by Jim Jansen and Jeff Stokes

The Nebraska Farm Real Estate Market Survey and Report 2023-24 provides insight into recent trends in the market value of agricultural land and cash rental rates across the state.

The annual report by the University of Nebraska-Lincoln covers topics on new or emerging issues related to the agricultural land industry in the state. These topics reflect the interest expressed by panel members and readers of the Nebraska Farm Real Estate Market Highlights reports. The special section for 2024 focuses on trends and considerations for cover crops across Nebraska and implications on lease arrangements.

Findings from the 2022 Census of Agriculture in Table 1 provide an overview of the use of cover crops across the state’s eight districts. About 925,686 acres of cover crops were grown on about 21 million cropland acres across Nebraska in 2022. Cover crops were planted on about 4.4% of cropland acres across the state by 4,477 operators. In 2022, about 36,351 operators across Nebraska grew crops on about 21 million acres of land.

Both the number of cropland acres and the use of cover crops greatly varied across each region of the state. Arid districts in the northwest, north and south grew between 53,069 and 92,422 acres. The northeast, east and southeast districts planted around 130,000 acres or more of cover crops.

The number of operators in each region planting cover crops also varied. In percentage terms, the cropland operators planting cover crops varied from a low of 8.6% in the northwest district to a high of 15.8% in the central district. 

Motivation for cover crops

When planting a cover crop in Nebraska, the motivation of the landowner or operator may vary depending on the needs of the region or management requirements. Increased interest in cover crops in recent years has come from the perceived benefits to the land and mitigation of environmental issues.

Cover crops reduce soil degradation through erosion and enhance soil quality by building organic matter and nutrient content. These effects may take multiple years to fully materialize but tend to persist for several years. Grazing cover crops or harvesting them for forage are perceived as viable options for generating benefits on a more immediate basis.

The underlying motivation for planting cover crops remains critical, as the operator may incur additional establishment and termination expenses for the land, while the benefits may be spread into the future.

Panel members reported as part of the survey that environmental benefits such as soil health at 35% and conservation at 21% accounted for about 56% of the reasoning or motivation behind utilizing cover crops.

Livestock grazing at 27% and use as a secondary forage in a rotation at 5% accounted for an additional 32% of the reason for planting a cover crop on an agricultural property. The ability to obtain cost-share funding contributed to about 12% of the motivation behind adopting this practice.

Cash rent discount

Dividing expenses for establishing cover crops remains a provision to consider in a cropland lease arrangement. Benefits from planting a cover crop may exceed the length of the current lease. The chart below summarizes the dollar-per-acre rental discount on a cropland lease provided to a tenant when planting a cover crop.

Panel members indicated that slightly over 68% of land leases do not provide a discount to tenants for planting cover crops. About 23% of leases offered a small discount between $1 and $9 per acre. Opportunities exist in lease negotiations to increase this amount to cover crop expenses.

The use of cover crops in the future will foreseeably be based on the underlying motivation of those involved in the lease arrangement. Cover crop utilization and division of establishment expenses should be considered in lease negotiations for the 2025 growing season when appropriate. Setting appropriate lease terms may encourage their use and provide long-term benefits to the property.

Find the Nebraska Farm Real Estate Market Highlights survey for 2023-24 at the UNL Center for Agricultural Profitability.

Jansen is an Extension ag economist and Stokes is a professor of agricultural economics, both at the University of Nebraska-Lincoln.