Cash Rental Rate Estimator (C2-20) - Iowa State University



Ag Decision Maker Activity File C2-20

Cash Rental Rate Estimator

Using the Decision Tool, Cash Rental Rate Estimator, answer the following questions.

The Swensons rent 240 acres from an out-of-state landlord. He is asking $195 per tillable acre for next year, which he heard was the going rate in his county. Is that a reasonable rate? Can the Swensens afford to pay that much?

Here are their estimates of their yields and productions costs.

Corn (127 a.) Soybeans (113 a.)

Expected yield (5-year average) 180 bu. 56 bu.

Expected selling price $5 $12

USDA direct payment $2,600 twice a year

Seed, fertilizer and pesticides $250 $180

Insurance, misc. $30 $30

Machinery fuel and repairs $50 $40

Drying $36

Machinery fixed costs $20 $20

Labor value @ $10 per hour $____ $____

3600 hours divided by 1500 total acres

What is the calculated rent based on the formulas below?

Share of Gross Income

35% of corn and 45% of soybeans _____________________

Yield Potential

$1.09 for corn and $3.61 for soybeans _____________________

CSR Index

CSR of 75, $2.00 per point _____________________

Percent of Land Value

3,500 @ 5% return _____________________

Ag Decision Maker Activity Continued… File C2-20

Cash Rental Rate Estimator

Tenant’s Residual

_____________________

Crop Share Equivalent

_____________________

What is the weighted average of all the approaches?

_____________________

Is $195 a reasonable amount?

_____________________

Why might labor and fixed machinery costs not be considered?

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. . . and justice for all

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC 20250-9410 or call 202-720-5964.

Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa.

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