Iowa Cash Rent Prices Drop 6.5% in 2016, Third Year of Decline
Cash rent for Iowa farmland declined for the third year in a row, according to the 2016 Cash Rental Rates for Iowa Survey conducted by Iowa State University. Following a 3.7% drop in 2014 and a 5.4% decrease in 2015, cash rent prices went down 6.5% in 2016.
“Cash rents are declining but not as fast as crop prices,” said Alejandro Plastina, extension economist at Iowa State University. “Prices have dropped for cash crops by between 50 and 60% in the last three years and rent has gone down 15%. Profitability in cash rented acres will still remain tight despite lower cash rents in 2016.”
For 2016, the average rental rate was $230 per acre, down from $246 in 2015 and $260 two years ago. From 1998 to 2013, cash rents increased each year, from $119 to $270.
Iowa State’s data shows a slightly different story than the USDA NASS Cash Rent Survey that comes out in August of each year. This report showed cash rent increasing from 2012 to 2014 from $235 to $260 an acre. The first decline was in 2015 when cash rent dropped down to $250. The USDA NASS numbers for 2016 will be released in August.
Differences in the survey group most likely contribute to the differences in cash rents between the two studies. “NASS surveys operators who rent land on a cash basis from land owners and asks about the actual cash rent paid,” explains Plastina. “ISU surveys all farmers and ranchers, ag lenders, farm management professionals, appraisers, realtors, and other ag professionals that are knowledgeable of cash rents in at least one county. We ask about the typical cash rent in the county, not the actual cash rent paid by a tenant or received by a landlord.”
The USDA data for Illinois and Indiana also showed a rise in cash rents from 2012 to 2014. Prices moved from $175 to $195 in Indiana and $212 to $234 in Illinois. In 2015, Indiana moved up slightly to $197 and Illinois came back down to $228.
What about 2017?
“I don’t expect crop prices to improve a lot over the next year,” Plastina said. “With profitability of cash rented acres remaining tight over the course of 2016, I do not anticipate seeing an increase in cash rent prices either.”
Farmers will need to see much higher crop prices before they see a reversal in the downward trend of cash rents, adds Plastina. He does not anticipate seeing this in 2016/17 or 2017/18.