2018 Iowa cash rents stabilize
The Cash Rental Rate for Iowa 2018 Survey compiled by ISU Extension and Outreach was released in mid-May and is posted on the ISU Ag Decision Maker web site. Results were that the average rent statewide is $222 per tillable acre. That’s a slight increase of $3 per acre or 1.4 percent from the 2017 average rent. This amount is still a 17.8 percent decline from the 2013 peak of $270 per tillable acre and higher than the average rent received in 2011.
Seven of the Iowa’s nine crop reporting districts did indicate slight increases in rental rates. The exceptions were the south-central and southeast districts. The largest average rent increase came from central district with a $9 per tillable acre jump. The largest decline in rent came from the southeast district with a $6 per acre drop.
The cumulative drop in average rental rates statewide since 2013 is 17.8 percent from their peak of $270 per acre. That percentage decline is comparable to the 15.9 percent decrease in average Iowa land values during this same time frame.
Corn and soybean prices received in Iowa peaked in August 2012 at $7.90 and $16.80 per bushel, respectively. In March 2018, corn and soybean cash prices were $3.40 and $9.60 per bushel, respectively. That’s an accumulated decline of 57 percent and 43 percent from those peak values.
Due to current and projected low crop prices, profit margins in corn and soybean production on cash rented acres are expected to remain very tight. Tenants will likely be using profits they make on their owned land to cover any negative margins on cash rented ground. Thus cash rental rate trends in Iowa are more closely associated with land values than they are to crop prices.
Cash rents reflected land quality
Not all Iowa land qualities saw cash rents decline proportionately in 2018.
High quality land experienced a 0.8 percent increase, from $256 per acre in 2017 to $258 in 2018. Medium quality land experienced a 0.9 percent increase, from $220 per acre to $222. Low quality land experienced a 1.1 percent increase, from $183 per acre to $185.
Survey results were collected from mid-March thru late April 2018 from 1,596 knowledgeable Iowans. They were asked to respond to what they thought were typical rents in their county for land producing corn and soybeans, hay, oats and pasture. Of these respondents, 47 percent were farmers, 29 percent landowners, 13 percent professional farm managers and realtors, 9 percent agricultural lenders, and 2 percent with other professions. Respondents indicated being familiar with a total of 1.8 million cash rented acres across the state.
Setting rents for 2019
Survey information can serve as a reference point for negotiating an appropriate rental rate for next year. However, rents for individual farms should be based on productivity, ease of farming, fertility, drainage, local cash price patterns, tenure of the lease and possibly additional services performed by the tenant.
Two major factors with the potential to influence future cash rental rates across Iowa are crop prices and land values. Should average or above Iowa crop yields result in 2018 in addition to steady to lower Iowa corn and soybean cash prices, expect both land values and 2019 cash rents to continue to stabilize.
Iowa State University Extension and Outreach will be conducting nearly 70 farmland leasing meetings statewide in late July and August where lease-related information will be discussed. For a list of meetings statewide, check the ISU Extension calendar for a meeting near you at www.extension.iastate.edu/calendar.
Steve Johnson is an Iowa State University Extension and Outreach farm management specialist. He can be reached at firstname.lastname@example.org.
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