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April 12 , 2010
The National Agricultural Statistical Service (NASS) recently released their estimates of average cash rents per county for 2009. This is the second year NASS released county rent estimates. Comparison of 2008 and 2009 cash rents provides indications of movements in the rental market.
Cash Rent Changes between 2008 and 2009
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Comparison between 2008 and 2009 does not indicate a clear direction for cash rents. Forty-one percent of the counties had cash rent increases while 37% had decreases (see Table 1). The remaining 22% of counties reported no change in cash rents. Overall, NASS reported that average the cash rent for the state of Illinois declined from $170 per acre in 2008 down to $164 per acre in 2009, a decline of 4%.
This 4% state decline differs somewhat from other sources. An earlier USDA survey indicated that cash rents in Illinois increased by 4% between 2008 and 2009. Results from an Illinois Society of Professional Farm Managers and Rural Appraisers also indicated that rents had increased between 2008 and 2009.
Unpublished cash rent data from Illinois Farm Business Farm Management (FBFM) supports NASS cash rents in that FBFM data suggests that there were some counties that had declines in average cash rents. For counties in which FBFM had observations on at least 20,000 acres, the correlation between changes in NASS rents and FBFM rents was .47, a fairly strong correlation.
There does appear to be some anomalies in NASS changes. For example, two counties in central Illinois had large declines that are difficult to explain: Livingston County's cash rent declined 18% from $198 in 2008 to $162 in 2009 and Edgar County's average cash rent declined 11% from $183 per acre in 2008 to $163 in 2009. On the other hand, Shelby County had a large increase. Shelby County's cash rent increased 24% from $137 per acre in 2008 to $170 in 2009.
These large changes point to two facts about the cash rental market. First, the cash rental market has local factors that influence rental levels. Hence, what may be occurring in one county may not be occurring in another county. Second, cash rents vary considerably from farms of similar productivity within a county. There will be rents more than $100 higher and $100 lower than the average. Determining averages in this environment is difficult. Some of the difference between averages from year to year may be simply based on which farms get sampled.
Overall, 2009 appears to be a year of relatively small changes in cash rents, unlike the 15 percent increase in cash rents between 2007 and 2008. During the last half of 2008, financial difficulties in the U.S. became apparent and a recession set in. When 2009 rents were being set, expectations were that 2009 returns would be lower than 2008 returns and, in fact, returns were lower in 2009 than in 2008. These factors likely caused cash rents to stabilize in 2009 from the growth that occurred in previous year.
2009 Cash Rent Levels
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Cash rental rates vary across Illinois, with rental rates generally positively correlated with farmland productivity (see Figure 1). The highest cash rents are in central Illinois, with eight counties having an average over $200 per acre. The highest cash rent was in Macon County, having a cash rent of $237 per acre. Lower average rents were in southern Illinois. The lowest average was in Williamson County, having an average rent of $67 per acre.
Expectations for 2010
Generally, rental rates for 2010 are expected to be at the same level as 2009 levels. Recent results presents by the Illinois Society of Professional Farm Managers and Rural Appraisers suggest small changes in average levels between 2009 and 2010.
NASS provides a valuable service in statistically estimating average cash rents by county. Data for many counties in the United States is available for download from the NASS website: www.nass.usda.gov .
The press release showing a map of Illinois cash rent is available from Illinois NASS website:http://www.nass.usda.gov/Statistics_by_State/Illinois/Publications/index.asp .
Average cash rents for 2009 suggest a cash rent market that no longer is increasing at the same rates as in 2007 and 2008. Some counties have average cash rents that are increasing while others are declining. Expectations are that 2010 average cash rents will be at roughly the same levels as 2009 averages.
Submitted by: Gary Schnitkey, Department of Agricultural and Consumer Economics, University of Illinois