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Serving: WI

State farmland rental rates are competitive

State farmland rental rates are competitive
Many more acres are rented than sold each year

Statewide land rental rates are reported annually by NASS. Even within a county, rental rates are highly variable.

"Some of the factors which affect rental rates are soil quality, field size, social contracts and demand for nutrient management," says Arlin Brannstrom, faculty associate at the University of Wisconsin Center for Dairy Profitability in Madison, "The 2015 NASS average rental rate was $130 per acre which is about 3.5% of the statewide average sale price." 

There has been a high demand for additional rented land in recent years and tenants bid up rental rates as a result.

In recent years NASS rental rates have averaged between 2.4% and 3.4% of the average statewide ag land sales prices.

"Tight profit margins are likely to exist this year if yields and harvest time prices are typical," he explains. "In many cases, renters are not able to cover their full cost of production and must hope for above average yields or improved commodity prices or both. The outlook for 2016 is not encouraging."

In recent years NASS rental rates have averaged between 2.4% and 3.4% of the average statewide ag land sales prices.

"Many more acres are rented than sold each year," Brannstrom says. "With narrowing profitability going forward, there has been an increased use of flex lease contracts in the Midwest. Flex leases allow the owner and tenant to share the risks and rewards in good years and bad."

Examples of several types of agricultural leases can be found at http://www.aglease101.org.

"When the average cash rents are combined with land value appreciation, the returns to owning land looks better than many other investment alternatives," Brannstrom says. 

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