Updated formula | New calculation will use previous year seeded acreage information
Saskatchewan is updating the formula it uses to calculate the rent it charges on cultivated crown land.
Most rents will go up, although they would have this year anyway.
Over the next three years, Saskatchewan Agriculture will phase in a calculation using information from Saskatchewan Crop Insurance Corp. to make the rent more reflective of current practices, said Wally Hoehn, acting director of the lands branch.
The existing formula dates back to the 1970s. It used commodity prices that were nearly two years old and just four commodities: wheat, barley and either flax or canola.
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“Then it made some assumptions, that 73 percent of the province was seeded to wheat and 17 percent was seeded to barley and then the other 10 percent was seeded to one of the other two,” Hoehn explained. “And, it assumed a half-half rotation.”
The new formula will use previous year seeded acreage information from an SCIC risk area. It will use up to 34 commodities and the guaranteed prices that SCIC uses for its insurance contracts.
Hoehn said the rent should better reflect what the farmer is getting off the combine in terms of prices.
This year, officials will compare last year’s rental rate to what the new rate would be if the formula were fully implemented and increase the rent by one-third of the difference.
Next year, the increase will be two-thirds of the difference and by 2014 the formula will be fully implemented.
Hoehn said the average rate for 2012 is $19.34 per cultivated acre, compared to $13.03 last year. Renters are also responsible for the municipal taxes of generally between $5 and $8 per acre.
He said if the existing formula had stayed in place, the rent would still have risen about 42 percent, on average.
He added that looking at the commodity and the price provides potential revenue per acre. The province then considers the quality of the land and takes a percentage as its rent, ranging from 18 percent for the best soil to 12 percent.
No one ever likes a rent increase, he said, but the rates are below what private landowners charge.
The changes affect farmers who rent between 360,000 and 370,000 acres from the province. Most of the land is located in east-central and northwestern areas and much of it was part of the land bank put in place during the 1970s and discontinued in 1983.
“There are farmers out there whose entire land base would be cultivated crown lease,” Hoehn said.
“That’s the exception but there are a few guys.”
In those cases the parents likely sold their land to the land bank and the younger generation took over the land in the 1970s at reasonable rent.
Letters went out to clients last week. They have until May 1 to surrender their leases without any liability for rent or taxes. Most rents are due Nov. 1.
Meanwhile, rates for grazing on crown pasture are also going up due to the strong cattle prices last fall. The 2012 rate will be $6.09 per animal unit month.
