Oklahoma Cropland Rental Rates: 2016-17

Rental agreements and rates are influenced by the landowner’s costs, the tenant’s expected earnings, previous rates charged, competition for the land, government programs, tax laws and the non-agricultural economy. The results of a statewide farmland leasing survey conducted in 2016 are reported here. Respondents were individuals contacted through the Oklahoma Cooperative Extension Service who agreed to complete periodic surveys plus recipients of a mailing by the Oklahoma Agricultural Statistics Service. Approximately 190 surveys were returned with usable data. Figure 1 shows the regions of the state used in reporting survey results: northwest, southwest, northcentral and east.

 

On average, crop cash lease agreements had been in effect for 13 years (Table 1) and 14 years for crop share lease agreements (Table 3). The statewide average lease size was 540 acres for cash leases and 344 acres for share leases. Median values are also noted, which shows the value in the middle of the survey responses. Figures 1a and 3a show the distribution of responses regarding acres and the years held for cash leases and share leases, respectively.

 

Most tenants and landlords in Oklahoma appear to be satisfied with their lease agreements although the levels of satisfaction have declined in recent years. Fifty-seven percent of respondents with cash lease agreements and 62 percent of respondents with crop share agreements classified their leasing agreements as either good or excellent from a standpoint of fairness in the most recent survey. This compares to 68 percent of respondents with cash lease or crop share agreements only a few years ago in the 2012 survey. In addition, 33 percent of respondents with cash lease agreements and 26 percent of respondents with crop share agreements classified their leasing agreements as adequate from the standpoint of fairness in the most recent survey.

 

 

Figure 1. Regions Used in Reporting Farmland Leasing Survey Results

 

 

 

 

 

Cropland Cash Rental Rates

Cash leases require a fixed payment, typically cash (or infrequently, a specified yield such as 10 bushels of wheat). Survey results document some regional differences in rental rates and average sizes of tracts rented. Cash rental rates for dryland wheat were highest in the north-central region of the state, averaging $39.21 per acre, compared to $30.75 to $37.07 in other regions of the state (Table 2)1.  The state average of $36.01 increased less than $1 per acre compared to the 2014 average of $35.54.

Figure 2 shows the distribution of responses (71) for dryland wheat cash rental rates. Four percent of the respondents reported a rental rate between $10 and $19 per acre, 21 percent reported a rental rate between $20 and $29 per acre, 34 percent reported a rental rate between $30 and $39 per acre, 21 percent reported a rental rate between $40 and $49 per acre and 19 percent of the respondents reported a rental rate of $50 or more per acre.

Dryland grain sorghum average rental rates were higher than wheat at $38.78 per acre while dryland alfalfa averaged significantly higher than wheat at $46.69 per acre. (Note: since there were only 9 and 8 responses on dryland grain sorghum and alfalfa rates respectively, the averages and distributions are less reliable than they would be with more observations.)

 

 

Figure 1a. Relative Frequency of Crop Cash Agreement Statistics, 2016-2017.

 

 

 

 

 

 

Figure 2. Relative Frequency of Responses for Dryland Wheat Cash Rental Rates, 2016.

 

 

 

 

 

Table 1. Crop Cash Agreement Statistics by Region, 2016-17.

¹ Median values that represent single observations are omitted.

 

Table 2. State Crop Cash Rental Rates, 2016-17.

¹ Median values that represent single observations are omitted.
² Other dryland crops (number of observations in parenthesis) include  soybeans (7), corn (2), cotton (3), canola (1) and other small grains (1).
³ Other irrigated crops (number of observations in parenthesis) include grains (5), alfalfa (1) and cotton (1).

 

Table 3. Crop Share Agreement Statistics by Region 2016-2017.

¹ Median values that represent single observations are omitted.

 

Figure 3a. Relative Frequency of Share Crop Agreement Statistics, 2016-2017.

 

 

 

 

Cropland Share Rental Rates

In a crop share lease, certain costs are often shared in the same proportion that production is shared. In crop share leases statewide, the tenant on average receives around 2/3 of dryland wheat, alfalfa or grain sorghum, while paying that or more of the fertilizer, herbicide, insecticide and chemical application expenses (Table 4). On average, the tenant pays nearly all seed and harvesting (combining, hauling, cutting, raking, baling) expenses. Because lime has multi-year benefits, landowners may share in the cost of pay-all costs of lime application if a multi-year lease agreement is not in place.

