With more than 40 percent of Nebraska’s agricultural land being leased, thousands of landowners and tenants face important lease decisions each year. Currently, the economic magnitude of these decisions is even greater, given the circumstances for 2008 crop prospects.
Of course, September 1st was the deadline for either party to notify the other of lease termination for 2008. There is also a minority of leases that are binding multi-year contracts which are not negotiated annually and would not be up for negotiation this fall. That said, however, there is still a vast majority of leases with details for 2008 still to be worked out. In these volatile economic times, the more that landowners and tenants can work together towards fair and equitable lease arrangements, the better.
In facilitating this process, we would advise all parties involved in cropland lease arrangements to access various information and analysis tools from the land grant institutions around the country. The University of Nebraska-Lincoln has the Farm Lease Calculator that can facilitate analysis of a host of leasing decisions regarding either crop-share or cash leasing arrangements. It is an Excel spreadsheet program designed to analyze and evaluate crop budgets and various lease options from the standpoint of both the tenant and the landowner. It can be accessed directly from the UNL Agricultural Economics web site at: http://www.agecon.unl.edu/resource/farmcalc.html
With the recent upward surge in crop prices, many land owners are taking a renewed interest in the crop-share lease, thinking it may lead to a larger dollar return than under a straight cash lease. To be sure, that may well be true for this 2007 crop year and quite possibly even for 2008 if the land owner is willing to take on the greater risk, and more of the direct management of production/marketing, etc.
For cash leases negotiated annually, the 2008 crop-year prospects suggest some strong upward rental advances. With favorable commodity prices for corn, soybeans and wheat going into next year, the income generating expectations are much stronger on both sides of the cash rent bargaining table. While there are already reports of “can you top that?” 2008 rental rates, these should not be the determining factors in the negotiations. Both tenant and landowners need to sit down together with realistic numbers and expectations and arrive at a mutually agreeable level. Here again, we believe the Farm Lease Calculator can be helpful.
Some additional resources include: Cornhusker Economics, September 12, 2007 issue “Cropland Leasing Decisions for 2008” and March 21, 2007 issue “Ethanol Fueling Land Market Advances. Both of the are available at: http://www.agecon.unl.edu/Cornhuskereconomics.html
