Audio Transcript:

Michael Langemeier: Welcome to Purdue Commercial Ag Cast, Purdue University Center for Commercial Agriculture Podcast, featuring farm management news and information. I’m your host, Michael Langemeier, Director of the Purdue Center for Commercial Agriculture. And joining me today is Jim Jansen from the University of Nebraska -Lincoln. Today’s podcast we’re gonna discuss cash rent results from the ’25 Purdue Farmland and Cash Rent Survey in addition to some cash rent results from Indiana. But we’re gonna take a deeper dive than we typically do, talking about irrigation leases, pasture leases, and hay leases.

And so before we get started Jim, why don’t you tell us a little bit about what you do at Nebraska.

Jim Jansen: Yeah, so at the University of Nebraska- Lincoln as part of the extension service there. There are four of us spread throughout the state in addition to the specialists on campus. And one of our major forms of outreach typically involves each year talking about farmland values, cash rental rates, different types of lease arrangements across Nebraska, and, just summarizing those trends and trying to deliver on different things that also change things like the farm bill. Crop insurance, grain marketing, livestock marketing, different types of new insurances that have come out.

So annually each year we talk about irrigated cash rents in Nebraska and beyond the center pivot irrigated cash rents, we also talk about gravity or flood irrigated, which I would, I would assume here in Indiana is maybe not nearly as present as center pivot is. But today we can highlight some of the things to be aware of.

[00:01:29] Dryland Crop Leases

Michael Langemeier: Yeah. when we talk about Indiana cash rents, there’s two different sources of information to give estimates. One is the Purdue Cash Rent and Land Value Survey. That contains information and cash rent and land values at the regional and state level.

If you want something at the county level, we actually go to USDA NASS. USDA NASS has extensive information on cash rent county lease rates, for non-irrigated in particular, but also has some information for irrigated and pasture, which we’re gonna focus on today.

Before we get to the irrigated results, Jim, one of the things to note here is the, Indiana average for non-irrigated ground is $225 for the USDA NASS survey in, in 2025. That’s about $40 lower, than the, than the, average, cash rent in the Purdue Cash Rent and Land Value Survey. And, Todd Kuethe’s talked before about the difference between the USDA survey and the Purdue survey, and I think this would be typical of, of state surveys. When you think about difference in the USDA, the USDA numbers tend to be lower, because the USDA numbers would contain a lot of leases that may not be arms’ length.

Jim Jansen: Right.

Michael Langemeier: Uh, Whereas the Purdue Survey, Nebraska Survey, Iowa Survey, Illinois survey, those are typically arms length transactions.

And so if you were thinking about renting some ground that you just inherited. You would probably, take first look at the state surveys and then maybe the USDA NASS knowing that the USDA NASS numbers are a little bit lower. But that’s the information we have in terms of irrigated lease rates.

Jim Jansen: The one comment I will make on the dry land crash rental rates, Purdue has it broke down by region or division of the state. You can at least gain some insight from the USDA NASS information on how do the cash rental rates vary around by county. The dry land at least can give you some ideas on how cash rents do vary around by the county. And that I kind of tell people the NA rental rates, you might think of ’em almost as a cookie cutter to give you some ideas, and there definitely are differences in soil, rainfall, whatever productivity factor is a big determining factor of force.

[00:03:28] Irrigated Crop Leases

Jim Jansen: Now, on the irrigated here in the state of Indiana, we have a snapshot where they have enough people responding to the survey to provide an estimate by county. And I’m not very familiar with the state of Indiana. Nonetheless, there are differences in the type of soils, rainfall, quality, overall quality of the property? Is it a nice contiguous parcel? Is it a parcel that’s cut up? Do you have to have a bridge or something for the pivot to cross it?

All those things have an influence on the cash rents and on the irrigated cash rents. One of the reasons we see a difference on the, differential between the irrigated and the dry land is just not all those things I mentioned, but also you have upkeep associated with the pivot. So whether that’s maintenance, upkeep, depreciation, whatever the case might be. You also have, insurance on the unit. And at least in the state of Nebraska, and I would assume the same for Indiana with higher and higher expenses associated with establishing the irrigation equipment, insurance rates have followed, especially with having a lot of wind events in the state of Nebraska. There have been cases where the insurance premiums have almost doubled over the last three to five years.

So that’s why we see some of those breakouts or the differentials that we see between, it’s just not a return on the land. It’s also return on those improvements associated with the irrigation equipment, the pivot, the pump, and the power unit. So the below ground as well as the above ground. And that’s some of the differentials that we see here. Center pivot is the most common type of irrigation.

Michael Langemeier: Another thing that does happen, and this happens in Nebraska and Indiana and other states, sometimes when you have irrigation, you have the opportunity to produce maybe a higher valued crop. In Indiana, a couple examples of that is melons in the Southwest, Knox County in particular, but also when you get to the North central region, we have more seed corn production.

