Farmers like to tell anyone outside of agriculture that there’s a lot more to the business than just the price of grain. Those grain prices have been relatively profitable the past few years but that doesn’t mean agriculture has become a no-worry enterprise. Because along with grain prices, the cost of farming is also rising.
When grain prices go up, it’s noticed by everyone in the business. Farmers certainly, but also by the people who supply farmers with what they need to grow a crop. That includes fertilizer, seed and tractor companies….and also landlords. They know high grain prices means farmers are seeing more revenue, and they generally want a piece of that income.
A good example is the price of renting land.
David Bau is with University of Minnesota Extension. He says land rental rates have increased steadily the last few years. For 2009, rental prices increased almost 9 percent. That means for the best farmland in the state rental rates are $150 an acre or more.
A typical southern Minnesota corn/soybean farmer plants about 1000 acres of crops. If that farmer happens to rent all the land, that rental bill alone is $150,000.
Bau says while all the numbers aren’t in yet for this year, it’s likely that rents rose sharply again, at least 7 percent in some parts of the state. And with grain prices now generally above year ago levels, Bau says rents will rise again next year.
Those rental rates are one of the most important cost factors for Minnesota farmers. Bau says contrary to what many people may believe, most farmers rent the majority of their cropland.
He says a rule of thumb is that a typical farmer owns anywhere from a quarter to a third of the land they plant each spring, the rest is rented. So as rental rates go up, their cost of business continues to increase. Those higher bills take some of the luster off surging grain prices.