The push to add solar energy is gaining traction across the U.S., and it’s coming with sticker shock on just how much solar companies are willing to pay farmers to lease their ground. A survey of farmers shows the majority of farmers are being offered more than $1,000 per acre by companies for solar leasing, and that could also drive up the price of cash rental rates.
The Biden administration has a goal of a net-zero electric grid by 2035, with solar and battery-powered energy as three vehicles to get there. As the administration works to accelerate their “clean energy” plan across the U.S., land is in high demand, especially for future solar projects.
Michael Langemeier, an agricultural economist with Purdue University, says the Ag Economy Barometer is revealing the sticker shock of solar leasing rates. The survey of 400 agricultural producers, is now asking farmers how many had actively engaged in discussions with any companies about leasing farmland you own for solar installation, and the response was surprising.
“It was 19% who said they have engaged in discussions, and so think about that, that’s a huge percentage of the survey respondents have actually engaged in someone about leases. That doesn’t mean they’ve signed a thing, but that means that they’ve actually been approached,” says Langemeier.
The April survey showed a noticeable uptick in the percentage of farmers who reported having a discussion with a company about it in the last 6 months. In April, 19% of farmers said they’ve had discussions, up from 12% in March.
The bigger surprise may be in the high rates solar companies are offering farmers.
- 58% say the rates were over $1,000 per acre
- 30% say the rates they were offered ranged from $,1000 to $1,250 per acre
- 28% say rates were more than $1,200 per acre.
With expanding renewable energy installations such as wind and solar, The Top Producer Podcast host Paul Neiffer asked David Muth of Peoples Company Capital Markets, the Investment platform for Peoples Company, how those land uses change long term land values.
“This is for the entire U.S.,” he adds. “That’s a high rate even for the eastern Corn Belt where our cash rates are much higher, but think about what even a $750 rate would mean in the Great Plains where the cash rents are much, much lower. And so what you’re having here is these solar lease rates that are multiples of the current cash rent rates.”
Langemeier says as farmers and land owners are offered high leasing rates for solar, he thinks the push for solar will then spill over to other cash rents.
“That’s going to put upward pressure on cash rents, and it’s probably going to put upward pressure on land values, given that it’s local,” he says. “And so it probably impacts a fairly local area, depending on whether your area has solar leasing or not, but it certainly has pretty wide ramifications on what’s going on in agriculture.”
How Do Wind, Solar, Renewable Energy Effect Land Values?
With a price tag of more than $1,000 per acre, t’s enticing for farmers who are staring at crop prices below their cost of production. The April Ag Economists Monthly Monitor survey released this week showed farmer sentiments are dropping. The survey, which is conducted by Purdue University and the CME group, fell 15 points from March to 99.
Purdue says it was the weakest farmer sentiment reading since June of 2022 and the lowest current condition rating since May of 2020 as both the current condition index and the future expectations index saw a drop.
“People became less optimistic about what was taking place on their farms today, and they’re also starting to show some evidence of being some concerns about where we’re headed here over the course of the next year,” says Jim Mintert, director of the Center for Commercial Agriculture at Purdue University.
Purdue economists say farmers are concerned about their current financial situation and expectations for weak financial performance in the year ahead were the driving forces behind the fall-off in farmer sentiment. The April Barometer survey was conducted from April 8 through April 12, 2024.
