A few weeks ago Tidbitsreported on the latest USDA National Agricultural Statistics Service (NASS) estimates of cash rents in Nebraska. This week Tidbits digs deeper into changes in cash rents over the past eight years between 2016-2024.
Unfortunately, NASS did not report rents for each class of land (irrigated, dryland, and pasture) in each county for both years. So, changes could not be tracked in every county. Still, sufficient rents are reported to provide a sense of the market changes. Figures 1-3 show the percentage changes for each class of land in counties where comparisons could be made.
Overall, rents across the three classes of land are higher in 2024 compared to 2016. Cash rents this year on irrigated and dryland ground on average are 15%higher compared to 2016, while rents on pasture exceed 2016 levels by 16 percent. The largest increases for irrigated ground occurred in Kimball County (37%), Madison (28%), and Franklin and Colfax Counties (26%).
In contrast, cash rents in Box Butte County for irrigated land were 9% less in 2024, the only county where rents for irrigated land were lower. Box Butte (60%), Holt (53%), and Sherman (43%) Counties saw the greatest growth in cash rents on dryland. Seven counties have lower rents on dryland this year. Kimball (76%), Thomas (67%), and Howard (43%) Counties saw the largest gains in rents for pasture, while rents in eight counties were lower in 2024. Boone County had the largest decline of 27%.
FIGURE 1. PERCENTAGE CHANGE IN CASH RENTS — IRRIGATED (2024 VS. 2016)
Source: USDA National Agricultural Statistics Service
FIGURE 2. PERCENTAGE CHANGE IN CASH RENTS — DRYLAND (2024 VS. 2016)
Source: USDA National Agricultural Statistics Service
FIGURE 3. PERCENTAGE CHANGE IN CASH RENTS — PASTURE (2024 VS. 2016)
Source: USDA National Agricultural Statistics Service
There doesn’t appear to be any geographic pattern regarding the changes in rents between 2016-2024, yet a few interesting aspects emerge. First, the range in changes on irrigated land across counties is much narrower compared to dryland and pasture.
The difference between the high and low percentage changes across counties for irrigated ground is 46 points. In contrast, the ranges for dryland and pasture are 84 and 103 percentage points, respectively, roughly double that seen on irrigated ground. This is likely due to the reduced yield and production volatility with irrigation from year-to-year compared to dryland and pasture.
Productivity for dryland and pasture are much more subject to the whims of Mother Nature which is likely reflected in changes in rental values. Second, growth in cash rents during the eight years did not keep pace with growth in land values. For example, the USDA average per acre value for irrigated land increased 33%, $6,430 to $8,550, between 2016-2024 compared to an increase of 15% on rents.
The average value for dryland ground increased 44%, $3,720 to $5,350 per acre. In comparison, rents increased 15%. And the market value for pasture increased 57 %, $891 to $1,400 per acre, compared to a 16% increase for rents. Changes in rents lagging land values are common. First, there is a time effect. Land values reflect the long-term value of the land, including potential capital appreciation, while cash rents reflect short-term economic conditions. Also, landowners are sometimes reluctant to boost rents too fast in order to maintain good relations with tenants. And rental agreements can cover multiple years, so rents are slow to catch up with land values.
What does the future hold for cash rents? Agricultural economists at the University of Illinois and Ohio State University recently noted farmers in Illinois who are cash renting farmland will experience negative returns this year. Negative returns are probably in the offing for cash rented farmland in Nebraska too. The negative returns should lead to downward adjustments in rents. However, the Illinois and Ohio State economists write, “. . . downward adjustments in cash rents historically do not fully reflect downturns in farm returns.
That situation likely will continue until a larger share of farm operations are forced to reduce cash rents because of the erosion of their financial positions.” So, while there will be downward pressure on rents, the adjustments won’t fully mirror the downward turn in returns.
