After a strong, somewhat steady climb since the 1990s, average cash rental rates for Iowa farmland have slid in recent years.
Six of Iowa’s nine districts saw drops in their average cash rental rates for farmland in 2019, according to Iowa State University Extension and Outreach’s annual survey, published in May.
The rents remained constant in two districts — District 7 in southwest Iowa and District 8 in south-central Iowa — where cash rents are on the lower side compared to the rest of the state. Rents increased in District 9 in southeast Iowa.
Farmland cash rental rates generally track with farm profitability, albeit with some blips across the districts, said Ann Johanns, extension program specialist.
“Part of that is some counties might be playing catch up or might realize a trend a little sooner,” she said. “If you see a county maybe have a huge decline in one year, it might have a slight increase the next year when the rest of the state went down.”
In 2017, Iowa had 30.6 millions acres of farmland, according to the university’s separate Iowa Farmland Ownership and Tenure survey.
Of that total, 16.8 million acres — 55 percent — were leased, with 13.9 million acres handled as cash rent.
The rest of the state’s farmland —13.8 million acres, or 45 percent — was operator-controlled.
The average value for an acre of Iowa farmland in 2018 was $7,264, according to ISU Extension and Outreach, and $7,290 per the U.S. Department of Agriculture’s National Agricultural Statistics Service.
The farmland rental market currently is around $32 billion nationwide, and could near $40 billion if farmers did not underprice their rental rates, said Corbett Kull, CEO and co-founder of agriculture start-up Tillable, founded in May 2017.
The start-up serves as an online marketplace where landowners can create farmland listings and more easily connect with farmers interested in leasing. Starting in 2020, Kull said Tillable also will offer a “hassle-free lease,” under which the start-up will lease farmland for one or three years, and pay the landowner the full value before the growing season starts, then find a farmer to work the land.
Johanns said she is not sure what to expect but will be interested to see how the next generation of farmers handles farmland ownership compared to rentals. She pointed to university statistics showing 60 percent of Iowa farmland belonging to owners age 65 and older, and said, “That land is going to change hands.”
“With that next generation, do they have a connection to that farmland where they want to retain ownership or are they interested in getting out and maybe investing that money somewhere else?”
It is likely more farms will seek to expand, including through rentals, to stay profitable in the coming years, Kull said.
“We’re in a pretty volatile time from a pricing standpoint, so it makes a lot of sense for landowners to really make sure they understand what their farms are really worth from a rental standpoint,” he said.
• Comments: (319) 398-8366; thomas.friestad @thegazette.com