Iowa is known for having great farmland, so great, its been setting records! Our analysis will focus on Ida County, Iowa and the return a landowner could make. In 2021 the USDA reported Ida County on average produced 229 bu/acre of corn, making it one of the highest yielding counties in Iowa for Corn. Our model seeks to understand the rate of return through cash rent on a Corn planting farm in Iowa using Farmlandstats.com Dashboards.
Our financial model takes into account two key variables: the price per acre and cash rent. Each scenario below has a different cash rent (low, average, and high) and a variance of price per acre (low, average, high). Our numbers are explained below.
Determining the Price Per Acre
The low price per acre is $11,411 which was derived from University of Iowa's recent survey (HERE) . The high cost of $23,400 came from a recent article published about a record land sale in Ida County, Iowa (Here). The average is simply the average of the costs.
Determining price per acre is hard to do because it can fluctuate so rapidly. The current USDA's numbers are often far too low.
Determining Taxes
Taxes of 1.02% was derived from our Farmlandstats.com property taxes dashboard. (Here) Taxes is a rough estimate that may change depending on the county.
Determining Cash Rent
Cash Rent is also challenging to estimate as the price's vary county to county and often what agreement is made with the farmer. Our low cash rent was $292 and report by the USDA in our dashboard (HERE). The high cash rent of $600 was used due to a new record amount recorded in Iowa (HERE). The average is simply an average between expected and the highest point.
The Results
There was really only one option that looked attractive to an investor; paying the cheapest for the land yet charging the most cash rent. In the last scenario the highlighted value represents the best outcome with a return of 5.2%. This is a cost per acre of $11,400 and a cash rent of $600. While this is a good return the model fails to analyze if this is a sustainable practice or if it hurts farmers nationwide.
What do you think of our model?
Sources
Cash Rent Articles Here