Figure 4a shows the distribution of survey responses regarding the tenant’s share of production. Figure 4b shows the distribution of responses for the tenant’s share of crop inputs and expenses. These graphs indicate that the tenant typically pays either 2/3 or all of the fertilizer, herbicide, insecticide, chemical application, irrigation and lime costs. Chemical applications in particular are frequently paid entirely by the tenant. Compared to 2014-15 results, fewer tenants paid 100 percent of various expense items. The graphs also show that the tenant typically pays all seed, harvesting and hauling costs. Figure 4c shows the distribution of responses for hay inputs and expenses. The results for hay are similar to crops in that the tenant typically pays all seed, harvesting (cutting, raking and baling) and hauling costs.

 

 

Figure 4a. Relative frequency of responses for items in cropland share agreements, 2016-17.

 

 

 

 

 

Figure 4b. Relative frequency of responses for items in cropland share agreements, 2016-17.

Crop Inputs and Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 4c.  Relative frequency of responses for items in cropland share agreements, 2016-17.Hay Inputs and Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4. Relative Frequency of Crop Share Agreement Statistics, 2016-2017.

¹ Median values that represent single observations are omitted.
² Rental shares of 100% of the crop for the tenant or zero percent of expenses are generally special situations, usually reflecting concessions or unusual circumstances in another part of the lease. However, as lime improves the soil and this improvement is retained by the landlord if the lease is terminated, it is not unusual for the landlord to pay all lime expenses.

 

Other Lease Terms

Many lease agreements specify terms and conditions beyond the rental rate, which affect the value of the lease and the “real” rental rate. For instance, tenants may or may not be allowed to hunt, harvest pecans, graze cattle, cut timber, use buildings, improvements and lease out hunting privileges. Lime application costs or similar costs for improvements in which the benefits are shared over a number of years may be shared by the landlord and tenant, or if the tenant pays for them initially, repaid by the landlord at a fixed rate per year. Tenants may be required to maintain fences, spray weeds annually, provide liability insurance, share oil field damages, maintain terraces, and leave strips of grain in the field for game. Landlords may provide a well and water, fencing material or land for a mobile home. Tenants may ask for several months notice if the landlord wishes to terminate the lease agreement. In some cases, leases contain an option to buy with rental payments applied to the purchase price.

Historical and Regional Perspective 

Table 5 provides historical data on cropland rental rates for Oklahoma, Kansas, Arkansas and Texas for 2007-2016 as reported by the USDA National Agricultural Statistics Service (NASS). County level cropland rental rate data is available at: http://www.nass.usda.gov/Statistics_by_State/Oklahoma/ Publications/County_Estimates/index.asp. The next bi-annual USDA Cash Rent Survey will be available with the 2018 release in September 2018.

 

Table 5. Average Gross Cash Rent (Dollars per Acre) for Cropland, Selected States, 2007-2016.

 

Source: Agricultural Statistics Service, Oklahoma Agricultural Statistics 2016, USDA/NASS, Oklahoma Department of Agriculture, http://www.nass.usda.gov/ok/.

 

Concluding Comments

“Fair” rents must be negotiated between tenant and landlord. Regional or state average rental rates may be used as a beginning point for discussion and negotiation of rental rates. However, differences in land quality, improvements, and restrictions on land use can greatly impact the value of potential leases. Likewise, differences in family living expenses and hired labor costs can be substantial for different operations, affecting the maximum rental bids.

New legal restrictions and liability factors may instigate changes in future farm lease agreements. Some farm management firms include language that explicitly requires the tenant to be a good steward of the land. The tenant is expected to follow label restrictions in the use of pesticides, to remain in compliance with the farm’s conservation plan, and to dispose of wastes in a manner approved by the Environmental Protection Agency. Some leases already stipulate precisely what fertilizers, pesticides, and seed may be used on the property. Both landlords and tenants must be aware of changing environmental laws and regulations to avoid potentially costly liabilities.

 

Related Publications  and Other Resources

To help educate landlords and tenants with equitable lease agreements and current best management practices, visit the Oklahoma State University (OSU) Ag Land Lease website at http://www.aglandlease.info or http://www.aglease.info. A joint effort between OSU’s Plant and Soil Sciences and Agricultural Economics Departments, the website contains a wide assortment of farm management spreadsheet tools, lease information and forms, rental rate and land value resources, legal and tax considerations plus the latest production practices in Oklahoma.

The AgLease101.org website hosts several North Central Farm Management Extension Committee (NCFMEC) publications on leasing including these titles:

• Crop Share Rental Arrangements For Your Farm, NCFMEC-2
• Fixed and Flexible Cash Rental Arrangements For Your Farm, NCFMEC-1
• Pasture Rental Arrangements, NCFMEC-3

In addition to publications, worksheets and free downloadable sample lease forms are available on the site.

 

Recent Oklahoma school land lease auction information is also available through the Real Estate Management Division of Commissioners of the Land Office at https://clo.ok.gov/.

 

 

Damona Doye

Regents Professor and Extension Economist

 

Roger Sahs
Extension Assistant Specialist