Farmland Lease Rates: Key Determinants

5 December '13

We recently posted a blog article addressing the number one question landowners ask about leasing land: “What is my rental land worth?” This article turned out to be our most popular one yet – the most read, the most shared and the one we've received the most feedback about. It turns out that it also happened to be our longest article. So, we've decided to summarize the main ‘takeaways’ and provide you with a convenient audio file for those who prefer to listen to a discussion about the ‘Going rate for farmland rental.’ 
Determining farmland lease rates can be really challenging. This audio file presents the 5 biggest factors influencing the price for leased farmland, including the 'wild card' factor that trumps all the rest! Listen to find out what considerations are most important to pricing rental land.
To read a summary of these factors instead, continue below. Farmers, be sure to scroll down to participate in our brief survey about what you value most in rental land!
These are the top 5 factors which impact a piece of farmland’s lease value:

1) The Land’s Characteristics – This refers to the inherent features of the land and its location, including geography, weather, land type, soil type, terrain etc.
2) The Land’s History & Current Condition – This refers to what has been done to the land in the past, and how that affects its current condition. This category is particularly critical for crop land, since farm practices have the potential to strengthen or diminish the soil's fertility. 
3) The Land's Potential - For any given property, there are numerous purposes for which the land can be used. The potential for a tenant to profit from a rental agreement depends upon what can be done with the land, both in the present, and also in the future. The landowner's lease expectations (including the lease length) are critical factors that impact the farmer's potential to profit from the land.  

4) The Economic Climate - This is a broad category that captures the prevailing trends affecting the entire agriculture sector. This can include interest rates, commodity prices, weather, supply and demand balance and government regulations, although the factors within this category are virtually unlimited. These factors can be highly specific to particular sub-sectors within agriculture, particular jurisdictions, or communities.  
5) Each Potential Tenant’s Individual Circumstance – This category is the ‘wild card’ in the land rental price discussion. When a farm tenant considers a rental arrangement, they need to take stock of all of the factors we've just mentioned, and assess what they mean to their own unique business outlook. They need to consider their costs of production, profit margins, goals, their financial situation etc. There are so many unique factors that each farmer needs to weigh individually within the context of all of the other factors. The value of a piece of land to one farmer may differ incredibly to the value it offers another farmer, which is why it's the 'wild card'.
Because no two pieces of land are exactly the same, each property needs to be evaluated on its own merit. A fair price for one piece of land doesn't determine what's fair for another. Rumoured rental rates are not reliable, and unfortunately, there's no comprehensive source of information that can tell a landowner what their land is worth.

But there is a way to discover this -

If you are a landowner contact a member of our team today to find out how can help you discover the market value of your rental land. 

Of course this article just provided a snapshot of these considerations. For more more details about the factors within each category, be sure to check out our comprehensive article on the 'going rate for rental farmland'. 
Farmers – Tell us what factors are most important to you when considering whether or not to rent a piece of land. Landowners are always looking to understand the value of their farmland, and farmers need to make sure that their rental land meets their needs. 
We invite you to complete our quick, multiple-choice survey to tell us what factors you value most when considering a land rental opportunity. ** Your name is not required and all responses are anonymous.**  Your participation will help us to provide you with better info about what factors most affect the value of rental farmland. 

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