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Income surges from alternative farmland leases

Land Values: Cash rent led the way in preferred lease types in 2022, but only barely. Here’s a look at how Illinois farmers are leasing ground and who’s making money.

Michael Lauher

June 5, 2023

3 Min Read
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Every year presents a unique blend of challenges and rewards for farming. Few things have as much impact on a farming operation as land rent. In Illinois, 2022 proved to be exceptional for farmers and, subsequently, landowners, as reported in the recent survey by the Illinois Society of Professional Farm Managers and Rural Appraisers.

One key finding was the significant surge in average income for landowners from alternative leases compared to the previous year. These numbers speak volumes about the prosperity that buoyed the farming community.

Crop share. Traditional crop share leases accounted for 27% of all leases on professionally managed farms. This longstanding arrangement, where both landowners and farmers share in the risks and rewards of agricultural production, fosters a spirit of partnership. In 2022, traditional crop share leases yielded an average income of $344 per acre for excellent quality farmland, reflecting the power of collaboration and mutual success.

Cash rent. Cash rent leases, known for their simplicity and certainty, accounted for 36% of all leases in 2022. The survey revealed that cash rent leases generated an average income of $358 per acre for excellent quality farmland in 2022.

Custom farming. Custom farming arrangements, while less prevalent, offer income potential and control for landowners. Custom farming accounted for 6% of all leases in 2022 and yielded an astounding average income of $494 per acre for excellent quality farmland.

Variable cash leases. Another notable trend identified in the survey was the increasing popularity of variable cash leases. These leases offer a hybrid approach, combining elements of cash rent and crop share leases. Variable cash leases accounted for 31% of all leases in 2022, indicating a growing interest among landowners and farmers in this flexible arrangement. While specific income figures for variable cash leases were not provided in the survey, the combination of a fixed base rent with the potential for additional payments allows both parties to adapt to market conditions and share in the success of the farm.

Cash rents up in 2022

The survey revealed major increases in cash rents across all land quality classes in 2023, with the highest absolute increase observed on higher quality land. Excellent quality farmland commanded an average cash rent of $412 per acre statewide in 2023, up from $369 per acre in 2022. Similar upward trends were observed in good, average and fair quality lands, reflecting a widespread surge in cash rents.

Looking ahead to 2024, member expectations point toward moderation in cash rents. None of the surveyed farm managers anticipates cash rents to surpass 2023 levels, with 36% expecting them to remain the same and another 36% anticipating a decrease. These expectations highlight the need for prudent planning and cautious assessment of uncertain market conditions.

The survey also indicated that the average cash rent for pastureland with adequate water and fence was $56 per acre.

Leasing arrangements are not static and must align with the specific needs and circumstances of landowners and farmers. While the use of leasing arrangements remained consistent between 2022 and 2023, it is important for stakeholders to continually assess their needs and consider evolving approaches that promote mutual success and sustainability.

Expectations for the agricultural economy in 2023 vary among farm managers. While a significant portion expect stability, others anticipate a decline. Only by staying adaptable, proactive and informed can farmers and landowners navigate the challenges and capitalize on the opportunities that lie ahead.

For more information about this and past surveys, visit the ISPFMRA website, where you can find archived survey results and presentations from the 2023 Land Values Conference.

Lauher is a farm manager with First Mid Ag Services and is a member of the Illinois Society of Professional Farm Managers and Rural Appraisers. Email questions to [email protected].

About the Author(s)

Michael Lauher

Michael Lauher is a farm manager with First Mid Ag Services and is a member of the Illinois Society of Professional Farm Managers and Rural Appraisers. Email questions to [email protected].

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