As we turn the page to a new year, some of us are also turning the page to a new farmland rental rate. The wide majority of farmers in the United States operate under 1-year agreements, which means the rental rate is annually subject to negotiation. Since 2019 or so, that rate has gone up by 10-25% under strong demand nationally and internationally through the beginning of 2023.
Rental rates often reflect the previous year’s success, so it doesn’t look like rental rates will drop much going into 2024. Yet, farm income isn’t projected to be as high in 2024. Steady increases in rental rates are also coinciding with increasing input and labor costs, as well as higher interest rates. (Find more statistics in this article.) All this can squeeze the farm business, especially beginning operators with less flexibility to adapt to changing conditions. What can the farmer do to manage the situation?
The annual renewal of a lease arrangement can be an opportunity. The lease is, at its core, the agreement of two people regarding the use of a piece of land. That agreement is supported by the relationship itself. Farmers and landowners are often drawing on shared goals for the land, shared history in the community, and a shared passion for the agricultural lifestyle. Farmers can lean into that relationship by making sure the landowner understands all they are doing for the land and community. It may seem like the lease is just about the almighty dollar, but our relationships run deeper than that. When we start talking about our values and the meaning of our work, we usually find a stronger connection together. That stronger connection can result in a rental rate that’s more rational to everyone’s situation.
Consider the type of relationship you want with the farmland owner or tenant. Is now a good time to open up the conversation about rental rates AND about the deeper values you are expressing through the relationship? It might sound weird and hard, but this is how communities work (which is to say, it’s often weird and hard for those many farmers who are introverts).
Don’t worry, there’s help to be had. Check out our new resource, Farmers’ Workbook for Creating an Agricultural Lease, for support in having powerful conversations about your farmland lease agreement. Whether you’re the owner or the tenant, this guide will help you figure out how to talk about issues like rental rates, conservation practices, and more. We believe in the power of agricultural communities to create excellent rental agreements, and this guide proves everyone can get there!