Cash Rents Research Articles

Cropland Rental Tool (CROPRENT) for Agricultural Producers

The Cropland Rental Tool (CROPRENT) is an Excel-based decision tool for comparing different cropland rental agreements, such as flexible cash rents, for up to five crops and/or management systems using historical and current production data, such as yield and production costs. Flexible cash rents allow tenants and landowners to share in the risk associated with volatile commodity prices and uncertain yields. This tool can be used for a variety of commodities regardless of geographic location and by a diverse audience, including Extension educators, landowners, and tenants. The Cropland Rental Tool and accompanying User Manual are available for download.

Magnitude of Needed Decreases in 2016 Cash Rents

Table 1 shows estimates of 2016 operator and land returns. These returns are split between the landowner and the farmer. If operator and land returns are $300 per acre and cash rent is $250 per acre, the farmers will have a $50 per acre net income. Operator and land returns are based on revenue, yields and costs shown in the 2016 Crop Budgets with 50% of the acres in corn and 50% acres in soybeans. Non-land costs in these budgets are roughly at the same level of 2015 costs. The calculation of operator and land returns from these budgets is illustrated in the August 4th farmdoc daily article.

Direct Payments, Cash Rents, Land Values, and the Effects of Imputation in U.S. Farm-level Data

Research using the Agricultural Resource Management Survey (ARMS) and other data shows that direct government payments to farmers increase rents and the price of land. However, some ARMS data is imputed and does not account for relationships between payments and other variables. We investigate various imputation methods and benefits gained from a method with a wide scope rather than a parsimonious range of variables. Using our method, we estimate that an additional dollar of direct payment increases land value about $2.69 more per acre than ARMS imputation methods and that our imputations (using an exhaustive iterative sequential regression) outperform other methods and/or smaller models.

Linking the Price of Agricultural Land to Use Values and Amenities

The recent appreciation in agricultural land values across the United States has raised a number of important questions for farmers, farmland owners, lenders, and policy makers. While traditional economic theory suggests that farmland values are determined by the discounted stream of expected returns, previous research has shown that agricultural land values are actually driven by a complex set of factors. This study leverages the unique characteristics of a national land‐based USDA survey on farmland values and cash rents to estimate broad, national‐level determinants of the market value of cropland and pastureland. Our results support past research findings that indicate farmland values are only partially explained by agricultural returns. We find that multiple nonagricultural attributes of farmland also contribute to the market value.

Renegotiating Cash Rents Down for 2015

Actual cropland returns in 2013 and projected returns in 2014 and 2015 are considerably below returns from 2010 through 2012. In many cases, projected 2015 returns will be lower than current cash rents, likely require renegotiating for lower cash rents. This article evaluates these situations by 1) identifying farms requiring adjustments in cash rents, 2) identifying how far cash rents must be lowered, and 3) providing comments for both land owners and farmers.

Release of 2015 Crop Budgets

The 2015 Illinois Crop Budgets are available in the management section of farmdoc (click here for the budgets). Budgets are given for corn, soybeans, wheat, and double-crop soybeans grown in northern, central, and southern Illinois. Central Illinois is further divided into categories for high and low productivity farmland. Overall, 2015 returns are projected at the same levels as 2014 returns, which are considerably lower than returns from 2010 through 2013. These lower returns signal the need to reduce 2015 cash rents.

Projected 2014 Gross Revenues and Farmer Returns on Cash Rent Farmland

Returns to farmers are projected to be lower in 2014 as compared to 2011 through 2013 levels. Lower prices contribute to these lower return projections. Also playing a role are lower projected crop insurance payments. In 2013, many farmers received crop insurance payments on corn because of lower prices. These crop insurance payments then contributed to positive farmer returns in 2013. Crop insurance payments caused by price decreases will not lead to positive farmer returns in 2014. This is illustrate here by examining historical and projected returns from corn grown in central Illinois on high-productivity farmland.

Is Farm Real Estate The Next Bubble?

The recent increase in farmland prices leads many to conjecture that a price bubble exists. A dataset of Iowa farmland prices for three grades of quality over the last 60 years is examined to address the question whether the conditions for a rational expectations bubble are evident. An abnormal component in the change in farmland prices is found during the most recent sub-period of the sample. A novel valuation model that measures the speculative component of farmland value as a function of cash rents shows no speculative component is present. An additional test of the time series characteristics of the data provides no evidence of negative duration dependence. However, analysis of transition probabilities shows asymmetry exists most notably in the low quality farmland data series. Finally, time irreversibility is shown to be present at different lags for only the lowest farmland quality grade. Overall, the results imply that the low quality grade farmland is the most likely candidate to exhibit the conditions necessary to support a rational expectations bubble. In general, however, the data offer weak support of a bubble in farmland prices.

