Rental Rates Remain Under Pressure in Kansas

May 7, 2018 05:00 AM
Margins remain extremely thin for farmers in the Sunflower State, which is compressing what they can afford to pay in land rent.

Margins remain extremely thin for farmers in the Sunflower State, which is compressing what they can afford to pay in land rent. In 2014, the per-operator net farm income averaged $95,355, according to Kansas Farm Management Association data. In 2015 it dropped to $8,451. For 2016, it rebounded to $55,790. 

The 2017 crop year is likely to be similar to 2016 for farm income, alth-ough the impacts of low profitability are highly varied across the state, says Mykel Taylor, ag economist at Kansas State University.

Last year, counties with a large percentage of acres dedicated to wheat production harvested above-average yields. But, farmers also faced low cash prices due to basis levels well below historic averages. While counties with more soybean acres experienced a positive year for both yields and prices.

To determine what producers could pay for rented non-irrigated cropland in 2018, Taylor analyzed 
expected yields, commodity prices and production costs for the state’s farmers. These calculations do not inc-lude farmers’ profits from previous years or equity from owned assets. 

For 2018, the cash rental rates Kansas farmers could pay in most of the state’s nine regions are slightly higher than 2017. But this year’s estimates are significantly lower than what farmers could afford to pay in 2015 and 2016. Most of the 2018 estimates are also much lower than what Kansas farmers paid in cash rent last year, per data from USDA.

Kansas Cash Rental Rates for Non-Irrigated Cropland

“The recent decline in farm profitability puts producers in a difficult situation,” Taylor says. “Producers do not want to lose land if they can possibly afford to keep it, because the capital investment and labor decisions they made over the past several years were based on the amount of land they had to farm. This will lead many to pay more for the land than estimates of expected profitability suggest they can pay.”

As a result, rental rates will not fall quickly in the next few years, Taylor says. But rental rates will decline over the long term, in light of low profitability.  

Learn More: 2018 Kansas County-Level Cash Rents for Non-Irrigated Cropland


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