For the third consecutive year rental rates for Iowa farmland declined, according to results from the 2016 Cash Rental Rates for Iowa Survey conducted by Iowa State University Extension and Outreach.
After 15 consecutive years of rental price increases (1998-2012), prices have now gone down for three straight years. Prices dropped by 6.5 percent in 2015 after a five percent decrease the year before.
“Cash rents are declining but not as fast as crop prices,” said Alejandro Plastina, assistant professor in economics and extension economist at Iowa State University. “Prices have dropped for cash crops by between 50 and 60 percent in the last three years and rent has gone down 15 percent. Profitability in cash rented acres will still remain tight despite lower cash rents in 2016.”
Rental rates are $230 per acre statewide, with a dip in prices shown in all nine of the state’s districts. The state average rate was $246 last year and was $270 just three years ago. The largest drop in prices came from District 3, a $23 drop in the counties making up the northeast corner of the state. Regions 4, 5 and 7 all saw decreases of $20 or more as well.
Despite its drop in rental price, District 3 also had the highest cost in the state for the second consecutive year, averaging $273 per acre.
The district with the lowest cost per acre, also saw the smallest drop in rental price. Cost per acre in District 8 (south central Iowa) went down just $4, falling from $187 per acre to $183.
“I don’t expect crop prices to improve a lot over the next year,” Plastina said. “With profitability of cash rented acres remaining tight over the course of 2016, I do not anticipate seeing an increase in cash rent prices either.”
Rental values were estimated by asking people familiar with land rental markets what they thought were typical rates in their county. Of the 1,585 responses received, 47 percent came from farm operators, 25 percent from landowners, 14 percent from agricultural lenders, 12 percent from professional farm managers and realtors and 2 percent from other professionals. Respondents indicated being familiar with a total of 2.5 million cash rented acres across the state.
Cash rent survey results can be used as a reference point for determining an appropriate cash rental rate for a particular farm, but a number of factors (such as small size or unusual shape of fields, terraces or creeks that affect the time it takes to plant and harvest crops, high or low fertility levels or pH index, or longevity of the lease) may justify a higher or lower than average rent.
The Cash Rental Rates for Iowa – 2016 Survey is available online from the Extension Store and Ag Decision Maker.
Other resources available for estimating a fair cash rental rate include the Ag Decision Maker information files Computing a Cropland Cash Rental Rate (C2-20), Computing a Pasture Rental Rate (C2-23) and Flexible Farm Lease Agreements (C2-21). All documents include decision file electronic worksheets to help analyze leasing questions.
Source: Iowa State University Extension
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