Trends in cash rents and leasing terms for farmland and pasture
Nationally, cropland rents rose an average of 11 percent for 2012 to $158 per acre. But there is a huge range. California still holds the crown for highest state-average cash rent at $340 per acre. But that’s up just 1 percent from last year, among the smallest year-to-year increases in the country on a percentage basis. Rich soils, abundant rain, near-perfect temps, a very long growing season, high value fruit and vegetable crops and proximity to Pacific export destinations all contribute to the high rent. Meanwhile, Oklahoma has the lowest state-average cash rent at just $55 per acre, and that’s unchanged from last year.
The Lake States region edged out the Corn Belt in gains over 2011 in both dollars per acre and percentage gain. Average rents for the three states shown gained $30 per acre and 18 percent over last year versus an average gain of $29 per acre and 16 percent for the five key Corn Belt states. In percentage terms, Virginia rents took the biggest leap at 36 percent higher for 2012. In dollars per acre, the crown for biggest year-to-year jump goes to Arizona, where average cash rent jumped $45 per acre. Two factors were involved: First, virtually all cropland in Arizona is irrigated and access to subsidized-water is increasingly valuable; Second, population influx continues to grow for Arizona, as even Californians flee soaring taxes and costs-of-living to a state where there are real estate bargains second only to Nevada.
Rents are rising slowest in the Southern Plains, Delta and Northeast. In fact, the only states showing cash rents actually declining year-to-year were New York and Massachusetts. The region with the widest inter-region variation is the Appalachians, where Tennessee rents increased only 1 percent vs. 36 percent for Virginia.
Helpful perspective on pasture rents: At Doane, we thought it might be interesting to divide average cropland rents by average pasture rents for each state to see if there were much difference in these “multiples.” There was! Nationally, this multiple was 5.7, meaning the average acre of cropland rented for 5.7 times the rent for an average acre of pastureland. But there was a huge range among the states. This multiple was 100-fold for Arizona, where cropland is productive when well fertilized and irrigated, while rangeland is very cheap because the stocking rate is so low and the grazing season so short. In contrast, this cropland rent-to-pasture rent multiple is only 3.0 for Pennsylvania, where crop returns have to compete against high pasture value to dairy farms and lots of well-heeled folks who want “a scenic place in the country” for home sites or recreational use.