Cash Rents: While National Trends Important, it’s Critical to Keep an Eye on Local Conditions

An update this week by David A. Widmar at AgEconomists Online (“Farmland Cash Rental Rates in 2016: Where Cash Rents are Falling“) stated that, “Just as rising farm incomes place upward pressure on farmland values and cash rental rates, falling farm incomes place downward pressure on farmland values and cash rental rates. In August, the USDA released its annual update on farmland market conditions. Much attention focused on the slight drop in U.S. cropland values and unchanged pasture values. This week’s post takes a look at the changes in cash rental rates at the national, state, and county-level.”

“In figure 1, the U.S. average cash rental rate for cropland is shown. After a surge in rental rates that began in 2008, the national average for cropland cash rent fell 6%, to $136 per acre, in 2016. The only other decline in national cropland cash rental rates since 1998 was a 3% decline in 2007.

Figure 1

Dr. Widmar pointed out that, “While the national trend was for lower cropland rental rates, it’s important to keep in mind conditions often vary at the state and county levels. In figure 2 changes in the state average cropland rental rates are shown (2016 compared to 2015). Overall the changes were quite variable. In the Midwest, cash rents dropped the most in Minnesota and Iowa – more than 6% lower – while most of the Midwest and Great Plains were also lower. On the other hand, Michigan and Wisconsin actually reported higher cash rental rates in 2016.”

Figure 2

Furthermore, this week’s article indicated that, ‘Drilling even deeper, changes in non-irrigated cropland rental rates at the county-level are available and shown in figure 3. More specifically, figure 3 shows the percentage change in rental rates in 2016 compared to 2014 (county level data in 2015 were not collected by the USDA). Similar to the results in figure 2, rental values fell the most in Minnesota, Iowa, Northern Missouri, and Northern Illinois.

Figure 3

Dr. Widmar added that, “While cash rents have turned lower at the national level, conditions at the state and county levels vary significantly. Some states have felt significant downward pressure on cash rental rates while others have actually reported an increase in rates.

“Looking ahead, it will be important for producers and observers to keep in mind that the impacts of lower net farm income and the ag economy slowdown will vary across the county. While the national trends are important, it’s critical to also keep an eye on local conditions.”

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