Nine percent of all Midwest farmland will transfer ownership in the next five years, according to a USDA report released last week. And rented farmland will transfer at an even higher rate, based on a 2014 survey.
But relatively few farm operators will have an opportunity to acquire the land that transfers ownership, according to USDA.
"More families are creating trust ownerships to make sure land remains in their family for farming or as an investment," said Joseph T. Reilly, USDA National Agricultural Statistics Service administrator.
Landlords who also are farm operators are much more likely to transfer land through trusts than non-operator landlords, according to USDA. Nationally, ownership of 44.2 million acres of farmland will be transferred through trusts in the next five years. Another 57 million acres have been, or will be, put in wills, according to the report.
The transfer of land ownership can be a concern for farm operators renting that ground. Nearly 12 percent of rented farmland in the Midwest will transfer ownership in the next five years, according to the report. Those inheriting farmland already rented may continue to rent it, using the land as an income-producing asset.
Competition can be intense to rent farmland, especially high-quality cropland.
"Access to land is one of the biggest challenges facing agricultural producers, particularly beginning farmers," said Mary Bohman, administrator of the USDA Economic Research Service, which cooperated in the report.
Possible ownership transfers of rented farmland can be an opportunity to renegotiate rental rates. An analysis by Gary Schnitkey, University of Illinois economist, indicates Illinois producers need to cut costs by $100 per acre for corn and soybeans to be profitable next year.
While the entire cost reduction does not need to come from reduced rental rates, according to Schnitkey, "sizable" rent reductions are needed.
"If costs are not cut for 2016 and low prices continue, the financial problems associated with the grain farm sector will become more difficult to deal with in the future," he wrote on the Sept. 1 farmdoc daily blog.
State-by-state differences
Rented farmland in the Midwest is expected to transfer ownership at a higher rate than the national average of 9 percent, according to the USDA. States included in the Midwest Region, as defined in the USDA report, are Michigan, Ohio, Indiana, Illinois, Iowa, Missouri, Minnesota and Wisconsin.
Illinois and Iowa are the leading states for farmland rental incomes, combining in 2014 for $7.5 billion in rents collected on 24.1 million acres. Between 10-12 percent of farmland rented in Illinois and Iowa is expected to transfer ownership in the next five years.
In Indiana, 800,000 acres (10 percent) of the 7.9 million acres rented in 2014 are expected to transfer ownership in the next five years. Thirteen percent of Ohio’s rented farmland (800,000 of 6.2 million acres) is expected to transfer.
The percentage of transfer is higher in Michigan, where only 4 million acres of farmland were rented in 2014. Nearly a quarter of the Wolverine State’s rented farmland (900,000 acres) is slated for ownership transfer, according to USDA.
Kentucky and Tennessee are included in the Appalachian Region, which also includes West Virginia, Virginia and North Carolina. Transfer rates were less for rented farmland in this region, where 7.7 percent of 15.5 million rented acres are expected to change ownership, including just 300,000 of Kentucky’s 4 million rented acres.
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