So certainly in those regions, you’re gonna probably see some higher, irrigated cash rents than other regions that don’t have those opportunities.

Jim Jansen: Right.

Michael Langemeier: So let’s talk a little bit about how irrigation equipment works in these irrigation leases. And that’s one of the reasons I really wanted to have Jim on here because, you know, Nebraska obviously has a lot of irrigation. So, they have some things that they think about, when they’re thinking about leases for irrigation. We’ll start with some equipment lease provisions.

Jim Jansen: Yeah. As I said before, the big three P’s of irrigation: pivot, pump, power unit. So your below ground as well as your above ground equipment.

We make the general assumption typically all day expenses associated with running and operating. The pivot with respect to the physical equipment, not necessarily the energy, whether a diesel, or natural gas, or propane, whatever you’re pumping with. That’s a land ownership expense because if you kick that tenant off that property, they’re not gonna take the pivot with them.

Now we do see in leases, and it’s not uncommon to see tenants providing sweat equity, so the use of their time, skills, talents, equipment, whatever it might be. So they provide a labor component. And also it’s not uncommon to see a land tenant provides some degree of parts, what we refer to as the consumables. Some of the bigger consumables, they include the nozzles on the actual pivot itself, some of the dropdown hoses, as well as the tires or the gear boxes. So you might see in the lease that people specify that the tenant’s responsible for, let’s say, the first 500 to even up to $1,500 a year in expenses with those consumables. Now, the cost of repairs and upkeep have increased exponentially. You know, if you have someone come out and replace a tire on a pivot, that might be a thousand bucks, especially if it’s in the dead of summer and you can’t get equipment to it and you have to carry it through a hot corn field or whatever. On the, upkeep though, that’s definitely a negotiable thing. And if you’re someone struggling on setting a cash rental rate with a landlord, I typically see landlords, they sometimes fail to acknowledge the value, the sweat equity value, because if you hire a irrigation company to work on it, usually it’s a service call plus so many hundreds an hour after that. So what’s that tenant worth? It’s a value that might be $30 an acre or something to that effect.

Michael Langemeier: Yeah, we, talk about how the maintenance works, and how the cash lease are adjusted depending on ownership. Talk a little bit about, different ownership of the irrigation equipment in Nebraska. Just to give some idea how much difference there is depending on the tract of land.

Jim Jansen: Yeah. So, on the information we report. And I would assume with the USDA, they assume that the landowner owns the entire irrigation system. Pivot, pump, power unit. If the tenant is providing one of those components, most commonly it would be maybe the power unit, the diesel engine or natural gas, whatever you’re pumping with. And secondarily, it might be the pivot. So surrounding those things, we might discount that.

And the one side note that I might mention is when it comes to the upkeep, we always jokingly say it’s always the other party that’s responsible for maintaining it. Just like when you rent an apartment or a house here at Purdue outside campus, it’s not my responsibility to mow the lawn. It’s not my responsibility to paint it. It’s always someone else. Well assuming when the lease initially starts, what we found based on our survey work, it’s the landlord and the tenant are typically the ones responsible for the upkeep.

When we say the landlord and the tenant, once again, maybe the tenant provides some of that sweat equity time related to, putting air in the tires, topping off, fluids, gear boxes, oil grease, whatever the case might be. Our survey. I also find a third of the time the tenant takes care of it. The remainder of the time the landlord takes care of it. I can’t emphasize enough. It’s a joint decision between the landlord and the tenant.

A tenant needs to communicate to the landlord if they’d see that there are issues arising. Hey, you might have to pull that pump out of the ground. Uh, hey, you might have to re-drill that well. Let’s share that as part of the lease negotiation with that landlord. So we can make appropriate plans there. Significant capital outlays to drill a new well to have any kind of major well service done. So that kind of surrounds the maintenance and upkeep.

But once again, with the irrigated rental rates, it’s a return on just not the land and the increased productivity of the land. It’s also return on the equipment, the upkeep through depreciation, maintenance, things like that.

So if you have a situation here, we do take a look at what would we discount the cash rent? And Michael mentioned this when we first started today, there was a differential between the dry land and the irrigated. Well, there’s a differential or a discount, how much you might take off the cash rent. And we found this as part of some of our survey worked in Nebraska back in ’23. We asked the question if the tenant is the one providing pivot. So the landowner owns everything except for that pivot. Something happened to the old pivot or the 10, more often than not, usually you see a tenant get a new pivot on their ground, their existing pivot on the rented ground, it’s not that great. So they move that one off and bring their used one over. That still works. Works better than what might be out there onto that property.

Well, what we found with our survey work is just slightly over half the time, the discount is somewhere between 26 to $50 an acre, meaning let’s say you want to charge, $300 an acre for center pivot, irrigated cropland about half the time you take off 26 to 50. So you might be paying an effective cash rent to the landlord of, let’s say 250, 262, 270 because we are discounting that cash rent to account for the fact that the tenant is the one responsible for the pivot, the upkeep, the insurance. Third of the time we found 10 to 25, and the remainder of time we found it greater than 51.

