rents and Values publication also includes values for pastureland. Pasture rent factors such as water quality, current condition of fence, pasture management (Example: rotational grazing vs. season long, stocking rates etc.), pasture size and configuration, and access to pasture need to be factored into pasture rental rate negotiations also.
The bottom line is that it is it crucial that all parties involved in negotiating rental rates are at the table communicating about the details of the rental agreement.
Finally, no matter what type of agreement is agreed upon by the landowners and renters, everything should be written down and reviewed by a licensed law professional.
For more information on developing various rental arrangements as well as sample lease forms check out “Ag Lease 101” online at aglease101.org.
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