Does More Corn Mean Higher Cash Rent

Last month’s article (farmdoc daily April 18, 2014) reviewed the return and cost advantage as the corn enterprise on a farm increased in intensity. The intensity of the corn enterprise is measured by corn acres relative to tillable acres and expressed as a percentage. This post continues the thought line from last months’ post and delves into cash rent and cash rent acres for the five groups of farms over the fiveyear period.

Cash Rents on Professionally Managed Farmland Projected Down in 2014

For excellent quality farmland, mid-point cash rent decreased from $396 per acre in 2013 to $375 per acre in 2014, a decrease of $21 per acre (see Table 1). Other cash rent categories had similar decreases. Cash rents on good quality farmland declined from $339 in 2013 to $323 in 2014, a decrease of $16 per acre. Average quality farmland rents decrease from $285 in 2013 to $277 in 2014, a decrease of $8 per acre. Fair quality farmland decreased from $235 in 2013 to $219 in 2014, a decrease of $16 per acre.

Controlling Costs with Lower Crop Revenues: Cash Rents

Operator and land return equals gross revenue minus non-land costs, and represents a return to both the farmer and the land owner. To illustrate, take a situation where the operator and land return equals $320 per acre and farmland is cash rented for $280 per acre. In this case, the land owner receives $280 per acre in cash rent and the farmer has a return of $40 per acre ($320 operator and land return $280 cash rent).

High Cash Rents and Farmer Returns

High Cash Rents and Farmer Returns

Proportion of Farms with High Cash Rent Percentages and Levels

Proportion of Farms with High Cash Rent Percentages and Levels

Share-Rent Landowner Returns Compared to Cash Rents

Share-Rent Landowner Returns Compared to Cash Rents

Preferences of the poor: market participation and asset management of poor households in sixteenth-century Holland

Our article aims to detect differences in behaviour towards the capital and land market of households of different sizes and levels of income. Participation in markets for real estate, capital, and ships was considerable, not only among middling and elite groups but also among the poor. Large households were most active in markets, incurring significantly greater debt. Poor households with a low supply of labour were relatively active, purchasing houses and ships, and incurring debts, possibly in order to cope with a lack of parental support. Middling-group households with a low supply of labour primarily sold houses and invested in the capital market, adjusting capital assets to declining labour supply at the end of their life cycle, thus creating cash rents to be able to survive old age. © 2013 © European Historical Economics Society. (Less)

2013 Cash Rents on Professionally Managed Farmland in Illinois

2013 Cash Rents on Professionally Managed Farmland in Illinois

Pricing of New Zealand dairy farmland

PurposeThe purpose of this paper is to investigate the relationship between dairy farmland prices and farmland rental incomes in New Zealand from 1982 to 2009.Design/methodology/approachUsing the net cash income received under a 50/50 share‐milking agreement to proxy the net cash rent, the paper attempts to explore the prices and rental incomes relationship using the present value model and then apply them in a pool regression model to show how farmers formulate their price bids.FindingsResults show that over the long‐term dairy farmland price growth tends to be in line with rental growth. However, there is substantially higher growth in land prices in relation to the rental growth since 2002. Moreover, the risk premium placed by farmland owners on future rental cash flows since 2002 appears substantially below the historical average. The research further shows that farmers nowadays place more emphasis on the current season's payout than historical incomes in their price bids.Practical implicationsAs a consequence the recent high land prices will be extremely sensitive to a permanent change to the low interest rate environment and future growth of dairy income. A policy recommendation is also highlighted.Originality/valueThe results of this paper indicates that the rapid price appreciation for New Zealand dairy farmland since 2000s might give rise to bubbles.

Risks Faced by Farms with High Cash Rents

Risks Faced by Farms with High Cash Rents

Cash Rents in 2012 and 2013

Cash Rents in 2012 and 2013

Cash Rent with Bonus Leasing Arrangement: Description and Example

Cash Rent with Bonus Leasing Arrangement: Description and Example