Michael Langemeier: One of the things that’s so important with these irrigation leases. And leases in general is communication. That’s why you talked about the importance of knowing beforehand. Who’s responsible for the maintenance, how are we gonna discount the cash rent, based on who owns the pivot, and so on. We wanna make sure that that’s settled, before we start irrigating, because we all know that the timing of irrigation is so important. You don’t want to have any downtime. You need to have a plan on how you’re gonna fix that pivot in a very timely fashion. Because when the crop needs water, it needs water. You don’t wanna be, delaying that decision.

Jim Jansen: That’s right.

Landlords may not always trust that the tenant is properly maintaining the power unit. Diesel engines are probably the most common from what I see. Sometimes when people have access to a natural gas or propane service, especially natural gas, you have to be near the pipeline for it.

If the tenant provides the power unit, the thing that’s actually pumping the water, how much would you take off the cash rent to account for that? So the way we look at it, it’s about a third of the time in Nebraska, the discount is between one to $9 and another third of the time it’s between 10 to 20.

What I’ve seen more often than not, based on our phone calls from our extension offices, we take off 10 to $15 an acre is a pretty common discount. So if the irrigated cash rent’s 300 an acre, the tenant provides the power unit, we would might be paying an effective 2 85 or even two 90. We are discounting that cash rent to reflect the contribution of the tenant.

Michael Langemeier: So we gotta keep track of all these different items and who’s paying for that?

Jim Jansen: So in net, if you as a tenant, if you provide both the power unit and the pivot, your discount might exceed $50 an acre. In Nebraska, a new irrigation system installed, if you could get it ordered and get it paid for, you’re talking in excess of 120,000.

So here’s a setup for a question we get in our extension offices, and they usually happen in the dead summer. It’s still hot, the crop’s growing, and, uh, the tenant ended up having to call the local irrigation company to come work on something that they weren’t able to fix. And the landlord was inaccessible to approve it. They might’ve been on vacation, didn’t answer their phone. So who should pay that bill if the tenant went and contacted someone to make that repair?

Well, ideally, another element of an irrigated lease is we need to specify how the repair bill is handled. If the tenant pays it, you might discount some of that cash rent and it’s not such a big deal when you have small repairs. But when you have big repairs, 10, $20,000, we need to specify how those expenses are handled. Does a tenant pay it and get reimbursed? If it’s a large capital outlay, do they discount the cash rent for the next year, two years, three years? Be someone you’re working with over multiple years we more often than not see a kind of a deductible associated with using the irrigated ground. The tenant’s responsible for the first 500 to 1500 a year in expenses. Anything that exceeds that, that’s when the landlord steps in and pays that, especially when it’s below ground things. The actual, well, the pump below the ground, the quality of your water has a definite, influence on the reliability and how often you have to rebuild different components on that itself.

[00:14:14] Pasture Leases

Michael Langemeier: So we’re gonna switch gears here and talk a little bit about pasture.

Jim Jansen: Yeah.

Michael Langemeier: the Purdue Cash Rent and Land Value Survey, again, does not currently contain information on pasture rental rates. And there’s a couple different ways, Jim, you can think about pasture rental rates, and we’re gonna talk about both of those.

One is to think about it on a per ac a per acre basis. So how much, you know, $50 per acre, for example, $75 per acre. And, you know, how do to come up with that, that figure, we’ll talk about that. You can also think about rental rates on a, on a cow calf pair That’s right. And in the Western Corn Belt, Nebraska and Kansas, they, they talk about both.

Jim Jansen: Yeah.

Michael Langemeier: But a lot of times they’ll talk about the rent for the cow calf pair. So we’re gonna talk through that too. If you have rent for cow calf pair or maybe borrow the, the rental rate from the Western Corn belt and adopt it, to Indiana, how would you use that to come up with a reasonable rental rate for your pasture.

Jim Jansen: Yep. Yeah, so let’s, I don’t have any slides prepared today to talk about cow calf pair rental rates, but we’ll just go over that. The idea behind a cow calf pair rental rate, so that’s a stock cow for one cow with a calf its side. In Nebraska, the grazing season’s usually about five months. Based on rainfall and growing season. In Nebraska this past year, we’ve seen cash rents trail livestock prices with cattle prices being higher. We also saw, the cow calf pair rental rates go up. In Nebraska, I remember in the central district, in our state, the central part of the state, we had an average cow calf pair rental rate of about $70 a month. If you’re renting for the season, 70 times five would be about $350 per pair.

