Farm Bill impacts cash rental rates

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ST. PAUL, Minn. – The new federal Farm Bill will not generate windfall profits for agricultural producers, according to a University of Minnesota financial analysis.

And the Farm Bill will not generate profits to support substantially higher cash rental rates, the same analysis indicates.

Dale Nordquist, associate director of the University of Minnesota Center for Farm Financial Management, and Gary Hachfeld, regional Extension educator at St. Peter, conducted the study.

To assess the impact of the Farm Bill on cash rents, they used historic crop yield and expense information from a cross-section of southern Minnesota farms. They coupled this with expected government program receipts.

Then they projected per-acre crop income and expenses and the amount left to pay cash rent. Some of Nordquist and Hachfeld’s conclusions are:

* The average southern Minnesota producer can break even at $97 per acre cash rent if yields and expenses remain constant with 1998-2001 averages. This is almost exactly equal to the actual average cash rent in southern Minnesota over that period.

* The Farm Bill does effectively protect from down-side price risk.

* Corn base is generally worth slightly more than soybean base when bidding on rental land.

* The percentage of the whole acreage covered by program base is a key factor in rental value.

The analysis by Nordquist and Hachfeld is limited to southern Minnesota. However, the factors they studied also affect other regions.

“Renters need to carefully weigh the income potential of rental land, including government program payments, when bidding on rental properties,” they write in a report on their study.

“Landowners need to understand the provisions of the 2002 Farm Bill and involve themselves in the sign-up decisions. These decisions will impact the value of their land and the ability to garner rent well into the future.”

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