Michigan's farmland rental market is not in lock step with ownership prices
A new county-by-county survey from the U.S. Department of Agriculture and Michigan State University Extension survey shows that not all farmland in Michigan is keeping pace with the recent price hikes in ownership sales.
"Not all ground went up in value," said Jon LaPorte, a Michigan State University Extension Farm Business Management Educator.
Since the beginning of the pandemic, farmland ownership sales in Michigan have been hitting record highs. In recent months, some farmland sales have hit corn belt level pricing. Agriculture economists have been pointing to low interest rates and high commodity prices as an explanation for the rising costs to own farmland.
The conventional wisdom has been that the cost to rent land would increase in lock step with the price hikes to own land. But the new survey says that’s not the case for all Michigan counties.
LaPorte said the fact that rent prices did not grow alongside ownership pricing was the biggest surprise of this new survey. Additionally, LaPorte pointed out that the average rental cost of irrigated land has fallen.
"The responses indicate that the average actually went down a little bit," said LaPorte. "And then even in cases where we did see increases in irrigated ground they didn't increase in the same amount. You may have one county that increased quite a lot. And some were just increased maybe marginally."
Behind California, Michigan is the most diverse agriculture state in the country. And that fact stems from the variety of soil across the state. LaPorte says this diversity in soil type is at the heart of the county-by-county disparities in both land ownership and rental pricing.
LaPorte said the new data will help farmers make future purchases and help diversify their operations or expand into new counties. Renting farmland is usually the most expensive cost for a farmer when producing crops.