And, in the lease you’re going to specify how many pairs you’re allowing out on a property. Sometimes when you’re renting by the acre, you don’t always specify how many animal units or how many head or however, whatever the measurement is that you’re using. Probably number a head, how many head of livestock you might have out on there. So that’s one tip that you can take from a cow calf pair. So let’s specify the animal units. There’s many different ways to figure out, I think have counted almost 10 different ways to figure out a cow calf or a per acre, per animal unit per month, per week, per day, per season. What matters the most though is what is someone willing to pay and what is someone willing to accept?

Michael Langemeier: I like that the cow calf pair rental rate starting there and then thinking about how many acres per cow do we need for that cow calf pair, and then getting the rental rate from that information. The reason why I like that in Indiana and for states similar to Indiana, where you don’t have as many cattle and so there’s not a plethora of rates. You can’t go to your neighbor and say, well, what are you renting your pasture for? Their neighbor might not have any pasture. They might mean obviously being a pasture within miles, of your pasture. And so, in that particular case, use something from an area that has a lot of cow calf pair rental rates. Again, Nebraska, Kansas, $350 per acre. Look at the acres per cow. Divide the 350 by the acres per cow and get a rate per acre that way.

Jim Jansen: Yeah.

Michael Langemeier: Having said that, there is some USDA numbers on, cash rent, county estimates. And talk, so talk a little bit about that, Jim.

Jim Jansen: Yeah, so those folks that are just listening today, you can’t see this image, but I’m pretty sure we’ll probably be posting some of these at some point. The slides, and you can find this. The USDA annually releases in late August, their county level cash rent survey estimates. For in Indiana, there’s limited irrigated as well as grazing land in addition to dry land. I think they have a rate for almost every county in the state.

A breakout that we have here varies significantly. we had a low, you know, dollars per acre of 21.50 an acre all the way to a high of 107 in Delaware County, down to 21.50 in Switzerland County. My guess in this state is anything that’s grazing land is basically things you can’t farm. So is there some factor or feature to the ground? Is it a wet parcel of ground that, you know what, it doesn’t make sense to farm it or there’s limitations in farming it, but it makes it absolutely greater, phenomenal grazing land. Some wet ground, some rough ground. And I would guess some of the higher rates that we have on our map here in the state probably reflect some areas that have pretty good crop land, but also don’t necessarily have as much grazing land.

Michael Langemeier: Another consideration here, and, I don’t know if you collect this on your survey or not. I know Kansas has a little bit of information on this. Is services provided?

The big one is water. is there water in that pasture? And if there’s not, how are you gonna, how are you gonna cover that cost? And so how good, how, how good a quality is the water? Is it, is it a stream? is it, is it a windmill? What is it? in terms of a water source,.That’s also very important. we’re gonna talk a little bit about fences, but also fence maintenance. So talk a little bit about those items. You know, how you can think about those when you’re renting a pasture.

Jim Jansen: What I tell people, so the first question is always, who’s responsible for upkeep? Control of noxious weeds, unwanted brush, and just not shade trees. Livestock needs shade, good shade trees. There’s nothing wrong with that, but things that are almost noxious weeds in a way. Who’s responsible for that?

The thing we always tell people in our meetings from what we can tell based on our phone calls, it’s always the other party. It’s always someone else. It’s not me, it’s them. Well, I try to relate this back. Imagine you’re or gonna be living off campus outside of Purdue University here, and you’re someone that’s looking to rent a, an apartment or a home with some of your friends.

When you initially rent a property. Well, we need to make the assumption it has decent fencing. It has a secure water source that unless it’s extremely dry, that’s good safe water for the livestock to drink. Weeds are at a minimum, unwanted thistles or whatever might be out there. Same way with just when you rent a residence here in West Lafayette, you wanna rent a property that’s fairly well maintained. It’s easier to get someone to maintain something. It’s easier to negotiate that into the lease if the property is well maintained. Basic upkeep on the fences and that big of a deal. If you’re a new tenant and you see that the fence is already well established, you have to do a little bit of work after it snows or something. But it’s not that bad. If the fence is dilapidated and falling over. That’s where we need to probably step back and come up with a plan materials, major materials, if you have to replace a quarter mile fence or whatever the distance is, those materials are a landowner expense because if the tenant vacates, they’re not gonna remove a five wire or three wire barbed wire fence.

Now, in addition to the fence, if they are using their equipment, skid steers, tractors, whatever, to establish that fence, maybe we need to be looking at discounting that cash rent for the next year or three years or five years or whatever period of time. you know what you want to charge, but you discount it to account for the value of that time.

Same way if you have someone with a skid steer that goes out there and shreds on unwanted brush or whatever the materials are that aren’t desirable to be grazed. the one sticking point that I see most common is, thistles or noxious weeds. Your tenant might be the best person in the state of Indiana when it comes to maintaining weeds. If your neighbor is not, especially if you have running water sources or wind or whatever, those things continually spread onto your ground and you might think it’s the fault of your tenant. we need to have somebody, if someone can figure out how to automate a drone to only spray noxious weeds and pastures, they can become a very wealthy person, right?

