September 5, 2017 at 3:32 p.m.
Iowa farmland rental rates decrease
Iowa State University Extension Farm and Ag Business Management Specialist Kristen Schulte said that it may affect dairy producers' bottom line. "The change in rental rates will affect the cost of production for forages, and this will impact their break even cost per hundredweight of milk and their cash flow position if producing forages on rented acres."
This is the first decrease shown by the annual survey since 1999, according to William Edwards, retired ISU extension economist who directs the survey.
"The average estimated cash rent for corn and soybean land in the state for 2014 was $260 per acre, a decrease of $10 per acre or nearly 4 percent from last year," said Edwards. "Significantly lower crop prices for the 2013 crop and lower price forecasts for this year's crop have tempered farmers' optimism about prospective profits."
Schulte said the location of a dairy farm will determine the amount of impact rental rate changes will have. "For example, the northeast Iowa crop reporting district showed a decrease in alfalfa hay cash rent, but an increase for pasture land," she said. "However, each farm cash rent scenario is different due to various dynamics such as landowner/tenant relationship, size and location of field, type of soil and productivity, and accessibility. These dynamics could vary rental rates between neighboring fields to reflect or contrast changes in the market reflected in the cash rental rate survey."
The cash rental rates survey results are available in the ISU Extension and Outreach publication Cash Rental Rates for Iowa 2014 Survey: https://store.extension.iastate.edu/Product/Cash-Rental-Rates-for-Iowa-2014-Survey.
The publication details average rents in the nine Iowa crop reporting districts. The cash rental rate information presented in this publication is the result of a survey of farmers, landowners, lenders, real estate brokers, and professional farm managers. They supplied information based on their best judgments about typical cash rental rates for high, medium, and low quality cropland in their counties, as well as for land devoted to production of hay, oats, and pasture.
"Average rents were lower in all nine crop reporting districts except for the southeast district, which showed no change," Edwards said. "The largest decrease was in north central Iowa, $24 per acre, where a wet spring last year reduced yields and prevented some acres from being planted. Grundy County had the highest average rent in the state, $330 per acre."
In the two main dairy areas of Iowa - District 1, consisting of the 12 most northwestern counties of Iowa, and District 3, consisting of the 11 most northeastern counties - cash rental rates decreased from 2013 to 2014 for corn and soybean ground.
Typical rental rates per bushel of corn yield, soybean yield and CSR point are computed for each county and displayed as a chart in the publication. Also included are the typical charges for land growing oats and hay, for grazing pasture and corn stalks, and for renting hunting rights.
In the 12 most northwestern counties (Lyon, Osceola, Dickenson, Emmet, Sioux, O'Brien, Clay, Palo Alto, Plymouth, Cherokee, Buena Vista and Pocahontas), rent for corn and soybean acres averaged $188 in 2010, $224 in 2011, $267 in 2012, $283 in 2013 and $270 in 2014.
In the 11 most northeastern counties (Allamakee, Clayton, Dubuque, Delaware, Buchanan, Black Hawk, Bremer, Fayette, Chickasaw, Howard and Winneshiek) rent for corn and soybean acres averaged $192 in 2010, $223 in 2011, $266 in 2012, $281 in 2013 and $277 in 2014.
Schulte observed that although cash rental rates for corn and soybean ground generally decreased across the state an average of 4 percent, alfalfa hay and pasture ground rental rates varied depending on crop reporting district. In the heavy dairy regions of the state, average alfalfa hay (established) ground cash rental rate decreased in an amount ranging from $3 to $23 per acre.
In the most northwestern counties, established alfalfa ground was averaging $219 an acre, established grass hay acreage was $163, oats ground was $223 an acre, improved pasture was $82 and unimproved pasture was $57.
In the most northeastern counties, established alfalfa ground was averaging $265 an acre, established grass hay acreage was $202, oats ground was $235 an acre, improved pasture was $75 and unimproved was pasture $47.
The state average for cash rentals for established alfalfa ground was averaging $191 an acre, established grass hay acreage was $143, oats ground was $175 an acre, improved pasture was $77 and unimproved pasture was $52.
Allamakee County Dairyman Ian McCormick says that overall prices for the land they rent has held steady the last two or three years.
McCormicks plant about 970 acres total, of which about 550 are rented ground. The majority of the rented acres are planted in corn and soybeans, and they generally reserve the land closer to their home for oats and alfalfa to make hauling easier.
"We deal with some good understanding people and work to set up long term relationships," he said. "We're in a competitive neighborhood and county; landlords have a lot of options."
The majority of acres the McCormicks rent are planted in corn and soybeans, and they generally reserve the land closer to their home for oats and alfalfa to make hauling easier.
Schulte encouraged dairy farmers to do their homework before setting up rental agreements. "Where does your cost of production for cash grain compare to buying corn or feedstuffs? Depending on where markets settle, cost of production and price may be in a close range of one another and land rent is typically one of the largest costs per acre for cash grain production."
She continued, "Take advantage of positive cash flow position movements and utilize them to build working capital and net worth for future years of tight margins. This applies to any situation that improves the margin or income over feed costs (IOFC) for dairy producers.
The ISU Cash Rental Rate Survey is data that reflects actual cash leases across Iowa (by county) for the 2014 lease year (March 2014 through February 2015).
"Historically, cash rental rates have trended with land values and gross crop revenue. Looking at the changes in land values from 2013 to 2014, land values have stabilized or decreased over the past year. Gross crop revenue has come off record highs in recent years due to lower cash grain prices," Schulte said.
Information about rents for individual farms was not collected. The rental rates summarized in the publication do not reflect the value of any buildings or storage structures, manure application contracts, or seed production contracts.[[In-content Ad]]
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