Whole Farm > Leasing > Rental Rate Surveys

Cash rental rates up again, but slowing down

AgDM Newsletter
June 2009

Anyone who is involved with the rental market for Iowa farmland knows that rental rates have been pushed higher by the favorable corn and soybean prices that farmers enjoyed in 2007 and 2008. However, lower prices in late 2008 and 2009 seem to have taken much of the steam out of the land market.  Results from the most recent Iowa State University Extension survey estimated that the average cash rent for corn and soybean land in the state for 2009 was $185 per acre, $8 per acre higher (4.5 percent) than in last year’s survey. This compares to an increase of $27 per acre (18 percent) from 2007 to 2008.

The intent of the ISU survey is to report typical rents in force, not the highest or lowest values heard through informal sources.  Rental values were estimated by asking over 2,000 people familiar with the land market what they thought were typical rates in their county for high, medium and low quality row crop land, as well as for hay and pasture acres. For 2009 a total of 1,271 responses were received. Of these, 39 percent came from farmers, 27 percent from landowners, 11 percent from professional farm managers, 15 percent from lenders, and 9 percent from other professionals.

The most positive factor affecting rents has been higher grain prices. Consistently good yields in recent years have also lent support. On the negative side, escalating costs for fuel, fertilizer, seed, pesticides and machinery have offset some of the higher revenues. Wet, cool weather and flooding in some part of Iowa may have dampened competition for rented land for 2009, as well. There was evidence from the survey that the higher average rents came about mostly from renegotiation of leases that had not been changed for several years. On the other hand, many of the higher rental rates either stayed the same or were lowered slightly for 2009.

Other resources available for estimating a fair cash rental rate include Ag Decision Maker Information File C2-20, Computing a Cropland Cash Rental Rate, and File C2-21, Flexible Farm Lease Agreements. Both of these include decision file electronic worksheets to help analyze leasing questions.

 

William Edwards, extension economist, 515-294-6161, wedwards@iastate.edu