Michael Langemeier: Yeah.

Jim Jansen: But, what I tell people on herbicide expenses, at least in Nebraska, if you have a situation where the tenant’s willing to do the work, but you’re in an area where there’s a high pressure in some of these unwanted factors related to forages, let’s come up with a cash rental rate where we maybe cost share with the tenant if you’re a landowner. To split some of those expenses surrounding herbicides or whatever control measures you’re using to control those things. So those are kind of the big three. Fencing, water supply and control, noxious weeds, unwanted brush, whatever you have out there.

Michael Langemeier: And if you’re doing those kinds of things, then all of that impacts the rental rate.

Jim Jansen: Yes.

Michael Langemeier: And so if the tenant is responsible for maintaining those weeds and there’s no cost share on herbicide, he shouldn’t be paying as much, in terms of renting that pasture. If he’s responsible wholly for the fencing, he shouldn’t be paying as much. Another factor that we sometimes talk about, you talk about, you know, various regions, corn belt and also the plains is, the quality of the grass. we get into it is it native, is it improved pasture? What is it? but also just some simple things like eyeballing it and say, is that fair? is that good? And maybe make some adjustments related to that.

I actually have some of that from a, an animal science professor here at Purdue provided me with. Provided me with some information about an adjustment factor related to the quality of the grass, and that’s built into, the pasture and hay ground leasing publication that’s now on the Center for Commercial Agriculture website. And so, and that’s why I like the, I’ll go back to the cow calf pair I like that lease because a lot of times in that lease. You dictate the stocking rate. One of the problems with a per acre lease is you really need to talk about the stocking rate. The last, if you’re a landlord and you’re an absentee landlord in particular, you need to, you need to know how many animals they’re putting out there, whether that be sheep, goats, cattle, whatever it may be. You need to know that so that it doesn’t become a, a, you know, good grass to poor grass.

Jim Jansen: Right.

Michael Langemeier: I think it’s an obvious thing, but it’s something you need to think about, very, very carefully when you’re thinking about pasture leases.

Jim Jansen: My final comment I’ve seen on pasture, and I don’t know if it’s this present here in Indiana, especially in the ranching areas in Nebraska, people are getting older. The average age of ranchers exceeds the age of farmers. If you have a situation where someone is taking livestock in, meaning, hey, you have someone that wants to bring stockhouse in from a neighboring area. The cash rental rates the USDA, assume that the landowner is not providing any services related to watching the livestock, making sure they’re staying and putting mineral and salt out or something. If you’re someone that owns grazing land, You’re not necessarily taking cattle in, but you’re pretty darn close to it. Maybe due to your age or health, you don’t want to own the livestock. But in the summer you can go out there and do some of these different services, Michael mentioned, that can provide additional cash rent to you, especially if that person, all they have to do is drive the cattle off and then come back in the fall and pick ’em back up. Or only have to come and visit the property once a month or once every other week or something.

Michael Langemeier: And I could see that coming up, a pasture is limited in Indiana, and if you have someone that has a, has a decent sized cow herd, they may have to go quite a ways, for some of that pasture. And so just having the landlord or the landlord lives locally, just checking to see if the cattle are in.

Jim Jansen: Yeah.

Michael Langemeier: I know there’s people, I know people in Nebraska and Kansas that actually pays someone, you know, a certain dollar per acre, to do that. Yeah. because they don’t live right next to the cattle. It’s several miles away. So yeah, those are very important considerations.

Jim Jansen: We don’t talk about it extensively in our survey, the USDA survey of Indiana, but, grazing, corn stock grazing rental rates for livestock. some of the cash rental rates that we have reported go from what degree of services does the landlord, do you have any type of fence around the property? I would assume here in Indiana with a heavy, heavy row crop present that, you know, people that do graze corn stalks, there’s nothing wrong with grazing corn stalks, but, the value may not be quite as high as Nebraska is.

Michael Langemeier: There would definitely be some money exchange hands though, in some cases.

Jim Jansen: Yeah.

Michael Langemeier: So you have to pay something for that. It also comes up, and I know this comes up in Nebraska too, if you are, if maybe you’re, you’re renting your, some of the grass is related to cover crop. I mean, we don’t have as much grazing a cover crop as Nebraska would have, and that’s one of the disadvantages we have, in terms of cover crop is we don’t have those opportunities, because we don’t have, near as big a cattle herd. But, talk a little bit about that, how that might work.

Jim Jansen: Yeah. So treatment of grazing of cover crops in the monetary perspective is fairly similar to corn stalks. It can go from anything from free, especially when you get into some of these years when you have a bunch of down corn that even after you combine it, bailing a corn stocks is a little bit more of a concern with the amount of nutrients removed relative to livestock. Livestock than nutrient cycle as cattle roam through there, especially use the old ranchers adage, you graze half, you leave half. If you, now there are ways to over graze corn stalks and some of that, and you overgraze.

