The dramatic downturn in many crop and livestock prices this fall has prompted much public concern for the condition of farmers and rural economies in the state. Several members of the Department of Applied Economics have written recently on the situation. In this issue, four of these papers are summarized to give you a quick overview of how the price declines might affect farming in Minnesota. For details on estimation procedures, price histories, and market projections, please turn to the full reports. Data from past years suggest that cash rents will adjust over time, but adjustments will be small compared to the expected changes in profitability.
Average rents do rise and fall over the years.
Figure 4 summarizes an annual statewide survey conducted by the USDA in which randomly selected farmers are asked what cash rents they expect to pay during the current year. In addition, the figure plots the actual rents paid by members of the Southwestern Minnesota Farm Business Management Association. The two rent estimates track fairly closely, with the Association rates averaging 25 percent higher than the statewide average. The break-even rental rate is the amount a tenant could pay for land rent after all other expected expenses and revenues are considered. This amount, however, does not include either cash for family living expenses or the renter s opportunity cost, that is, what the renter could have earned in other employment.