Cash rental rates on irrigated land have been on a strong upward trend in recent years, which has continued into 2013. Obviously, with heavy demand tenants have tended to bid aggressively. In an effort to obtain leases, the practice of bidding on a straight per acre rate for both the irrigated cropland and the dryland crop acres in the corners has become more common by tenants. After several years with normal or above rainfall, yield differentials on dryland corner acres were small enough to convince some tenants to bid essentially a per acre irrigated cash rent for the whole cropland parcel

Jansen, Jim A.

Johnson, Bruce

English

UNL | Libraries

University of Nebraska - Lincoln
DigitalCommons@University of Nebraska - Lincoln
Cornhusker Economics Agricultural Economics Department
2013
Center Pivot Rental Rates With and Without
Adjustments for Dryland Corners
Jim A. Jansen
University of Nebraska-Lincoln, jjansen4@unl.edu
Bruce Johnson
University of Nebraska-Lincoln, bjohnson2@unl.edu
Follow this and additional works at: http://digitalcommons.unl.edu/agecon_cornhusker
This Article is brought to you for free and open access by the Agricultural Economics Department at DigitalCommons@University of Nebraska -
Lincoln. It has been accepted for inclusion in Cornhusker Economics by an authorized administrator of DigitalCommons@University of Nebraska -
Lincoln.
Jansen, Jim A. and Johnson, Bruce, "Center Pivot Rental Rates With and Without Adjustments for Dryland Corners" (2013).
Cornhusker Economics. 649.
http://digitalcommons.unl.edu/agecon_cornhusker/649
CORNHUSKER
ECONOMICS
University of Nebraska–Lincoln Extension
July 31, 2013
Institute of Agriculture & Natural Resources
Department of Agricultural Economics
http://agecon.unl.edu/cornhuskereconomics
Center Pivot Rental Rates With and Without Adjustments for Dryland Corners
Market Report
Yr 
Ago
4 Wks
Ago 7/26/13
Livestock and Products,
 Weekly Average
Nebraska Slaughter Steers,
  35-65% Choice, Live Weight. . . . . . . . . .
Nebraska Feeder Steers, 
  Med. & Large Frame, 550-600 lb.. . . . . .
Nebraska Feeder Steers,
  Med. & Large Frame 750-800 lb. . . . . . .
Choice Boxed Beef, 
  600-750 lb. Carcass. . . . . . . . . . . . . . . .
Western Corn Belt Base Hog Price
  Carcass, Negotiated. . . . . . . . . . . . . . . .
Pork Carcass Cutout, 185 lb. Carcass,     
51-52% Lean.. . . . . . . . . . . . . . . . . . . . . .
Slaughter Lambs, Ch. & Pr., Heavy,
  Wooled, South Dakota, Direct. . . . . . . . .
National Carcass Lamb Cutout,
  FOB. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$115.42
143.87
137.62
178.06
92.66
92.27
103.50
329.30
$121.47
174.19
148.96
197.64
99.86
108.91
117.50
286.58
$121.28
174.03
152.56
187.40
98.63
98.66
118.38
282.92
Crops, 
 Daily Spot Prices
Wheat, No. 1, H.W.
  Imperial, bu. . . . . . . . . . . . . . . . . . . . . . .
Corn, No. 2, Yellow
 Nebraska City, bu.. . . . . . . . . . . . . . . . . .
Soybeans, No. 1, Yellow
 Nebraska City, bu.. . . . . . . . . . . . . . . . . .
Grain Sorghum, No. 2, Yellow
  Dorchester, cwt. . . . . . . . . . . . . . . . . . . .
Oats, No. 2, Heavy
  Minneapolis, MN , bu. . . . . . . . . . . . . . .
8.24
7.98
16.69
13.20
3.96
6.52
6.77
15.71
11.50
4.26
6.72
5.62
12.94
9.50
3.64
Feed
Alfalfa, Large Square Bales, 
  Good to Premium, RFV 160-185
  Northeast Nebraska, ton. . . . . . . . . . . . .
Alfalfa, Large Rounds, Good
  Platte Valley, ton. . . . . . . . . . . . . . . . . . .
Grass Hay, Large Rounds, Good
  Nebraska, ton. . . . . . . . . . . . . . . . . . . . .
Dried Distillers Grains, 10% Moisture, 
  Nebraska Average. . . . . . . . . . . . . . . . .
Wet Distillers Grains, 65-70% Moisture,     
 Nebraska Average. . . . . . . . . . . . . . . . . .
242.50
192.50
155.00
330.25
119.00
+
200.00
200.00
232.00
85.00
250.00
180.00
155.00
225.00
80.50
+ No Market
Cash rental rates on irrigated land have been on a
strong upward trend in recent years, which has continued
into 2013. Obviously, with heavy demand tenants have
tended to bid aggressively. In an effort to obtain leases,
the practice of bidding on a straight per acre rate for both
the irrigated cropland and the dryland crop acres in the
corners has become more common by tenants. After