But, cattle are a great, especially in cover crops, it’s a great way if you have to terminate it, cattle can easily do a fair amount of, you know, utilize the forage and then almost kill it off in a way, depending on how heavy you graze it.

And, kind of in summary on some of the big things when it comes to grazing land that we need to negotiate different things. specifying the stocking rate’s critical. The big three disaster. One of my colleagues always used to call it was fire, hail, and drought. If you have to have an early removal of that property, what happens to the cash rent? So we need to specify that.

And I do think in Indiana there’s probably still a fair amount of hunting and green. How do you treat that crop? Land lease versus a pasture lease? Pasture leases, you’re usually talking just the summertime. Cropland leases is more of a year round deal where you have off season operations occurring. And sometimes people that own that ground, maybe they don’t hunt themselves, but they have a relative or extended family member that really wants to hunt it. Just make sure you communicate in that lease. Maybe the tenant that’s running their cows out there and need to remove their cattle two weeks before the deer season ’cause somebody has to set up their deer stand or whatever the case is. Just make sure you understand what’s going on out there and what do you wanna have occur.

Michael Langemeier: As a little side note here, something to watch for if you’re driving through Nebraska is the amount of cattle you have grazing.

Jim Jansen: Yes.

Michael Langemeier: On corn stalks, even on I 80, which is a pretty flat, pretty flat highway compared to most of Nebraska. It’s just unbelievable how many cows are grazing those corn stalks. And so if you get a chance to drive through Nebraska, check that out.

Jim Jansen: We’re gonna go ahead and, talk in general about, calculating cash rent.

Yeah, so one common question are extension offices, I’m sure they get ’em here too, is what’s the county yield? Well, within the last year or two, the USDA Risk Management Agency pushed forward a website, if I was on Google or some search end, do a search for something like USDA county yield report. You can look by county, by crop, by production practice, irrigated, non irrigated.

And what we do in this example, we’re taking a look at basically modifying a county cash rental rate and discounting a little bit to reflect a property. So we are looking at the county we’re sitting in today had an average crop yield over the last five years of 217 bushel per acre. We also took a look and it just as a side note, the Purdue Farm Real Estate Survey and report also has some of this information on the idea of what we call rent per bushel. Just be aware that the Purdue Farm Real Estate Survey and report does report on it. And what we start with is we had our average five year yield was 217 bushel per acre. If you divide the two of those together, that gives us what is called the county rent per bushel. What the county rent per bushel means is a dollar 38 per bushel is going towards what it’s going towards paying the cash rent, and the farm real estate survey for Purdue has some very similar estimates by quality of land and things of that nature.

We’re gonna take that a dollar 38 a bushel from dividing the county rental rate or the regional rental rate by at the county yield. And on our farm that we wanna rent, in this example, it only yields a 202 bushel per acre. It’s not as productive for whatever reason. And you could come, that number might come from the APH, the actual production history from crop insurance. You might look at the last three years, the last five years, whatever the APH or your yield expectation for the property, we come up with a farm level cash rent of $278 and 33 cents per acre.

The idea is we are stepping down what we know on the left hand side of this slide where it’s stepping down our county rental rate and we’re stepping it down to the farm level cash rent.

Michael Langemeier: If a landlord calls me and asking some general questions related to rent, I of course point them to the Purdue survey. In particular, I point them to this rent per bushel. And then my next question is, what is a, what is a typical corn yield on your farm? There’s quite a few landlords don’t know that, and so that’s something they’re gonna have to ask their operator. But really to, think about cash rent intelligently, you really need that information.

What’s my corn yield? you know, what’s the rent per bushel? With that, I can come up with a, at least a first estimate or guesstimate, of what the cash rent, should be. There’s other factors, of course, that may come in there, but it gives you a, a kind of a first impression, of what that ground, might, might be worth. And so I, I really like that method.

And one of the things that we do in the Purdue survey that I’m so glad they started doing in the mid seventies. is when we have a professional farm manager or an appraiser, give us land values and cash. We ask them. Okay. on that track that you’re looking at, we’re calling it average productivity. Average productivity is not the same to everybody. Mm-hmm. What I call average may not be the same. What, what someone else calls average. And so we ask for the associated corn yield with that rent and land value that they’re giving us. And we have them do that. For what they consider top, average and poor quality. We ask for that information. Use it, when you’re trying to think about cash rent, for your farm or for different tracks of land. I think that’s a really good way of doing that.

Also you wanted to talk a little bit about, crop share leases.

Jim Jansen: Yes.

Michael Langemeier: So what are some sources of information when we think about crop share leases?

