The most recent annual survey of cash rental rates for Iowa farmland shows that rates increased, on average, by 10.3% in 2022 to $256 per acre. This is the third consecutive and largest uptick in cash rents since 2013, when rents peaked at $270 per acre — a level 5.5% higher in nominal terms than in 2022. In comparison, nominal corn and soybean prices received by farmers in Iowa declined by 16% and 11%, respectively, since mid-2013.

Iowans supplied 1,401 usable responses about typical cash rental rates in their counties for land producing corn and soybeans, hay, oats and pasture. Of these, 43% came from farmers, 34% from landowners, 8% from professional farm managers and realtors, 8% from agricultural lenders, and 7% from other professions and respondents who chose not to report their status. Respondents indicated being familiar with a total of 1.5 million cash-rented acres across the state.

There was considerable variability across counties in year-to-year changes, as is typical of survey data, but 95 out of the 99 Iowa counties experienced increases in average rents for corn and soybeans. Only Buchanan, Davis, and Mahaska counties experienced declines in their overall average cash rents, while Black Hawk County experienced no change in average rent.

Besides typical rents for farm ground on corn and soybean tillable acres, the report also shows typical rents for alfalfa, grass hay, oats, pasture, cornstalk grazing and hunting rights in each district.

Survey shows rent increases in all districts

The survey was carried out by Iowa State University Extension and Outreach. Statewide, reported rental rates for land planted to corn and soybeans were up from $232 per acre last year to $256 per acre in 2022, or 10.3%. This percentage increase is slightly less than one-third of the 32.9% increase in Iowa farmland values between March 2021 and March 2022 reported in surveys conducted by the Realtors Land Institute’s Iowa chapter.

Furthermore, the 15.3% increase in rental rates since 2020 is about half the increase experienced in average land values between November 2020 and November 2021 and reported in the Iowa Land Value Survey.

Different regions experienced different increases in cash rents: from 8% in Crop Reporting District (CRD) 8 to 13.6% in CRD 7. All CRDs experienced at least a $15 increase in average rents, and Western Districts (1, 4, and 7) saw their average rents increase by $29 per acre, or $7 more than in the Central and Eastern Districts.

Percent increases in rent similar across land qualities

All land qualities have seen their average cash rents increase by similar percentages. High-quality land experienced an 11.2% increase, from $267 per acre in 2021 to $297 in 2022.

Medium-quality land experienced a 9.4% increase, from $233 per acre in 2021 to $255 in 2022.

Low-quality land experienced a 10.2% increase, from $197 per acre in 2021 to $217 in 2022.

Setting rents for next year

Survey information can serve as a reference point for negotiating an appropriate rental rate for next year. However, rents for individual farms should be based on productivity, ease of farming, fertility, drainage, local price patterns, longevity of the lease, conservation practices and possible services performed by the tenant.

Three major factors with the potential to influence future cash rents are crop prices, government payments and land values. Corn and soybean prices received in Iowa peaked in August 2012 at $7.90 and $16.80 per bushel, respectively. In March, corn and soybean prices received by farmers in Iowa averaged $6.59 and $15.00 per bushel — still 16% and 11% lower, respectively, than in August 2012. USDA projected in February average corn and soybean prices at $4.80 and $10.50 per bushel, respectively. Recent futures prices from the CME Group fluctuate around $6.50 for the December 2023 corn contract and $13.90 for the November 2023 soybeans contract. These lower projected prices, along with input inflation, would negatively affect net farm income and put downward pressure on cash rents. In February, the Economic Research Service forecast a 4.5% reduction in net farm income between 2021 and 2022.

Return on farmland investment

A major factor considered by landowners when negotiating cash rents is the return on their farmland investment. The evolution of the ratio of average cash rents to average land values in Iowa suggests that the average return on investment for landowners who cash-rent their land to operators has followed a declining trend since the early 1990s — stabilizing at around 3% after 2010, but dropping to 2.4% in 2021. Although this ratio does not measure net returns to land because ownership costs (such as real estate taxes, maintenance, and repairs, etc.) are not considered in its calculation, it suggests that landowners will likely be hesitant to accept lower cash rents in the future unless land values decline or stagnate. However, Iowa farmland values increased by 14.1% between September 2021 and March (Realtors Land Institute). Furthermore, increasing interest rates to curtail inflationary risks will result in higher opportunity costs for landowners, and added pressure to ask for higher rents.

Due to lag between the time when cash rents are negotiated in Iowa (late August), and the time when the ISU Cash Rental Rates for Iowa Survey is implemented (March-April), the typical cash rents reported in the survey reflect the economic conditions prevailing during the months of July and August of the previous year. The survey has historically been implemented at around the same time each year to avoid interfering with cash rent negotiations or renegotiations.

However, in times of drastic changes in crop prices, input costs, and other economic variables between summer and the following spring (such as the 10% and 17% increases observed in the corn and soybean prices used to calculate revenue guarantees in crop insurance between October 2021 and March), the reported cash rents might feel out of date. It must be emphasized that the goal of the survey is to estimate the average going rate for renting farmland in the same season when the survey takes place, and not to project the rate for the following season.

For questions regarding the cash rent survey, contact the authors. For leasing questions in general, contact the farm management field specialist in your area. An online tool to visualize the cash rents by land quality in each county by year and compare trends in cash rents for a county versus its CRD and the state average is available on the Center for Agricultural and Rural Development website.

Plastina is an associate professor in the Department of Economics at Iowa State University.