Historically, land values have increased at a faster rate than cash rent rates, says Nick Paulson, University of Illinois ag economist.
“If we look at the ratio of cash rent rates to land values in the ‘80s and ‘90s, we’d see those ratios to be anywhere between 5% and 8% at the peak,” Paulson says. “Now we’ve seen that relationship level off to about 3.5% of cash rents relative to land values.”
Paulson says cash rent rates are keeping more in line with increases in revenues, cash and margins.
“If we continue to see land rate rents increase we’ll continue to see cash rents also increase given the strength for commodity prices in the short-term,” he says.
Listen in as Paulson discusses the historical increases in cash rents and the type of rent agreements farmers should consider with University of Illinois Extension’s Todd Gleason.