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Advisor

farmland rental rates

I got the information about an estate farm being sold at public auction in my area. Nothing unusual except that it is rented for $110/acre for this year. you read right and i suspect the same for the last several years. I know the previous tenant very well and he said he was paying 125 back in the 80's. auctioneer said that the elderly lady "just didn't want anymore".  Another farm near corwith iowa will be sold soon and it is rented for $165. I wonder how many of these deals are out there?

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7 Replies

Re: farmland rental rates

Many, I would think.

 

But my observation is that those deals often become the swan song for the tenant. At some point the landlord or the heirs look at it and rightly, or wrongly, assume that the tenant was taking advantage and in some cases overreact.

 

And in a lot of cases the former tenant isn't even given consideration for future rental.

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Senior Contributor

Re: farmland rental rates

I know of guy who rents to a close friend of his for $100 per acre. Says he doesn't "need" the money. No desire to switch or ask for more. Whatever dude.

I think we all get wrapped up in the media thinking avg rent in the Midwest is $300-$500 per acre. Here in IN, Purdue University conducts a survey of rents yearly. For 2011, 180 bushel corn ground was avg $218 rent. 160 bushel ground was $182. Poor ground was about $140 or so. I would agree to those as state avg, that would include family ground, etc to lower it. Locally, $300 is kinda standard for the competitive parcels that have been known to come up. $350-$400 here in my immediate area will raise some eyebrows, especially multi-year. Flex leases are coming on fast with base rent of about $200. Rent was about $1 per bushel corn yield for a long time around here, recently it is about $1.50. This ground here will avg 185 corn and 50 bushel beans, we don't have csr ratings here.
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Re: farmland rental rates

The Purdue Land Rent Survey probably is a decent snapshot of what is really going on out there- a lot of rents lag.

 

Of course it is never a good indicator of what the current new bid is at the margin and there has never been where the marginal rent has risen so much so fast.

 

It really is a conundrum for some people who have swwetheart deals.

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Senior Advisor

Re: farmland rental rates

My mother was talked into some of those deals by her previous tenant.  When I came back from the Army and starting farming, I rented her ground and paid appropriate rent - quite an increase for her.

I don't know how many sweetheart deals there are.  I'd think the IRS would look unkindly on those that were in the family and might not be a business relationship. 

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Advisor

Re: farmland rental rates

Who knows, perhaps in a few years, the IRS may be requiring substantiated evidence of "arms length" deals.  They already are requiring evidence when calculating imputed interest rates on loans to family members.

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Advisor

Re: farmland rental rates

As always, good advice would be to be proactive and maintain communication with all parties of an agreement to thwart any feelings that someone is taking advantage of a good thing.

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Advisor

Re: farmland rental rates

I know of a sweet family deal.  Land lady charges 10K for a quarter section, 140 acres tillable, average Iowa soil.  I once asked the question and was told "if I want more rent then I will ask for it".  I never said another word because frankly I don't think it is any of my business.

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