In the May issue of Iowa State University Extension's online Ag Decision Maker newsletter, an article reviewed the 2012 leasing rental rates, which showed continued strength in cropland rental markets. The article provided highlights from Information File C2-10, 2012 Iowa Cash Rental Rate Survey, which is available on the Ag Decision Maker website or you can get the printed publication by contacting your county extension office.
However, a lot has happened since that ISU rental rate survey was gathered and published in the spring. The drought of 2012 came along to cripple crop yields in many areas of Iowa and the Corn Belt. As a result, corn and soybean prices have reached record high levels. So there's reason to revisit the question--Where might cash rental rates for cropland be headed this coming year? What are the new issues to look at?
Kelvin Leibold, an Iowa State University Extension farm management specialist located at Iowa Falls in north central Iowa, provides the following information and observations.
What should landlords and tenants look at when setting a cash rental rate?
When landlords and tenants establish rental rates they often look at the following: what other farm operators are paying, average crop yields, Corn Suitability Rating Index, share of the gross crop value, the return on investment, percentage of the crop and the tenant's residual. Next year's rents may be influenced by the drought of 2012. In recent years the tenant's residual has received a lot of scrutiny.
For more information on the methods listed, read Information File C2-20, Computing a Cropland Cash Rental Rate on calculating rental rates. A Decision Tool for analyzing the different methods is also available.