April 25, 2024

Leasing farmland becoming a more viable option

By Ty Rushing

With the rising value of cropland in Iowa, many new farmers are choosing to lease land versus attempting to buy it wholesale. Steven Johnson, of the ISU Ext. Office, has been giving presentations across central Iowa explaining the benefits for tenants and landowners to leasing. (Ty Rushing)

According to the United States Department of Agriculture, the average acre of Iowa cropland is valued at $8,750, which is great for current farmers but bad for those interested in becoming farmers.

“Iowa land prices are at the highest levels in history,” said Steve Johnson, farm and agriculture business management specialist with ISU Extension and Outreach.

One solution to the rise in land values that can help older farmers maintain their land and let younger farmers gain some experience is the rental of farmland. At 6:30 p.m tonight on Newton’s DMACC Campus, Johnson  will give a three-hour presentation on farmland leasing.

Johnson has been involved in the business side of the agriculture industry for 30 years and he explained why leasing was a viable option for both parties.

“If someone wants to purchase farmland, the lender would likely ask for a down payment of 35 percent  to 40 percent,” Johnson said. “While long-term interest rates are very low, few people have the cash for down payment or want the risk of buying farmland with $3.50/bushel cash corn and $10/bushel cash soybean prices expected over the next four to six months.”

As far as the landowners go, he said it is a chance that is worthwhile.

“Very little risk as long as they can collect the annual cash rent, which is roughly 3 percent of the value of the cropland,” Johnson said.

He also doesn’t see land values going down anytime soon.

“Annual cash rent represents about 3 percent of the value of land. With the record crop prices in the past five years, both land values and cash rents increased. It now appears that both are headed lower,” Johnson said.

“However, there is a limited amount of farmland for sale. There is more demand for cash rent ground than there is supply. Thus, both farmland values and cash rents remain high for the much reduced crop prices being witnessed today,” he said.

During his presentation, Johnson will also cover what  the new farm programs, Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), entail of and how to enroll into them.

Johnson has been making his presentation in different cities across central Iowa, and it’s $20 for individuals and $30 for couples. Registration for tonight’s meeting in Newton has closed, but for an additional $5 at the door you may attend.

Contact Senior Staff Writer Ty Rushing may at (641) 792-3121, ext. 6532 or at trushing@newtondailynews.com.