Jim Jansen: You bet. And one thing I wanna plug on, some folks that you may have never heard of, county rent per bushel. Especially in Iowa, they talk about the CSR, the corn suitability rating. They do a very similar idea on the corn suitability rating when it comes to setting cash rent. But it’s just that it’s a productivity value that you’re trying to encompass the good, the bad, and everything in between on the features of the ground. And how does that tie into the ultimate output being the yield.

Now our second idea for setting cash rent here is called cash equivalent from crop share. So let’s say we set up an example under a 50 50 crop share. Split, meaning the landlord gets half the yield, but they also get half the seed, fertilizer and chemicals or the pesticides.

And on their survey, they took a look at. I pulled, the fertilizer seed and pesticide expenses, so if you added all those up together on a corn rotation, so I believe that was corn soybean rotation. If you add the two of those together and divide that by two. So I said the landowner gets half of that yield, so about 108.5 or about 109 bushel per acre. And this is an example we’re trying to do for 2026. I thought fall of 2026 corn might be worth, let’s say 4 46 a bushel. So the landowner’s getting half of the crop revenue per acre. And in addition to that, they’re paying half of the big three from the prior slide, half of the seed, fertilizer, and chemical or pesticide expenses. And the difference between those two, we given before the farm ER landowner has to pay real estate taxes. regardless of his crop share or cash rent. The difference between those two that gives us what the landowner anticipates, they’ll make the net return to the owner, 2 58 91 an acre.

Now, if you look through the, our example, we have set up, we can look at March, we can look at July, and then we can look at November.

Once you pay the inputs in the United States, once you pay the inputs, that’s a fixed expense for that season. You can’t get a refund on your chemicals. But once that seed is planted, the fertilizer is applied. Those are locked in for at least that season. So we let the cat and the yield is probably gonna be different than what you exactly anticipated, although there’s less yield variability in Indiana than Nebraska.

But anyways, we go through the example and we let that price vary. We go from 4.46 to 3.92 to 4.27. The idea is depending upon when you’re negotiating those things. Your cash rent, what you think it could be or should be is probably gonna vary.

Do you know what your property yields? Do you know what the yield to price expectation is? That’s probably the point of consternation between the landlord and tenant because they have different expectations. Maybe you understand the expense side, but you think the price of corn’s gonna be 5.46 a bushel or whatever the price is. Who knows? So this is one way to estimate cash rents for the upcoming 2026 planting season.

[00:34:19] Hay Leases

Michael Langemeier: We wanna switch gears here a little bit again, and we’re, we’ve, focused on, irrigation leases. irrigated crop leases. And then we, talked about pasture leases. Now I wanna talk, briefly about hay market, price or hay leases.

And one of the things that I recommend using, is to have some idea of what the hay yield is. and also the hay market prices, and we can use that information along with some typical shares, to come up with some rental values. I think that’s a very logical way, to do this. So walk us through the example you’ve got on your slides.

Jim Jansen: So the USDA has a divisions called AMS, Ag Marketing Services. And the thing I’ll point out on the USDA hay report for Indiana there, from what I could see, there were two hay auctions that they reported on, and I think they report every other week, or one’s one week and one’s a following week.

Depending on where you’re living at in the state, you might pull from a neighboring state. If you’re in southern Indiana, maybe you’re gonna pull from, I don’t know, Tennessee or something. just be aware that depending on where you’re at in the state, you might have to look at a neighboring state because the number of sales might be low certain times throughout the year, and it’s a resource that you can find online that you don’t have to pay anything or have a subscription through.

The example report we pulled together here, we took a look at, pulling together some price ranges. And the one interesting thing that stood out to me when I looked through the prices of mixed, what they call mixed hay, grass hay. Prices in Indiana this year are about twice what they are in Nebraska.

So obviously there’s some, distance. You can’t move hay, unlimited distance like you can a grain. It’s not as compact, but we use the price, based on the USDA report here.

Michael Langemeier: Yes. and so if you do have a cow herd, not only you have to go further to probably get some pasture for all your cows. You probably have to go ways to get hay if you’re not producing yourself. And so it’s a more challenging situation when it comes to pasture and hay, in Indiana for the cow cap producer than would be, in Nebraska.

Jim Jansen: Plus we actually got rain this year. Yeah. Two years that we’ve had in some areas favor very favorable rainfall amounts. So in this example, we take that cash equivalent from crop share and we apply it to cash equivalent from hay share. We know we wanna work together, we just don’t know what we should charge for cash rent.

Maybe it’s an odd shaped field. Maybe it’s on the side of a hill. That’s why we don’t crop it. So let’s say this field yields two and a half tons per acre. Maybe you cut it once, maybe you cut it twice, who knows? But if you get two and a half tons per acre, we have two situations. We could do a one third, two third split, or we could do a 50 50 split.

So the landowner’s gonna get, a third in the, one example, half the yield in the other. And, based on the prices, you can’t see this if you’re just listing the long today. Well, we used a price of $190 a ton, so let’s make the assumption it’s pretty. Fairly good quality hay. And, under the one third, two third expense or split crop share or hay share, the landowner is not paying for any expenses.

