BLOOMINGTON, ILL. (RFD-TV) — As landowners and farm operators prepare to renew leases for the 2027 crop year, tight margins, rising input costs, and uncertainty over farm profitability are making communication an important part of rental negotiations.
Spencer Smith with the American Society of Farm Managers & Rural Appraisers (ASFMRA) said written agreements and ongoing conversations can help landowners and tenants establish expectations and navigate difficult financial discussions.
Written Leases and Open Communication
In his interview with RFD-TV, Smith said about 40 percent of U.S. farmland is leased, making rental agreements an important part of agricultural operations.
He recommends having a written lease that clearly outlines terms, expectations, and responsibilities for both parties.
“It’s very important to have open dialogue between both parties,” Smith said.
He said some farm operators may hesitate to discuss their financial performance because they worry that sharing challenges could affect future lease terms. However, Smith said regular communication can help prevent surprises and build stronger working relationships.
“Rather than making this a once-a-year conversation, create an open dialogue so that when something does arrive or comes up during the year, it’s not a surprise to anybody,” he said.
Farm Profitability Influences Rental Rates
Smith said compressed margins in some regions could influence whether rental rates increase, remain steady, or move lower for the 2027 crop year.
With diesel costs and other production expenses affecting profitability, he said operators should discuss their financial outlook with landowners before finalizing lease terms.
“Those margins and those production levels are all influencing those rental rates,” Smith said.
He added that many farmers have already begun making decisions about fertilizer and other inputs for the next growing season, making rent one of the remaining major expenses to address in their budgets.
Smith encouraged landowners who are retired farmers or otherwise leasing out their property to maintain open communication with the operators working their land.
Leased Farmland Continues to Play a Role in Agriculture
Smith said the amount of rented farmland can change as farm operations expand and more producers retire.
Operators often lease additional acres to expand their businesses, while land formerly managed by retiring farmers may remain under agricultural production with a new tenant.
He also noted that institutional investment continues to play a role in the farmland market.
As ownership and operating arrangements evolve, Smith said both landowners and tenants benefit from understanding their agreements and staying informed about market conditions.
Seek Professional Guidance
Smith encouraged landowners and tenants with questions about rental rates, lease terms, or other arrangements to consult a professional farm manager.
He said the American Society of Farm Managers & Rural Appraisers can be a starting point for finding guidance.
“Educate yourself and have that open dialogue,” Smith said.
