Farmland rent prices on the rise

AMES — Cash rent values for corn and soy farmland are climbing across the state, according to a recent survey from the Iowa State University Extension.

ISU Extension Program Specialist and study co-author Ann Johanns said the finding was expected.

“Historically, land values and cash rental rates do trend together … and that follows along with commodity prices as well,” she said. “Since last fall we’ve seen a pretty significant increase in both those things.”

Some counties saw bigger changes than others. In Southeast Iowa, for example, Lee County’s average cash rent shot up to $284 per acre from $219 last year, shattering its previous high of $231.

It’s a trend seen across the state. In Southeast Iowa, Washington, Henry, Jefferson, Van Buren and Wapello counties all logged their highest cash rent averages on record for 2022. While there are exceptions — like Davis County where the average fell 20% this year — the overall trend is upward.

Johanns said the survey’s big picture trends were its most important take-away.

“If a county has a significant increase or decrease one year, it will kind of self correct to better align with the general trend the next year,” she said. “I really encourage people to look at not just the county data but the ranges and the district data as well, because we will see more fluctuation at the county level from year to year.”

Rental survey data often lags behind the more volatile land value data, according to Johanns.

“This (survey) is asking for rents that maybe aren’t decided upon in that year,” she said. “There are rental rates in the state that, they’re on a five-year agreement, there are some that are done every two or three years, and then some are adjusted annually … those are still being paid for this year, they were just being negotiated a few years back.”

Still, the statewide average cash rent per acre climbed from $232 to $256 from 2021 to ‘22, according to survey results. The over 10% increase is the biggest one-year jump since 2012.

Adam Sylvester, office manager and accredited farm manager at Hertz Farm Management in Washington, said that year’s high crop prices came after a drought lowered supply and an ethanol boom boosted demand.

“It was an unprecedented time in modern agriculture,” he said. “A lot of people called it the golden age because there was a lot of profit to be made during that time but it was fairly short-lived. As farmers ramped up production, we got to a point where we were considerably high on supply, and demand started to level off.”

The data is a big deal. Sylvester said most "the vast majority“ of producers rented land for at least some portion of their work: 60-75%, in his estimation.

Still, he said he expected today’s scarcity-driven trend to level off sometime soon.

“I think there’s some indication in the land values right now that maybe we’re kind of plateauing,” Sylvester said. “I don’t predict a decrease in land values for next year, but I think there’s a lot of indication that we’re maybe going to slow down … we’re seeing interest rates increase, and as we do that, that tends to effect the farmers’ ability to buy.”

Iowa Farm Bureau District 17 Director Lane Eads — who oversees the southeast corner of the state including Jefferson, Henry and Wapello counties — said the impact of changes would likely fall to farmers, but hopefully even out for most.

“The more infrastructure costs … that cuts into your bottom line ultimately at the end of the day,” he said. “Sometimes you’ve got to spend money to make money. If your ground makes more money at the end of the year but you’re making more payments on the bottom end, it may even out. If you have a bad yield one year, it’s going to effect you differently.”

Eads said that impact was not likely to effect consumers, who already face high food prices.

“We continue to raise record crop yields, we continue to overproduce and things like that, our farmers are really good at what they do,” he said. “Unfortunately, we have to look at the supply chain too. Our farmers only get one piece of the pie, and then you have to two or three others in the middle that are involved in the retail end of things, and those are going to have more of an effect, I would think, on consumer prices, rather than farmland prices having an effect.”

Comments: Kalen.McCain@southeastiowaunion.com