Don’t base 2021 land rental rates on the past year
An ag lender is concerned some landowners will base 2021 rental rates on what happened this past year.
Kent Thiesse with Minnstar Bank in southern Minnesota says 2020 will be prosperous for a lot of farmers because of strong yields, a fall rally, and an unusually high level of government farm program payments.
“If land rental rates go up significantly, it could really make budgeting, and especially if crop prices come back down, a bit more challenging for ’21. Especially if they had above-average or exceptional yields, and those yield levels start to drop back.”
Thiesse believes rents should be based on what’s expected for the next year and tells Brownfield that’s why he’s a big proponent of flexible lease arrangements.
“You’re much better off to have a rent based on realistic average yields, projected prices and average crop expenses. And then if yields and or prices end up better than expected, then there’s a bonus rent at the end.”
He says 2020 would’ve been a good year for flex leases because of that.
Thiesse also points out that approximately 70 percent of cropland in the Midwest is under a land rental agreement, and he suggests most of the negotiating for 2021 is happening right now.