Production costs for 2027 are already being set, even before many farmers have started harvesting the 2026 crop.
For row-crop producers, land represents a major share of the budget. USDA-ERS data shows land accounts for 20 to 40% of production costs. That means by Sept. 1 — when lease termination deadlines arrive in states such as Ohio, Iowa, Nebraska and South Dakota — many farmers will already have a large piece of next year’s production budget in motion.
So, why does this year feel different?
The calendar has not changed, but the stakes have. With land costs already representing a large share of row-crop expenses, fall lease deadlines are forcing producers and landowners to make 2027 budget decisions before the 2026 crop is fully known.
With input costs still high and crop prices under pressure, Iowa farmer Ben Riensche says land is top of mind.
“Revenue has gone down, and expenses are up 40%,” he says. “There’s a lag in how rent adjusts when crop prices languish and input prices stubbornly wouldn’t come down. It’s the margin compression that isn’t being factored into farm rents and farmland values.”
Johanns says that lag is partly tied to the way cash rents tend to follow land values, which have remained relatively stable.
“Over time, cash rents track with land values,” she says. “Land is still held by many in this state as an investment, or it is their rental income.”
According to USDA-ERS, about 40% of U.S. farmland is rented or leased. Over the past year, average cropland rent was $160 per acre, down just $1 from the prior year but still 15% higher than in 2020. The average from the Iowa farmland survey had the same result–$1 lower in rent per acre in 2026 compared to 2025.
In Iowa, Ann Johanns, extension program specialist at Iowa State University, says rental rates are a major decision point for the state’s farm economy because over half the state’s farmland is rented. Iowa State’s annual Cash Rent Survey is designed to bring more transparency to those negotiations, she says.
“We try to not use it as the basis for rents, but to provide information for the discussion,” Johanns says. “If you’re outside the range, there should be a really good reason why.”
In Illinois, cash rental rates continued to firm from 2025 to 2026, particularly for higher-quality farmland, according to the Illinois 2025 Land Value Report from the Illinois Society of Professional Farm Managers and Rural Appraisers.
- Excellent-quality land rose $5 to $375 per acre.
- Good-quality land posted the largest increase, climbing $25 to $325 per acre.
- Average-quality land increased $13 to $273 per acre.
- Fair-quality land was the only category to decline, slipping $5 to $200 per acre.
Land values also remain historically strong. The American Farm Bureau Federation reports average farm real estate values rose for a sixth consecutive year, increasing 3.4% to $4,500 per acre in 2026. Since 2020, cropland values are up 48%, while pastureland values have climbed 43%.
Still, there is little consensus that a major correction is underway.
The newly released Farm Journal Ag Economists’ Monitor asked whether 2026/2027 fall land auctions would mark the first significant year-over-year decline in high-quality Midwest farmland values since the 2020 rally. Only 13% of respondents said they believe a market correction is beginning.
Sept. 1 Does Not Have To End The Conversation
Johanns says one point is especially important as the Sept. 1 deadline approaches: terminating a lease is not always the same as ending the relationship.
“When we terminate a lease, it doesn’t mean that we’re terminating the relationship,” she says. “The termination is just saying, we need to talk about our terms.”
In Iowa, she says, the lease itself does not have to be finalized by Sept. 1. Rather, the deadline gives both sides a chance to revisit terms and make decisions with more information after harvest.
“Tenants want to know, and they do need to have some idea of what land base they have for decisions, but the lease itself does not need to be signed by September 1 for next year,” Johanns says. “It just needs to be terminated.”
Lease Structure Matters, Too
As farmers and landowners weigh 2027 agreements, the type of lease can determine who carries more risk when margins tighten.
Purdue University’s Center for Commercial Agriculture recently compared net returns to land from three common lease arrangements: crop share, fixed cash rent and flexible cash leases, using a case farm in west central Indiana.
- Under a crop share lease, the landowner receives a share of crop revenue, government payments and crop insurance indemnities, but also pays a share of expenses such as seed, fertilizer, chemicals and crop insurance premiums.
- Under a fixed cash rent lease, the landowner receives a set annual payment, regardless of crop revenue or production costs.
- A flexible cash lease typically includes a base rent plus a bonus if revenue exceeds a certain threshold. In Purdue’s analysis, the base rent was set at 90% of fixed cash rent, with the landowner receiving a bonus when revenue exceeded non-land costs plus base rent.
Purdue found that average landowner returns were fairly similar across the three lease types over time, but the volatility was not. Fixed cash rent provided the most stable return. Crop share and flexible cash leases offered more upside in stronger revenue years, but they also exposed landowners to more downside when crop prices weakened or input costs rose.
Flexible cash lease bonuses were uneven. From 2007 to 2025, bonuses occurred in 11 years, ranging from $0 to $127 per acre and averaging $37 per acre.
That flexibility may be less rewarding in the current margin environment. Due to high input prices and lower crop prices, Purdue’s early projections suggest no bonus payment for flexible cash leases in 2026. Crop share leases are also expected to generate lower returns than both fixed cash rent and flexible cash rent.
For farmers heading into 2027 lease negotiations, the message is clear: land costs are not just another line item. They are one of the first major expenses to be locked in — and in a year of compressed margins, the rent level and lease structure could shape the entire budget.
