Illinois Farmland Lease Trends

Farm Managers' report on cash rents indicates modest to significant increases in 2010, due to higher crop prices.

Published on: Mar 17, 2011
Cash rental rates this year are expected to be significantly higher than in 2010 and could continue to climb in the future if farm returns remain strong, according to a statewide survey of farm managers and rural appraisers.

A survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA) broke rental rates down by land class and divided those in thirds based on the price ranges of each lease.

And the survey found cash rents for the middle third of the leases are projected to rise in 2011 compared to 2010 by an average of about $37 per acre.

Specifically, cash rents for the middle-third of leases this year are projected to average $319 per acre for excellent ground (up from $268 in 2010), $271 for good ground (up from $231 in 2010), $220 for average ground (up from $189 in 2010), and $183 for fair ground (up from $156 in 2010).

“Survey results indicate cash rents for 2011 increased dramatically over 2010 levels,” said Gary Schnitkey, University of Illinois Extension farm management specialist who also serves as secretary/treasurer of ISPFMRA.

The main drivers of higher farm lease prices include stronger farm returns in 2010 compared to 2009 -- that resulted from a run-up in commodity prices last fall --along with higher farm land values.

A survey of ISPFMRA members estimated farm land prices last year increased in the state by an average of about 15 percent.
 
Meanwhile, rental rates in some areas could continue to creep higher in the future. Some rates for 2011 were set early last fall due to the rapid harvest and prior to the run-up in crop prices.

“There’s a big range (in lease prices). And it’s gotten bigger over time,” Schnitkey said. “A lot of variability has to do with the relationship between landlords and tenants and when they set the rent.”

Cash rent averages for all land classes in all price categories are expected to range this year from $132 per acre to $357 per acre, according to the survey.

The highest lease prices are in Central Illinois, according to the National Agricultural Statistics Service Illinois field office (see graphic). Nine counties in 2010 had an average cash rent of $200-plus per acre, led by Macon County with an average cash rent of $242 per acre.

On the flipside, the average cash rent in Pope County in 2010 was just $72 per acre.

The extreme variability in lease prices combined with volatility in the commodity markets and input prices has prompted more farmers/landowners to switch to variable cash rent arrangements.

“It’s hard to set cash rents in this environment,” Schnitkey noted.

The use of variable cash rents from 2010 to 2011 nearly doubled from 11 percent to 21 percent of all leases, respectively, he said.
The other forms of leases in use this year include 43 percent that are some form of crop share (either traditional or with supplemental rents or accounting), 28 percent traditional cash rent, and 8 percent custom farming, according to the ISPFMRA survey.

Copies of the complete 84-page report can be ordered online at www.ispfmra.org/land-values.html.