On the right hand side, let’s say they put down $50 worth of fertilizer with the tenant and they also spent, $20 on sprained some noxious weeds or something, so they invested $70 an acre. Remember, we split half the seed fertilizer chemicals. So the landowner’s gonna take off $35 under the 50 50 split because they have to share in some of those expenses.

So the hay gets put up, you bail everything. You count the number of bails, the landowner gets a third, and the one case they get half the bails then the tenant turns around and says, listen, why don’t we go weigh some of these and why don’t I just haul these off and write you a check. Cash equivalent from hay share.

We’re taking the yield. And depending on how much the landowner invested, they are getting an effective cash rent. They get a gross check divided by the number of acres, and that’s how we figure out the cash rent.

Michael Langemeier: I’m using a very similar calculation in my pasture and hay ground leasing publication.

In fact, I use a one third, two thirds in there. very similar to the example, that you talk about here. I think it makes a lot of sense. You know, what’s the yield, what’s the price? How much income are we getting from that? If we don’t wanna share expenses, that can be difficult, to do in some Cases. So we don’t wanna share expenses that one third, two thirds is a good way to do it, and we can come up with a net return, to the owner.

Now, when you’re thinking about the maximum amount of money. That you’d be willing to pay if you were an operator? It should be obvious that, if you’re looking at the market rent for poor quality land, hay should be under that.

Jim Jansen: Yeah.

Michael Langemeier: And so if I’m in an area where my poor quality land’s getting $200 hay should be something south of that. And, it’s not uncommon at all to see. 20, 30% discount, from hay ground compared to crop land because some hay ground’s, hay ground because it’s an odd shaped piece. It’s only a few acres. It’s just not suitable for cropping, for whatever reason. So that’s why it’s hay ground. Well, it shouldn’t rent for as much as crop land. And so if you’re landlord, just remember that you’re not gonna get the same rent, not even in some cases, not even close to the same rent as you’d get if you were, growing wheat, corn, or soybeans.

[00:39:06] Conclusion

Michael Langemeier: So just to summarize, we’ve talked today about irrigated leases, irrigated crop leases. pastor leases and hay leases. before we leave this conversation, I think we’d be remiss if we didn’t mention Ag Lease 101.

This is an excellent, website. The North Central Farm Management Committee put this together years ago. there’s information in here about the different types of leases, vantages disadvantages of fixed, flexible, crop share leases. It, there’s, there’s also information about pasture leases. if you’re thinking about leasing cows, there’s a publication on cow leasing in there. some very useful general information about leases and probably of more interest, to the listener here is there’s also some lease forms. Now, don’t use these blindly, but there certainly gives you a place to start.

Jim Jansen: Yes. And even if you trust your landlord. Remember, you probably aren’t gonna trust their probate judge if they’re someone that’s in advanced age and they pass away. That’s why we always wanna get a lease. And a good lease is just not for the protection of the landowner. It is for equally for the protection of the tenant. And if you sign a five year lease with someone that’s in their nineties, that lease is in effect until it is terminated. So just make sure you get whatever you wanna do, get it in writing.

You can go see a private attorney, you can get, Ag Lease 101 is a good place to start. I’ve seen it’s a fairly, you know, four or five pages long. I’ve seen people cross out sections with their landowner and they both date it and initial it when they sign the lease to acknowledge certain sections may not apply to their situations, but it’s a good start if you don’t want to go see an attorney.

Michael Langemeier: And we always recommend written leases, but in particular, a couple different leases that I think it’s so important that, that are written down. One of those is flex leases. if you have a flex crop lease, there’s so many different ways, to set the trigger and to set the bonus payments that you definitely want that in writing.

The other one is pasture. Yes. I think it’s so important to have these pasture leases in writing because you need to know stocking rate. You wanna make sure that they’re not overstocking or even under stocking, properly stocking, that pasture, make sure that that’s in there. you wanna make sure that there’s something in there about services, you know, who’s gonna provide the services, who’s gonna. Fix the fence, who’s gonna pay for the repairs of the fence? And so, pastor leases, even though there’s not, it’s not as much money involved per acre. it’s so important that there’s, some things written down.

and so thanks Jim for joining us today and, this was a very interesting conversation. Hopefully our listeners will equally find it, interesting as we do, we, of course, we, you do a lot of lease meetings in Nebraska and I do a lot of lease meetings, here in Indiana and so we’ve tried to cover some of the things that come up, when we’re talking to landlords and operators.

So that concludes this podcast focused on cash rents. I encourage you to take a look at that. Also, we’re have a separate podcast related to land values, I encourage you to also watch, listen, check out the slides, check out the written material, related to land values.

Thank you for joining us.

Jim Jansen: Alright, very good.