2013 rental arrangement needs to be in place
Landowners are now past the reasonable time to develop or change their farm land rental agreements for 2013 field crops.
By mid-May, farm land rental arrangements and any necessary changes for 2013 should have been worked out. Farm operators should now be fully engaged in field work and planting is in progress or near complete as the weather allows. Landowners who have not completed their farmland rental agreements with their renter are in a position that is not as attractive or desirable as we were a few months ago. Any change to a new/different operator at this time will normally create several major issues and will require, at a minimum, payouts by the landowner to the former renter for the time, materials and activities that have already occurred for the 2013 crop. In many cases, renters may have commodity marketing agreements, started tillage, applied fertilizer and chemicals for which the landlord will need to reimburse.
As the deadline date rapidly approaches for farms to be fully enrolled in the 2013 USDA farm program, it becomes more difficult to make changes in 2013 rental agreements. During the past few years, many changes in farm business operations have taken place such as major price changes for both the commodities being produced and sold. Input costs have increased at a steady pace with land costs among the top three items of change causing increased overall cost of crop production.
During a period of rapid change, gaps in communication can lead to confusion if everyone is not able to stay fully in the loop. Direct communication between landowners and farmland renters is one of the greatest challenges, but provides positive results for those who do communicate well. In my duties as a Michigan State University Extension educator, I have seen numerous problems turn into conflict when securing or settling annual farm land rental agreements. A good written farmland rental agreement is a great tool to prevent a problem from developing, as the ground rules between the landowner and the renter are established. MSU Extension recently created the Michigan Cash Farmland Lease (E3193), a written agreement form that can be filled out on a computer. This agreement is available at no cost. You can find other resource materials related to farm land rental agreements, rates and historical reported values at the MSUE – FIRM farm management web page.
Landowners generally see increases in farm land cash rental values when commodity prices move higher. However, we are currently looking at cash grain commodity prices 20- 25 percent lower than last year at this time. Some economists are estimating prices to decrease as much as 30 percent from the high prices we experienced last fall and winter when most 2013 land rental agreements were put in place. This downward change in potential crop revenue will need to be reflected in current and future farm land rental rates. Lower cash rental bids can be expected for those agreements that were delayed until now. Rental arrangements put in place at this point in the year are often a flex rent agreement that will better reflect the actual 2013 crop price and production situation. A historical Saginaw Valley land rental rates summary reported by farmers should assist landowners in determining rates.