What’s a fair cash rental rate?
Producers and landlords often wonder about cropland lease rates. Unlike land prices that are accessible to the public, there’s no way to actually determine what’s happening with lease rates. Alberta Agriculture and Rural Development sheds some light on this issue by commissioning an annual survey on the topic. The rents reported in the survey vary widely even within the same county, but they do provide a bit of a guideline as to what’s happening in the marketplace. To my knowledge, no similar survey information is available in Saskatchewan. Ted Nibourg, a farm business management specialist with Alberta Agriculture has an interesting rule of thumb formula for determining a rental rate tied to land productivity. Nibourg says take one-quarter of the long term average yield of a given crop and multiply this by an anticipated price. Discount this result by a further 25 per cent to cover risk and uncertainty. He uses the example of land that would typically produce an 80 bushel per acre barley crop. One quarter of this yield is 20 bushels. Using a $3 a bushel price is $60 an acre. Discounting that by 25 per cent gives a cash rental rate of $45 an acre. A 30 bushel per acre canola yield at $8 a bushel gives the same result. I’m Kevin Hursh.