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Having large acres of land is a privilege and burden at the same time. People who have inherited family farms but they do not see themselves succeeding in the agricultural field often go through bittersweet dilemmas.
They are often at crossroads of whether they should sell the farm with a family history or rent it. Leasing farmland might be the sweet spot or middle ground you have been looking for.
Owners of hundreds of acres of land often rent it to a single person or farmer for the continuous production of crops and animals.
In fact, most of the farms in the United States are rented. As the land changes hands, most new owners and farmers calculate the farmland rental rates.
Farmers are faced with different mind-boggling questions like what is a fair land rental rate? How much does it cost to rent an acre of farmland? Find out in this short guide about rental rates for farmland.
Cost to Rent an Acre of Farmland
When the farmer and the landowner reach a mutual agreement, both parties wonder whether it is beneficial for them.
The owner wonders if this is the fair land rental rate whereas the farmer worries if he is being charged too much.
The answer to this question can not simply be a definitive number when many factors play an important role in the varying rental rates.
Factors like soil quality, the value of crops, and the demand for the land affect the rental price per acre.
Generally, the farm rental rates vary from free to over $100 per acre.
According to different surveys conducted, the average land rental price was $127 $120 for non-irrigated farms, and $220 for irrigated land per acre in 2019.
This year you can expect an increase in rental prices. As the prices of commodities have gone up, the farmland rentals have reached their own record highs.
Farm rental income differs from state to state and country to country.
In the last 20 years, farmland rentals have risen in the US alone from $60 to over $125.
In different US states, farm rates are different, the average rate is $317 in California, $220 in Arizona, $191 in Washington, $189 in Iowa, 179 in Illinois, and $152 in Indiana. These are the average rates that may vary depending on different elements.
Calculating Farmland Rental Rate Per Acre
The key to finalizing a farmland rental is fairness. Often landowners come up with a different figure than the farmer and vice versa.
Then, both parties negotiate to settle on a mutually agreed figure and have a lasting agreement in writing. There can be more than one way to calculate a fair rental price.
- Keep in mind tax rates, cost of repairs, fences, and other land improvements when charging a specific rental rate.
- It is unfair to charge a percentage of the property’s highest possible value but only for the portion rented for farming.
- If the farmer spends money on improvements and repairs, the rent will drop accordingly.
- Calculate the annual cost of ownership including insurance cost and property taxes. Add up these costs according to the proportion of the farmed acreage. It would be a fair rental price that can be charged from the farmer.
- The ‘going rate’ is different from location to location in a country. Farm advisors and area farmers can help you inform about the rates in effect for farmlands in your areas.
It is customary to have the agreement in writing as most farmers settle with no more than a handshake.
The written lease agreement will help out in many situations like in the event of liability or insurance claims.
Related Ranch vs Farm
Factors Affecting The Farmland Rental Rates
Landowners want to do a little better than the break-even, whereas, farmers like to be charged as little as possible.
Besides personal preferences, there are some other factors that determine the price of the farmland.
- If the agricultural land is fertile and has better soil quality, many farmers would be happy to pay some extra dollars for the increased crop production.
- Size has a direct impact on all farmland rental rates. For instance, if you are renting a hundred acres of land, the rate would obviously be higher.
- The demand for farmland is also considered when determining the rental rate for a farm.
- Last but not least, if the farmland is located close to urban areas, the worth of the land and the rental rates would likely be higher.
There could be several reasons why you want to sell a farm, think again, as leasing the farm would get you easy money without having to do anything. If you have hundreds of acres of farmland, you can easily get over $10000 in lieu of rent. Leasing land has a lot of perks as you do not have to sell the land and the owner earns the rental income continuously.