2008 Cash Rental Rates in MissouriRon Plain and Joyce White
Department of Agricultural Economics
In the summer of 2008, 207 Missourians responded to a mailed survey and provided information on their cash rental arrangements for farm property. A summary of their rates for Missouri cropland, pasture, farm buildings, pasturing livestock and whole farms is shown in the following tables. As expected, most rates have increased since our last survey.
This guide should not be used as the sole basis for determining your rent, but it may provide a reference as you consider the factors unique to your situation. The acres of land available for rent (supply) and the number of tenants wanting to rent for cash (demand), as well as production costs and market prices, can affect the amount of rent negotiated.
Table 1. Cash rent paid for Missouri crop and pasture land in 2008.
Table 2. Cash rent paid for Missouri cropland in 2008 by yield and acreage.
Table 3. Charge for pasturing cattle by stocking rate (Missouri, 2008).
Table 4. Rental rates for Missouri farm buildings in 2008.
Whole-farm annual rent
What is "cash renting"?
Entire farm units may be rented on an annual basis for a flat rate. These rates vary widely because of the diversity of farm units in the amount and quality of the land as well as type and usefulness of buildings. Structures such as grain bins and storage facilities are also rented for cash. Rates are usually based on size or capacity of the structure for a specific use and time period such as grain bins per bushel per month or per year for storing corn or soybeans.
Storage facilities, such as grain bins and equipment storage structures, are also rented for cash. Rates are usually based on size or capacity for a specific use and time period ó such as grain bins by capacity or a storage rate per bushel per month or per year. Use or availability of auxiliary equipment and utilities may also affect the rate.
A written lease that describes the terms of the agreement is recommended. A cash lease usually includes restrictions on use, such as which crops can or cannot be grown on specific fields and the degree of productivity that must be maintained. It also states the amount of rent due, the time and method of payment and the duration of the lease. Apart from these terms, the tenant has free rein in planning production or use of facilities.
It is common practice for the tenant to pay all costs involved in raising the specified crops during the period of the lease. Landowners normally pay for improvements expected to endure beyond the period of the lease, as well as expenses related to property ownership. As indicated by our 2006 survey, sharing of expenses for durable fertility improvements is a consideration in multi-year crop and pasture leases.
Pluses and minuses of cash renting
+ Receives all profit resulting from higher crop yields or higher commodity prices. This adds an incentive for higher production.
+May enroll in government programs and receive entire payment.
- Has increased risk. Rent is fixed regardless of production.
- Can have large capital requirements for production expenses.
- Can have rent increased for doing a good job. As yields increase, landowner sees opportunity to negotiate a higher rent.
+ Is not required to tie up cash in the production process.
+ Has no worries about storing or marketing crops.
- In good years, does not receive as much money as he/she would in a crop-share arrangement.
- Worries that the tenant will let the place run down.
- Has little chance to do income tax management.
High rents increase the tenantís risks but benefit the landowner. A variable or flexible cash rent based on yields and prices can help distribute risk. However, adding variable or flexible features to a cash rental agreement can affect its classification for government programs and the distribution of payments. It is suggested at a proposed flexible agreement be reviewed by the local USDA Farm Services Agency office for classification before finalizing the agreement.
For information on other types of rental arrangements and lease forms, contact the agriculture business specialist at your local University of Missouri Extension Center.
This report is also available as a PDF document: http://agebb.missouri.edu/mgt/cashrent2008.pdf