Crop Rental Rates Down for Second Year in 2016

This past year crop rental rates declined state wide compared to 2015. In 2015 the average rental rate for cropland across South Dakota was $145.10 per acre in 2016 the average was $141.00 per acre. This is a 2.8% decrease in the cropland rental rate state wide. This follows up a 3.3% decrease in 2015 as well. Some regions, such as the Northeast had greater decreases (12%), while others such as the Southwest had lower decreases (1.9%). The continuation of the decrease in crop rental rates is likely due to the current economic conditions.

Key Rate Factors
There are many variables affecting the decrease in crop rental rates. Commodity price declines are one of the reasons South Dakota’s average cropland rental rate dropped for the second year in a row. The 2016 average cropland rental rate was $141.00 per acre compared to $145.10 one year ago. This 2.8 percent decline follows a 3.3 percent decrease in the 2015 average.

Across the seven reporting regions, the Northeast had the greatest change. Averaging $169.04 per acre, this is 12 percent lower than a year ago. The Southwest had the smallest percent change, decreasing only 1.9 percent, averaging $42.76 per acre.

Looking Forward
While average cropland rental rates have been declining, they have not dropped as much as the commodity prices. Since the peak price highs received in 2012, farm-level corn price for corn fell 52 percent, soybeans are 42 percent lower and wheat has dropped more than 40 percent.

The continued speculation of low commodity prices may be cause for producers to evaluate their current lease situation. Determining individual crop budgets and creating detailed marketing plans are going to be key components to a sustainable operation in 2017.

Lease Evaluation
If lease changes are needed to remain profitable, Ag Lease 101 has examples of cash, share and flexible crop leases producers can modify to fit their operations. Producers with oral leases that require changes need to provide notice in writing to the other party, by September 1, 2016.

More information on cropland, rangeland and hay land rental rates and values can be found in South Dakota Land Market Trends 1991-2016.

Source: Shannon Sand, South Dakota State University