Frequently Asked Questions: How Do I Set a Good Rental Rate?

            Back in September, I posted cash rents at the county level for Maryland and Delaware.  The county cash rent averages compiled by USDA’s National Agricultural Statistics Service (NASS) is one way to see how your rental rate compares with others in the county.  But you have to remember that it is an average and some cash rental prices will be above and some will be below that average.  The other thing to keep in mind is that average may not always work for every operation.

            Setting a cash rental rate is especially important for beginning farmers who may start out renting farmland as a way to enter agriculture.  I’m typically asked the question: “Is $X a good cash rental rate?”  My answer is usually, “I do not know if it is or not.”  I give that answer because honestly I do not know.  A lot goes into developing a good cash rent.  Knowing if a cash rent is good for you depends on your individual costs of production and current commodities prices.  If you have high costs of productions but higher commodity prices, you potentially can afford higher cash rents.  Higher costs of production and lower commodity prices mean you potentially can only afford lower cash rent prices.

Click over to the Maryland Risk Management Education Blog to finish reading this article.