November 20, 2002
FARMLAND LEASING UPDATE
The University of Illinois - Extension conducted a leasing survey
in 2002 in which farmers and landowners were asked to describe their
share rent and cash rent leases. This Farm Economics: Facts and
Opinions summarizes findings from this survey and is divided into
1. Land tenure in Illinois,
2. Cash rents in Illinois, and
3. Share rent characteristics in Illinois.
Land Tenure in Illinois
Of the leased land in Illinois, 58 percent was share rented and
40 percent was cash rented. Two percent was leased with share rent
leases that include supplemental rents. Results of the survey indicate
that share rent leases continue to be the most used lease.
However, the most used lease type varies by region of Illinois.
In northern Illinois, cash rent leases are more common than share
rent leases. Data from Illinois Farm Business Farm Management (FBFM)
for 2001 indicated that 45 percent of land in northern Illinois
is controlled using cash rent leases compared to 30 percent by share
rent leases (see Table 1). By comparison, 23 percent of central
Illinois was cash rented and 22 percent was cash rented in southern
Over time, more farmland is being cash rented. In northern Illinois,
41 percent of farmland was cash rented in 1995 compared to 45 percent
in 2001 (see Table 1). In central Illinois, 18 percent of farmland
was cash rented in 1995 compared to 23 percent in 2001. In southern
Illinois, the cash rented percentage moved from 20 percent in 1995
to 22 percent in 2001.
Cash Rents in Illinois
The Extension survey indicated that the average cash rent in Illinois
during 2001 was $114 per acre. There is considerable variability
around this average. The average cash rent by Crop Reporting District
(CRD) ranged from $50 for the southeast CRD up to $134 per acre
for the East CRD (see Figure 1).
Differences in expected corn yields explain some of the variability
in cash rents. Figure 2 shows each cash rent in the Extension survey.
A dot represents a cash rent observation with the per acre cash
rent indicated on the vertical axis and the expected corn yield
indicated on the horizontal axis. There is a general trend upwards
as expected corn yield increases. However, there is variability
in cash rents at a given corn yield. For example, cash rents range
from $64 per acre up to $185 per acre at an 150 bu. corn yield.
Cash rents have increased over time. An Extension survey conducted
in 1998 indicated that cash rents across Illinois averaged $103
in that year. Since 1998, cash rents have increased by $11 per acre
up to $114 per acre.
Cash rent leases vary in the number of payments required under
the lease. The Extension survey indicates
- 41 percent of the leases had one payment. Twenty-nine percent
of these leases have payments due in December, 16 percent in March,
and 14 percent in November.
- 50 percent had two payments. The first payment typically is
due in March or April and the second payment is due in November
- 5 percent had three payments. One payment typically is due in
spring, one in summer and one in fall.
- 4 percent had more than three payments.
In the Extension survey, 60 percent of the cash rent leases had
a written agreement between the tenant and landlord. The length
of the agreement varied: 75 percent of the leases had a one-year
term, 4 percent a two-year term, 4 percent a three-year term, and
17 percent had more than a three year term.
Share Rent Characteristics in Illinois
Share rent leases in northern and central Illinois typically are
50 - 50 leases, in which the tenant and landlord equally share in
revenue from the farm. The Extension survey asked how these leases
split production costs. Results are presented in table 2.
Table 2 reports the percent of leases in which the tenant pays
50 or 100 percent of the costs. For seed, tenants pay 50 percent
of the costs under 96 percent of the leases and 100 percent of the
costs in 3 percent of the leases. Percentages will not always add
up to 100 as some leases may share costs in a different split than
the 50 and 100 percent splits reported in the table. Most 50 - 50
share leases had the landlords and tenants share equally in productions
costs. Burndown herbicide is the cost where more tenants paid 100
percent of the costs. Even in this case, however, only 5 percent
of the leases had tenants paying all of the costs.
There are a number of 2/3 - 1/3 leases in southern Illinois in
which the tenant received 2/3 of the revenue. Percentages of costs
paid by the tenant are shown in Table 3. Under this lease, 93 percent
of the leases had tenants pay 100 percent of the seed costs. Breakdowns
for the other costs vary considerably. Compared to 50 -50 leases,
2/3 - 1/3 leases have much more variability in the way in which
costs are shared.
Only 27 percent of the share rent leases had a written agreement
between the tenant and landlord. Of the written leases, 67 percent
had a one-year term, 5 percent a two-year term, 19 percent a three-year
term, and 9 percent had more than a three-year term.
This survey confirms that a number of trends continue. The first
is that per acre cash rents continue to increase. This survey does
not contain many cash rents that are extremely high; however, the
general trend is upward. It appears that whenever a cash rent lease
is negotiated the cash rent is increased.
While cash rents are increasing, overall returns to farming have
not increased over time. Therefore, the trend of higher cash rents
means that land owners are getting more of the return to farming.
Farmers are getting less of the return. To remain equal in this
type of environment, farmers must either be reducing costs or farming
more acres to maintain the same income.
Higher cash rents, and a move to more cash rent leases and less
share rent leases, means that farmers are bearing more risks. Hence,
risk management strategies such as use of crop insurance and pre-harvest
marketing take on increased importance as tenure relationships evolve
Issued by: Gary Schnitkey,
Department of Agricultural and Consumer Economics