Most recent cash rental rate estimates paint a mixed portrait for Oregon

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An OSU Extension article containing the same information as this post can be found here.

Agricultural producers can gain access to the land they need through two general channels. Some own their land, after purchasing it from another landowner, bidding on it in an auction, or inheriting it from a family member. The alternative to ownership is renting land from another producer or a non-operating landowner (a person who owns land but is not actively involved in agricultural production). Per the most recent data published in the 2017 Census of Agriculture, rented farmland in Oregon accounts for 30% of all farmland in the state. This is relatively low compared the national figure, which stands at 39%, but still accounts for roughly 4.7 million acres of land in the state.

The comparatively low rental percentage in Oregon can likely be chalked up to a few things. One is the large amount of grazing (pasture and range) land in the state. If it is not owned by the federal government, grazing land is generally more likely to be owned by the producer using it. There is also a large amount of irrigated cropland in Oregon – roughly 27% of all cropland in the state was irrigated in 2017 – which is also less commonly rented out than non-irrigated cropland due to the capital and maintenance costs associated with irrigation infrastructure.

Each year, the US Department of Agriculture’s National Agricultural Statistics Service (USDA-NASS) publishes cash rental rates at the state and county levels. The county-level data come from a cash rental rate survey conducted every summer to collect information on the cash rents paid for non-irrigated cropland, irrigated cropland, and pastureland. A unique aspect of this survey is that it provides county-level data on an annual basis. Additionally, at just one and a half pages in length, the survey is very short and less complicated compared to other USDA surveys, which tends to produce a higher response rate. In 2023, 70% of the 3,700 surveyed producers responded to the USDA-NASS cash rent survey in Oregon. The state-level cash rent data come from the same June Area Survey that USDA-NASS uses as the basis for its annual farmland value estimates (see my recent OSU Extension article here).

Note: Values in the figure are adjusted for inflation to $2023 using the BEA’s GDP Implicit Price Deflator.

Over the past year, the statewide cash rent for irrigated cropland declined by 3.75% in inflation-adjusted terms. Irrigated cropland tends to be rented for much more than non-irrigated cropland, due to the higher returns associated with irrigated production and the costs of maintaining irrigation-related equipment and water conveyance infrastructure. In 2023, irrigated cropland was rented for an average of $259/acre, which is comparable to the previous five-year average of $260/acre. Looking across the state, irrigated rents tend to be highest in the northern Willamette Valley and other counties along the Columbia River (Hood River, Wasco, and Morrow). With a couple of exceptions (Klamath and Malheur), counties in the eastern, central, and southern parts of the state tend to see lower irrigated cash rents. Changes in irrigated cropland rents over the past year varied widely, with the largest percentage gains occurring in Clackamas, Baker, Union, and Lake, and Grant, Cook, and Lane seeing the largest declines.

Note: The color shading in all maps corresponds to the cash rental rate reported for 2023. Where present, the numeric value on the map corresponds to the 2022-23 real percentage change in cash rent. Shaded counties without a numeric label did not report a rental rate in 2022. 

In contrast to irrigated cropland, non-irrigated cropland rent, at $107/acre, was up by 2.75% over the past year. Note, however, that the 2023 rental rate is actually down compared to the most recent previous five-year average of $109. Counties in the northern and mid-Willamette Valley tend to have the highest rents, along with Tillamook and Union. Southern, coastal, and northeastern Oregon tend to have lower non-irrigated cash rents. The largest annual percentage gains were in Jackson, Douglas, and Wasco. Columbia, Clackamas, and Harney, on the other hand, had relatively large percentage decreases.

The average 2023 pasture cash rent was $11.50/acre, a 3.01% decrease compared to the 2022 value, continuing a downward trend since USDA-NASS started their current rental rate reporting program. Although the dollar values involved tend to be lower on a per-acre basis, pasture operations tend to be much larger, so small deviations in rental rates can add up quickly. Pasture rents have generally declined continuously since 2009, with the 2023 rent being nearly 16% lower than the previous five-year average of $13.68. The Willamette Valley, coastal, and central parts of the state tend to have the highest pasture rents, while eastern Oregon, where farms tend to be larger, have lower per-acre rents. Lake, Douglas, and Morrow had the largest percentage gains in pasture rents over the past year, contrasting with the large declines in Umatilla, Klamath, and Coos.

As I mentioned in a previous blog post, it bears emphasizing that the USDA-NASS pasture rent figures paint an incomplete picture of the rental market for this type of land. This is because the USDA survey only reports on land rented for cash, but most private grazing land is rented on a per-animal unit month (AUM) or per-head basis. In addition, a considerable fraction of land in grazing operations comes from public land owned by the Bureau of Land Management or U.S. Forest Service, with those lands also rented on a per-AUM basis.

Cash rents can be a useful snapshot of the overall health of the farm economy, as they are heavily influenced by the net returns to agricultural production. They do, however, tend to be a lagging indicator. Rental leases for the upcoming year tend to be negotiated following harvest in the late fall, winter, or early spring, so the values reported by NASS for 2023 are more reflective of what landowners and renters expected the year to bring, not what actually happened. In addition, some leases, particularly for irrigated farmland, tend to be renewed on a multi-year basis. Thus, for example, a three-year fixed-cash lease covering the 2021-2023 production years could also be included in the 2023 NASS values, which makes it further removed from current production conditions.

Because purchasing land outright typically requires extensive financial capital (e.g., money for a down payment and other land currently owned as collateral), renting is often seen as a way for new and beginning producers, or producers who are otherwise financially disadvantaged, to build and grow an operation. Land rental, however, is not limited to smaller producers, as most commercial farms in the US contain a mix of owned and rented land. As is the case with land values, changes in rental rates produce winners and losers. As commodity prices rise, landlords tend to raise rents and gain a higher nominal return on their land investment, which offsets the benefit of higher prices for their tenants.

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