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top 10 us states for crop land rental rates

Land rents decline, but margins do not improve

A 2015 survey shows cash rental rates for farmland in Iowa fell by 5 percent in 2015, accumulating a 9 percent decline since 2013. This is consistent with the recently observed decline in Iowa land values.

However, average marketing year prices for corn and soybeans are projected to decline, respectively, by 47 percent and 30 percent from their 2012-13 levels in 2014-15. As a result, profit margins are expected to fall further and likely turn negative for the average Iowa farmer.

For the state as a whole, reported rental rates for land planted to corn and soybeans were down from $260 per acre last year to $246 in 2015, or nearly 5 percent according to a survey conducted by Iowa State University Extension and Outreach. This is about half the change in Iowa farmland values over the past 12 months reported in surveys conducted by the Iowa Realtors Land Institute.

But, the 9 percent accumulated decline in rental rates since 2013 is aligned with the 8.9 percent decline in land values reported in the 2014 Iowa Land Value Survey published by the ISU Center for Agriculture and Rural Development.

Iowans supplied nearly 1,450 responses about typical cash rental rates in their counties for land producing corn and soybeans, hay, oats and pasture.

Of these, 49 percent came from farmers, 27 percent from landowners, 12 percent from agricultural lenders, 10 percent from professional farm managers and 2 percent from other professionals.

This is not to say that all cash rents were lowered for 2015. The intent of the survey was to report typical rents being paid for the current crop year, including those that may have been negotiated in prior years as well as those that were set more recently.

There was considerable variability across counties in year-to-year changes, as is typical of survey data, but 89 percent of the responses showed at least a small decrease in average rents for corn and soybeans.

Grundy County showed the highest average rent, at $316 per acre. The report also shows typical rents for alfalfa, grass hay, oats, pasture, corn stalk grazing and hunting rights in each county and district.

Table 1 shows the average rent reported for land planted to corn and soybeans in each of the nine crop reporting districts in Iowa for last year and this year.

Northeast Iowa had the highest average rental rate in 2015. All districts showed a decrease.

The largest decreases in average rents were recorded in the Central and West Central districts. Those districts had the highest rents among all crop reporting districts in 2014 as well as 2013.

All areas of the state faced significantly lower grain prices at harvest for the 2014 crop, as well as decreased forward pricing opportunities for the 2015 crop. This was the major factor impacting rents.

Since 2013, the typical Iowa farm has had to come up with additional revenue from other sources to cover fixed costs of corn production. In 2013, the average multiple peril crop insurance indemnity payment received per planted acre more than offset the $43 gap, and the return to management after indemnity payment was positive.

But in 2014, the average indemnity payment was insufficient to cover the negative return to management. As a result, the $11 gap had to be financed with income from livestock operations, non-farm income, asset liquidation, savings or debt.

In the projected scenario for 2015, the return to management before indemnity payments would amount to -$128: revenue from corn production would cover all variable costs but would fall short of covering fixed costs by $128.

The marketing year average corn price would have to climb to $4.36 in 2015-16 for the typical tenant to break even with a yield of 171 bushels per acre; or to $4.19 with a yield of 178 bushels per acre.

For soybeans, return to management prior to crop insurance was positive in 2010-14. However, the $100 gap projected for 2015 would require financing from other sources of income or debt.

The marketing year average price for soybeans would have to climb to $10.85 per bushel in 2015-16 for the tenant to break even with a yield of 48 bushels per acre; or to $10.11 with a yield of 51.5 bushels per acre.

Farm program payments (ARC/PLC) are expected to contribute only marginally at most to covering the negative returns to corn and soybean production in Iowa in 2015.

The estimated return to management is based on cash rented land. Return to management on owned land does not depend on rental rates, but on interest payments on land loans, property taxes, and maintenance and upkeep costs. For example, return to management on fully owned land will be positive as long as crop revenue exceeds land property taxes, maintenance and upkeep costs plus non-land cost of production.

Survey information can serve as a reference point for negotiating an appropriate rental rate for next year. However, rents for individual farms should vary based on productivity, ease of farming, fertility, drainage, local price patterns, longevity of the lease and possible services performed by the tenant.

More Crop News: Iowa Farmer Today stories

top 10 us states for crop land rental rates:Land rents decline, but margins do not improve A 2015 survey shows cash rental rates for farmland in Iowa fell by 5 percent in 2015, accumulating a 9 percent decline since 2013. This is

top 10 us states for crop land rental rates

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top 10 us states for crop land rental rates Land rents decline, but margins do not improve A 2015 survey shows cash rental rates for farmland in Iowa fell by 5 percent in 2015, accumulating a 9 percent decline since 2013. This is consistent with the recently observed decline in Iowa...