several years with normal or above rainfall, yield
differentials on dryland corner acres were small enough
to convince some tenants to bid essentially a per acre
irrigated cash rent for the whole cropland parcel. 
However, the severe drought conditions in 2012,
which led to significantly-reduced yields on dryland
cropland corners, seem to have altered that perspective.
Our 2013 survey reporters noted this change in the
Northeast, Central, East, South and Southeast reporting
Agricultural Statistical Districts. They reported the
greater frequency of tenants preferring to negotiate leases
with specific per acre rates for the irrigated circle and
the dryland corners. Irrigated cropland in these five
districts represents about five million acres of Nebraska’s
total 8.6 million irrigated acres (58%), with essentially
80 percent being under center pivot irrigation.   
Reported 2013 rates, as seen in Table 1 (on next
page), highlight these different rental rates for center
pivot irrigated cropland in the Nebraska Agricultural
Statistical Districts. When irrigated rates were
specifically negotiated for only the center pivot irrigated
portion, the per acre rates were $9 to $33 per acre higher
than commonly reported in our conventional University
of Nebraska-Lincoln cash rental series. The cash rates for
the center pivot whole parcel average reflect the lower
rental rates on the outer dryland corners of an 80 or 160
acre parcel, which a conventional pivot cannot reach. A
relatively small difference between these two rates im-
Extension is a D ivision of the Institute of Agriculture and Natural Resources at the University of Nebraska–Lincoln
cooperating with the Counties and the U.S. Departm ent of Agriculture.
University of Nebraska Extension educational program s abide with the non-discrim ination policies 
of the University of Nebraska–Lincoln and the United States Departm ent of Agriculture.
Table 1. Reported Center Pivot Cash Rental Rates for Selected Districts in 2013a
Reported Survey Statistics
Agricultural Statistical District
Northeast Central East South Southeast
------------------------------ Dollars Per Acre ----------------------------
Center Pivot Irrigated Only Parcel Average . . . . . . . . . . 397 296 388 350 356
Center Pivot Whole Parcel Average . . . . . . . . . . . . . . . . 379 287 355 313 345
Rental Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9 33 37 11
SOURCE: 2013 UNL Nebraska Farm Real Estate Market Developments Survey.
Table 2. Weighted Irrigated Whole Parcel Rental Rates and Bidding Differences for Selected Districts in 2013  a
Reported Survey Statistics
Agricultural Statistical District
Northeast Central East  South Southeast
---------------------------- Dollars Per Acre --------------------------
Estimated Irrigated Whole Parcel Rental Rate . . . . . . . . 369 266 358 311 324
Rental Bidding Difference . . . . . . . . . . . . . . . . . . . . . . . . . 10 21 -3 2 21
SOURCE: 2013 UNL Nebraska Farm Real Estate Market Developments Survey.
plies the land tenant does not discount very much for the
dryland corners when bidding on the parcel. In a highly
competitive rental market bidders may not discount for
the dryland corners as much in an effort to obtain the
lease. 
In analyzing the economics underlying these
reported differences we assumed a typical 160 acre
center pivot irrigated quarter with 132 acres irrigated by
the pivot, with the remaining 28 acres (7 acres in each
corner) not reached by the pivot and farmed as dryland
cropland. We could then arrive at a weighted rental rate
for the entire 160 acre parcel, using the reported per
acre average rates for irrigated and dryland cropland
from the 2013 UNL Nebraska Farm Real Estate Market
Developments Survey.
The difference between the reported center pivot
whole parcel averages of Table 1, and the weighted
average rental rate per acre on an irrigated center pivot
by Agricultural Statistical District are reported in Table
2. A large positive dollar per acre difference suggests
tenants in the Northeast, Central and Southeast Districts
may be overbidding when negotiating on a single rate
for the entire parcel. In contrast, the small dollar
difference in the East and South Districts would seem to
