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Relationship Between Corn/Bean Prices VS Land Values And Rents

Aug 05, 2015

By David Bau, University of Minnesota

I receive many questions daily about land rents and land values and what direction they are going in the near future and long term.  Corn and soybean prices have fallen from record highs in recent years to a level that presents a challenge for farmers to generate a profit. I thought I would try to put together a chart that correlates the relationship between these three items.

I put together a list of average farmland values in Southwestern Minnesota from 1994 thru 2014 average Southern Minnesota cropland cash rental rates and average prices received by farmers for corn and soybeans sold each year.  Next I took the percentage yearly change for each and compared the results to each other in Table 1 below. The average change in land values is indicated by diamonds, the average change in Farmland Rental Rates is indicated by squares and the average change in corn and soybean prices is indicated by triangles.

From 1994 to 1995 all three had increases in values with corn & soybean prices increasing by an average of 32.9%, while farmland sales prices increased by 8.4% and farmland rental rates by 5.3 %.  In 1996 farmland sales prices declined by 1.3% while corn and soybean prices increased by 4.1% and rents by 7.9%.

In the last 20 years, there were seven years where corn and soybean prices were negative, while farmland sale prices and farmland rental rates were in negative territory three years.  Is there anything to learn from the chart? There is a trend between all three with corn and soybean prices the most volatile, followed by farmland values and with farmland rents more stable.  There is definitely a year or two lag in the reaction of farmland sales and rental rates following the direction in corn and soybean prices.

From 2013 to 2014 farmland sales declined by 10.7% and farmland rents declined by .9% while corn and soybean prices declined by 15.7%.  With corn and soybean prices in negative territory, this should indicate lower farmland sale prices and lower farmland rental rates unless prices go up dramatically in the near future.