Iowa Farmland Rental Rates Drop 5%

 
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Iowa farmers who were looking to bring down their cost per acre have found a little relief in terms of farmland rental rates. The 2015 Cash Rental Rates for Iowa Survey that’s conducted by Iowa State University Extension and Outreach showed rental rates for Iowa farmland decreased by 5% in 2015.

2015 is the second consecutive year of declining rates after a 15-year period of increasing rental rates, accumulating a 9% loss since 2013.

Power Hour Noon Logo for Rotator“Average rents were lower in all nine crop reporting districts,” says Alejandro Plastina, assistant professor and extension economist with Iowa State University.

“The average estimated cash rent for corn and soybean land in the state for 2015 was $246 per acre, a decrease of $14 per acre or nearly 5% from last year," he says. "Low crop prices for the 2014 crop and small- to negative-profit margin forecasts for this year’s crop put downward pressure on rental rates.”

Key findings of the survey include:

  • The largest decreases in land rental occurred in central and west central Iowa, at $24 and $23 per acre, respectively
  • Northeast Iowa reported the highest average in 2015 at $273
  • The lowest district value was $187 in south central Iowa
  • Grundy County had the highest average rent in the state, at $316 per acre
     

Could this be a Major Rent Reversal?

The verdict is still out. “It isn’t a trend yet, but it certainly is a reversal of the 15-year trend we’ve seen of land rental rate increases,” Plastina says. “Land rates and other input costs take time to adjust to lower levels of crop revenue; so if corn and soybean prices don’t improve soon, we can expect land rental rates to continue to decline.”

Earlier this year, a survey of more than 1,000 Pro Farmer Members and LandOwner subscribers also showed cash rents to be down 5% on average across the Corn Belt.

Mike Walsten, LandOwner editor, says the really high cash rents—those starting at $400 and ranging up to $650 an acre in 2013—backed off in 2014 by $50 or so in 2014. “Those rents have come down again for 2015,” he says.

Even in 2014 there were still plenty of average and below-market cash rents, Walsten adds. “Some of those are still on the increase as they attempt to narrow the gap with the high-end cash rents in recent years,” he says. “Others were not increased as aggressively as the high-end rents the past several years and are proving ‘sticky’ now that pressure is on commodity prices and net incomes.”

Walsten says it may be 2016 or 2017 before those rents decline more than marginally, if current commodity price trends continue.

 

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