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Arriving at equitable land from Sept. 1 in the year of rental rates is always an harvest, until Aug. 31 of the ongoing challenge for farm following year.) The market operators and landlords year average prices in alike and will likely be an recent years for corn were even bigger challenge for $3.56 per bushel in 2019-20, the 2022 growing season. $3.61 per bushel in 2018-19, Many times, land rental $3.36 per bushel in both rates for a coming crop year 2017-18 and 2016-17, and are based on the profitabili- FARM PROGRAMS $3.61 per bushel in 2015-16. ty in crop production in the Recent market year average previous year or two before. By Kent Thiesse soybean prices were $8.57 In some cases, this can per bushel in 2019-20, present profitability challenges for farm MARKETING $8.48 per bushel in 2018-19, $9.33 per operators if grain prices drop or there bushel in 2017-18, and $9.47 per bushare yield challenges. On the other el in 2016-17. USDA is estimating the hand, there can be extra profit for market year average prices for the farm operators in years with above- 2021-22 marketing year at $5.45 per average yields and higher levels of bushel for corn and $12.10 per bushel crop prices. for soybeans (as of Nov. 1).

Many landlords reduced land rental Current cash corn prices for fall rates from 2015-2018 and would like delivery for the 2022 crop year are to return to higher rates. near $4.50 to $5.00 per bushel at Approximately two-thirds of the farmland in the Upper Midwest is under some type of cash rental agreement. Based on farm business management land rental data compiled by the University of Minnesota, average many locations in the Upper Midwest; while 2022 cash soybean prices are near $11.25 to $12.00 per bushel. This is lower than the current USDA projections for the 2021-22 marketing year (listed earlier). rental rates from 2015 to 2019 Most farm operators do not begin declined by 10 to 20 percent after forward pricing their corn and soyshowing an average increase of 40 to bean crop until the year production, so 50 percent from 2010 to 2014. Based there has been very little forward pricon the U of M data, 2020 average land ing of the 2022 crop at this point. rental rates in the region were steady Many farm operators will have signifito slightly higher. According to a U.S. cantly higher crop input costs in 2022 Department of Agriculture Cash as compared to 2021, and could face Rental Summary released in late some challenging breakeven price levAugust of 2021, average cash rental els next year if 2022 land rental rates rates in most counties increased by 5 are set at quite high levels. to 10 percent in 2021 as compared to average 2020 rental rates. Farm management analysts expect 2022 cash rental rates to show a fairly significant increase in most areas compared to 2021 rental rates, given the current strong corn and soybean prices. Based on Southern Minnesota Farm Business Management records, the average total direct cost in 2020 for seed, fertilizer, chemicals, fuel, etc. (excluding land rents) on cash rental corn acres was very near $425 per acre, and was near $225 per acre on

The commodity prices for corn and cash rented soybean acres. The aversoybeans in 2021 reached their high- age direct expenses for 2021, excludest levels since 2013, due to increased ing land rent, increased slightly for domestic usage and higher export lev- most farm operators — mainly due to els of U.S. corn and soybeans and the slightly higher fertilizer, fuel and associated decreases in the nation’s repair expenses. The 2020 FBM grain supplies. The final USDA records showed an average of nearly national market year average crop $100 per acre on cash rented corn prices for the 2020-21 marketing year acres and $65 per acre on soybean were $4.53 per bushel for corn and acres for overhead expenses, which $10.80 per bushel for soybeans. (The includes machinery costs, hired labor, market year average prices are the insurance, and other ongoing expensaverage farm-level prices calculated es, but does not include any net return to the farm operator. Most farm management analysts expect total direct and overhead expenses for corn production to increase by 15 to 20 percent in 2022, with an increase of 10 to 15 percent for soybean production.

Typically, southern and western Minnesota farm operators use average yields between 175 and 200 bushels per acre for corn and 50 to 60 bushels per acre for soybeans for cash flow planning purposes. If the direct expenses for corn are $500 per acre, with overhead expenses of $115 per acre, and a land rental rate at $250 per acre, the total expenses (before any allocation for labor and management) would be $865 per acre. With a corn yield of 175 bushels per acre, the breakeven market price to cover the cost of production and land rent would be approximately $4.94 per bushel, which would drop to $4.33 per bushel with a corn yield of 200 bushels per acre. If a $50 per acre allocation for labor and management (family living expenses) is included, the corn price breakeven levels would rise to $5.23 per bushel with a 175 bushel per acre yield, and $4.58 per bushel with a 200 bushel per acre yield. If the cash rental rate or other expenses are also $50 per acre higher, the breakeven levels increase to $5.51 per bushel at 175 bushels per acre and to $4.83 per bushel at 200 bushels per acre.

Similarly, with soybeans, using direct expenses of $250 per acre, overhead expenses of $85 per acre, and land rent of $250 per acre, total costs would be $585 per acre. The breakeven soybean price to cover the cost of production and land rent would be about $11.70 per bushel with a yield of 50 bushels per acre, which would decline to $9.75 per bushel with a yield of 60 bushels per acre. If a $50 per acre allocation is included for labor and management, the soybean breakeven price increases to $12.70 per bushel at a 50 bushel per acre yield, and $10.58 per bushel at a 60 bushel per acre yield.

There can be a big difference in crop yields and expenses from farm to farm, which can cause breakeven prices to either increase or decrease, compared to the average. Based on 2020 FBM records for southern Minnesota, the average breakeven price for corn on cash rented land, in order to cover direct expenses and overhead costs, was $3.58 per bushel, with a range of $3.08 per bushel to $4.16 per bushel. The 2020 FBM average breakeven price for soybeans was $8.32 per bushel, with a range of $7.23 per bushel to $10.03 per bushel. The 2020 FBM average yields were over 205 bushels per acre for corn, and nearly 60 bushels per acre for soybeans, which were above average.

Considerations for flexible cash leases

An alternative to a flat cash rental rate which may be difficult to “cash flow” would be for producers and landlords to consider using a “flexible cash lease” rental agreement. This allows the final cash rental rate to vary as crop prices and/or yields vary, or as gross revenue per acre exceeds established targets. The use of a flexible cash rental lease is potentially fairer to both the landlord and the farm operator, depending on the situation, and how the flexible lease is set up. A true flexible cash lease allows for the landlord to receive additional land rental payments above a base land rental rate if the actual crop yields and/or market prices, or the gross revenue per acre, exceed established base figures. It would also allow for the

See THIESSE, pg. 14

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