indicate that tenants are not overbidding on whole
parcel arrangements.
Several factors may account for the differences in
the reported versus estimated rates on center pivot
irrigated land across the regions. Rental markets in the
Northeast District have been highly competitive in
recent years. Producers in the Northeast and Central
Districts may also have manure from animal feeding
facilities which needs to be spread on high yielding
ground, and the irrigated parcels may provide the best
area to spread the valuable fertilizer. Also, extensive
cattle feeding in parts of the Northeast and Central
Districts of the state leads to more competition of rental
land for spreading the manure S which is increasingly
becoming recognized as a valuable fertilizer and soil
conditioner. Irrigated parcels are also seen as some of
the best land for that purpose. In contrast, non-irrigated
corners in the East District are somewhat more uniform,
and therefore, rental rates for dryland in the East District
may be more in line with the irrigated rental rates.
Producers in the South District may discount
significantly for dryland corners since precipitation in
this area is lower than in the eastern third of the state,
which allows reported and estimated whole parcel rental
rates to align fairly closely. Irrigation is not as prevalent
in the Southeast District due to limited water
availability, but when possible, producers are willing to
bid more per acre on average for the entire parcel just to
obtain the lease. 
One key institutional factor behind the bidding
process in every area of the state is crop insurance
provisions. Crop insurance policies have an impact on
producers’ bidding patterns when renting irrigated land,
where quite often tenants will farm multiple parcels
from different land owners. Producers basically have
two different crop insurance unit options. One involves
selecting policies which have separate insurance units
and guarantees for the dryland and irrigated acres.  The
other option insures the entire irrigated and dryland
parcel as an enterprise unit, having one guarantee. Land
tenants can typically purchase a higher level of coverage
for an enterprise unit policy for about the same cost as
lower levels of coverage on separate dryland and
irrigated policies. The prices for these policies reflect
the anticipated level of yield risk associated with
separate versus an enterprise combined unit. The policy
holder receives a discount on enterprise crop insurance
premiums versus pricing separate policies for dryland
and irrigated units. 
Producers using an enterprise crop insurance unit for
the irrigated and dryland acres on a parcel may choose
to bid one rate for the entire tract of land. The yield risk
for irrigated and dryland acres basically becomes
averaged across the entire parcel. For this particular
case, the land tenant may have a complete loss on
dryland corners, but still raise enough on the irrigated
acres that the yield damages does not trigger any
indemnities from the enterprise crop insurance policy.
Producers utilizing an enterprise crop insurance policy
may better align irrigated and dryland yield risk on
parcels where the irrigated and dryland yield
differentials are not highly substantial. In our multi-area
analysis example the irrigated and dryland yield
differentials may be lower in the Northeast, East and
Southeast Districts, relative to those in the Central and
South Districts.  
In summary, operations may be willing to bid high
average rates across all irrigated and dryland acres of
cropland to obtain the lease. But, careful consideration
should be given on weighting the bid for an entire
irrigated parcel to take into account separate rates on the
irrigated and dryland acres. Also, the operation’s crop
insurance strategy and the resulting guarantee are
important factors to consider when renting irrigated
tracts of land.          
Jim Jansen, (402) 472-4624
Research Assistant
Department of Agricultural Economics
University of Nebraska-Lincoln
jim.jansen@huskers.unl.edu
Bruce Johnson, (402) 472-9673
Professor
Department of Agricultural Economics
University of Nebraska-Lincoln
bjohnson2@unl.edu


