PRIMGHAR, Iowa — In June, Iowa State University Extension and Outreach reported their annual survey of 2021 cash rental rates. For the state, lease rates increased an average of 4.5 percent ($10/acre average increase when compared to one year ago) to $232/acre (https://www.extension.iastate.edu/agdm/articles/plastina/PlaJun21.html). This survey supplied 1,363 useable responses about typical cash rental rates for farmland planted to corn, soybeans, hay, oats, and pasture. Producers and landowners made-up approximately 75 percent of the respondents, who were familiar with a total of 1.5 million acres across the state.
Increases were shown across all Crop Reporting Districts (CRDs) in the state, though considerable variability is present across specific counties when looking at year-to-year changes. These lease rates represented the first substantial rent increase since the peak of 2013 and following four years of lease reductions and three years of relatively stable rents. During that approximate same timeframe:
- Nominal corn and soybean prices declined 31 and 14 percent, respectively; and
- Land valuations declined 13.3 percent (versus the accumulated rent reduction of 14.4 percent; https://www.extension.iastate.edu/agdm/wholefarm/html/c2-70.html).
County cash rental rates for Iowa in 2021 can be found at https://www.card.iastate.edu/tools/ag-risk/cash-rental-rates/. All land qualities showed similar percent changes to lease rates, and with the exception of CRD #1 and CRD #3, all CRDs individually showed at least a $10/acre increase to average rents.
When setting rents for the 2022 crop year, it is important to use survey information as a reference point for negotiation. However, any one lease rate must be reflective of productivity, ease of farming, fertility, drainage, local commodity price patterns, longevity of present lease and tenant services performed by the present tenant. Ag Decision Maker provides seven cash rental rate tools to analyze and use when calculating lease rates (https://www.extension.iastate.edu/agdm/wholefarm/html/c2-20.html).
Future crop prices and government payments influence future cash flow (hence, cash lease rates). Higher market prices for 2021 corn and soybeans are currently projected; however, an overall decline (2020 to 2021) to net farm income is also projected due to the lower government payments (estimated decline 8.1 percent, February, 2021, Economic Research Service, https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast/). Additionally, preliminary anecdotal reports are offering costs of production will be higher for the 2022 crop. Does this offer the needed evidence to carefully consider a flex lease for the 2022 crop year? (See AgDM worksheet: https://www.extension.iastate.edu/agdm/wholefarm/html/c2-01.html).
Are farmland lease rate changes justified by farmland value changes? Historically, a typical landowner wants to compare cash rents to a return on the farmland investment. Since 1990, there has been a declining average return on investment (in farmland) who cash rent, stabilizing at approximately 3 percent. Though a final answer is not possible, the returns from the stock market, compared to a farmland investment are heavily dependent upon timing (https://www.extension.iastate.edu/agdm/newsletters/nl2019/jul19.pdf). Historically, low interest rates, predictions for inflation, and the most recent REALTORS Land Institute survey (https://rliiowachapter.com/wp-content/uploads/March-21-Survey-Press-Release.pdf) showing a 7.8 percent increase in farmland values, may be combining to place upward pressures upon 2022 cash rents.
All 13 Northwest Iowa counties are hosting (or co-hosting) a 2.5-hour Farmland Leasing Meeting. The August 3-17 schedule can be found at https://www.extension.iastate.edu/dickinson/farmland-leasing-meetings-2021. Following our efforts one year ago to mitigate the COVID-19 risks, these meetings will be in-person, though we will again be using health-first meeting guidelines. Pre-registration is requested to ensure space is best-managed and enough resources are available. I encourage you to review marketing materials, sign-up and attend. Please contact me (712-223-1574; gdwright@iastate.edu) with any questions regarding ISU Extension and Outreach, ag programming, Ag Decision Maker (https://www.extension.iastate.edu/agdm/), etc.
— Gary Wright, Farm Management Specialist
Iowa State University Extension and Outreach
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