Iowa Cash Rents Show Slight Increase

Cash rent per acre up over last year, but economic challenges could influence the future

May 19, 2020, 2:24 pm | Alejandro Plastina, Ann Johanns

AMES, Iowa – Despite another difficult year in agriculture, cash rents still posted an increase of about 1.4%, according to this year’s Cash Rental Rates for Iowa 2020 Survey, released earlier this month.

Rates across the state averaged $222 per acre, compared to $219 per acre in 2019, the fourth year of relatively stable rates, but at levels about 18% lower than the historical peak reached in 2013, of $270 per acre.

“It’s surprising for me to see that cash rents are pretty stable and have not gone down,” said Alejandro Plastina, associate professor and extension economist at Iowa State University. “And that’s likely a reflection that government programs last year were injecting enough liquidity.”

planting corn.This year’s survey is available in the May edition of the Ag Decision Maker. The survey included nearly 1,600 responses from farmers, landowners, professional farm managers, realtors and others with knowledge of land rents, reportedly familiar with 1.6 million acres of cash-rented land across Iowa.

The percentage of increase varied across the state, with the lowest quality land showing the largest increase, at 2.7% per acre, compared to the .4% increase for high quality land.

According to Plastina, most cash rents for 2020 were determined by September 2019, during expectations of federal Market Facilitation Program payments and expectations of higher soybean exports to China.

He said the challenges of 2020 were mostly not yet considered, and could lead to some future renegotiations and softening of rates. Those challenges include economic losses from the coronavirus, delays in the Phase 1 trade deal, and decreased demand for biofuels, due to plummeting oil prices.

Plastina said the poor economic condition in agriculture will continue to pressure cash rents and land values, and that barred strong government assistance, it’s possible both land values and rent could see future declines.

“It will remain to be seen whether there will be enough support to maintain the cash rents going into 2021,” Plastina said.

Plastina reminds Iowans that information in the survey is “intended to serve as a reference point” for negotiating an appropriate rental rate for the next year. Rents for individual farms should be based on productivity, ease of farming, fertility, drainage, local price patterns and other factors.

Other resources available for estimating a fair cash rent include the AgDM 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 of these fact sheets are on the Ag Decision Maker Leasing page, including decision tools (electronic spreadsheets) to help analyze individual leasing situations.

For questions regarding the cash rent survey, contact Plastina at 515-294-6160 or plastina@iastate.edu, or Ann Johanns, program specialist in economics with Iowa State University Extension and Outreach, at 641-732-5574 or aholste@iastate.edu. For leasing questions in general, contact a farm management field specialist in your area.

 

Original photo: Planting corn.

About the Authors: