The annual cropland rental rate survey for Iowa, released earlier this week by Iowa State University Extension, shows a big jump in cash rental rates for 2011 compared to 2010. The average cash rent for corn and soybean land for the state for 2011 is estimated at $214 per acre, an increase of $30 per acre or 16% from last year. That comes as no surprise, considering the huge rise in corn and soybean prices that has take place since last fall, says William Edwards, the ISU Extension farm economist who coordinates the annual survey.
Anyone who is involved with the rental market for Iowa farmland knows that rental rates were pushed significantly higher by the favorable corn and soybean prices that farmers enjoyed in 2007 and early 2008. That was followed by lower prices in late 2008 and 2009, which took much of the steam out of the land market. "Corn and soybean prices took off again in fall of 2010 due to tight grain supplies and increased demand worldwide," notes Edwards. "It didn't take long for those higher crop prices to be reflected in cash rents."
Largest one-year increase since statewide survey began in 1994
Results from the most recent Iowa State University Extension rental rate survey indicate that the average cash rent for corn and soybean land in the state for 2011 is $214 per acre, an increase of $30 per acre or 16 % from last year. This is the largest one-year increase since the statewide survey was started in 1994. Even more interesting, though, is the range of typical rents reported.
"For most counties the lower end of the range was about the same as in 2010, but the high end of the range was as much as $50 to $100 an acre above last year," says Edwards. "Remember, the range represents the highest and lowest estimates of typical rents for high, medium and low quality land by respondents who replied for each county. They do not represent rents for individual farms."
Average rents were higher in all nine crop reporting districts, with increases ranging from $23 per acre (12%) in east central Iowa to $37 per acre (21%) in southwest Iowa. Individual farm rents that were set before the September 1, 2010, termination deadline in Iowa probably changed very little, while rents that were negotiated later likely reflected the higher corn and soybean prices being offered then.
Survey reports typical rents, not the highest or lowest values
Rental values were estimated by asking over 3,000 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 oats, hay and pasture acres. The number of responses received was 1,567 this year, an increase of 25 % over last year. Of these, 33 % came from farmers, 24 % from landowners, 22 % from professional farm managers, 14 % from lenders and 7 % from other professionals.
The intent of the ISU survey is to report typical rents in force, not the highest or lowest values heard through informal sources. The rental rates summarized in the survey report are for cropland. They do not reflect the value of any buildings or storage structures, manure application contracts or seed production contracts.
The results of the survey are available at ISU county Extension offices, or online at the ISU Ag Decision Maker site. Go to www.extension.iastate.edu/agdm/ and in the list on the left, look under the "Whole Farm" section and click on "Leasing."
Where to get more information about setting cash rents
In addition to the survey results, 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 include electronic worksheets to help analyze leasing questions. File C2-23, "Computing a Pasture Rental Rate," is also available on the site.
"Keep in mind the average rental rates reported in the ISU survey are to be used as guidelines," says Edwards. "The purpose of our survey is to provide information to both tenants and landlords to use as a starting point for estimating a fair cash rent for their particular farm." He points out that circumstances such as the following may justify a higher or lower rent in specific cases:
• Small size or unusual shape of fields
• Presence of terraces or creeks that affect the time it takes to plant and harvest crops
• Difficult or restricted access to fields
• High or low fertility levels or pH index
• Existence of contracts for growing seed or specialty grains, or application of manure
• Above-average local grain prices due to proximity to biofuel plants or feed mills
• USDA program variables, such as crop bases and assigned yields
• Longevity of the lease
• Other services performed by the tenant
ISU survey results released in May, USDA survey released in September
The ISU cash rental rate survey each year is conducted in March, the data is gathered and assembled, and the complete report is released in early May.
USDA also conducts a cash rental rate survey each year, the results of which are reported in September. The USDA survey provides information about cash rental rates by county in Iowa, and it is available from USDA's National Ag Statistics Service at the following website: www.nass.usda.gov/Statistics_by_State/Iowa/Publications/Prices/reports/Cash%20Rent%2009-10.pdf.