Center Pivot Rental Rates With and Without Adjustments for Dryland Corners

DigitalCommons@University of Nebraska

University of Nebraska - LincolnDigitalCommons@University of Nebraska - LincolnCornhusker Economics Agricultural Economics Department2013Center Pivot Rental Rates With and WithoutAdjustments for Dryland CornersJim A. JansenUniversity of Nebraska-Lincoln, jjansen4@unl.eduBruce JohnsonUniversity of Nebraska-Lincoln, bjohnson2@unl.eduFollow this and additional works at: http://digitalcommons.unl.edu/agecon_cornhuskerThis Article is brought to you for free and open access by the Agricultural Economics Department at DigitalCommons@University of Nebraska -Lincoln. It has been accepted for inclusion in Cornhusker Economics by an authorized administrator of DigitalCommons@University of Nebraska -Lincoln.Jansen, Jim A. and Johnson, Bruce, "Center Pivot Rental Rates With and Without Adjustments for Dryland Corners" (2013).Cornhusker Economics. 649.http://digitalcommons.unl.edu/agecon_cornhusker/649CORNHUSKERECONOMICSUniversity of Nebraska–Lincoln ExtensionJuly 31, 2013Institute of Agriculture & Natural ResourcesDepartment of Agricultural Economicshttp://agecon.unl.edu/cornhuskereconomicsCenter Pivot Rental Rates With and Without Adjustments for Dryland CornersMarket ReportYr Ago4 WksAgo 7/26/13Livestock and Products, Weekly AverageNebraska Slaughter Steers,  35-65% Choice, Live Weight. . . . . . . . . .Nebraska Feeder Steers,   Med. & Large Frame, 550-600 lb.. . . . . .Nebraska Feeder Steers,  Med. & Large Frame 750-800 lb. . . . . . .Choice Boxed Beef,   600-750 lb. Carcass. . . . . . . . . . . . . . . .Western Corn Belt Base Hog Price  Carcass, Negotiated. . . . . . . . . . . . . . . .Pork Carcass Cutout, 185 lb. Carcass,     51-52% Lean.. . . . . . . . . . . . . . . . . . . . . .Slaughter Lambs, Ch. & Pr., Heavy,  Wooled, South Dakota, Direct. . . . . . . . .National Carcass Lamb Cutout,  FOB. . . . . . . . . . . . . . . . . . . . . . . . . . . .$115.42143.87137.62178.0692.6692.27103.50329.30$121.47174.19148.96197.6499.86108.91117.50286.58$121.28174.03152.56187.4098.6398.66118.38282.92Crops,  Daily Spot PricesWheat, No. 1, H.W.  Imperial, bu. . . . . . . . . . . . . . . . . . . . . . .Corn, No. 2, Yellow Nebraska City, bu.. . . . . . . . . . . . . . . . . .Soybeans, No. 1, Yellow Nebraska City, bu.. . . . . . . . . . . . . . . . . .Grain Sorghum, No. 2, Yellow  Dorchester, cwt. . . . . . . . . . . . . . . . . . . .Oats, No. 2, Heavy  Minneapolis, MN , bu. . . . . . . . . . . . . . .8.247.9816.6913.203.966.526.7715.7111.504.266.725.6212.949.503.64FeedAlfalfa, Large Square Bales,   Good to Premium, RFV 160-185  Northeast Nebraska, ton. . . . . . . . . . . . .Alfalfa, Large Rounds, Good  Platte Valley, ton. . . . . . . . . . . . . . . . . . .Grass Hay, Large Rounds, Good  Nebraska, ton. . . . . . . . . . . . . . . . . . . . .Dried Distillers Grains, 10% Moisture,   Nebraska Average. . . . . . . . . . . . . . . . .Wet Distillers Grains, 65-70% Moisture,      Nebraska Average. . . . . . . . . . . . . . . . . .242.50192.50155.00330.25119.00+200.00200.00232.0085.00250.00180.00155.00225.0080.50+ No MarketCash rental rates on irrigated land have been on astrong upward trend in recent years, which has continuedinto 2013. Obviously, with heavy demand tenants havetended to bid aggressively. In an effort to obtain leases,the practice of bidding on a straight per acre rate for boththe irrigated cropland and the dryland crop acres in thecorners has become more common by tenants. Afterseveral years with normal or above rainfall, yielddifferentials on dryland corner acres were small enoughto convince some tenants to bid essentially a per acreirrigated cash rent for the whole cropland parcel. However, the severe drought conditions in 2012,which led to significantly-reduced yields on drylandcropland corners, seem to have altered that perspective.Our 2013 survey reporters noted this change in theNortheast, Central, East, South and Southeast reportingAgricultural Statistical Districts. They reported thegreater frequency of tenants preferring to negotiate leaseswith specific per acre rates for the irrigated circle andthe dryland corners. Irrigated cropland in these fivedistricts represents about five million acres of Nebraska’stotal 8.6 million irrigated acres (58%), with essentially80 percent being under center pivot irrigation.   Reported 2013 rates, as seen in Table 1 (on nextpage), highlight these different rental rates for centerpivot irrigated cropland in the Nebraska AgriculturalStatistical Districts. When irrigated rates werespecifically negotiated for only the center pivot irrigatedportion, the per acre rates were $9 to $33 per acre higherthan commonly reported in our conventional Universityof Nebraska-Lincoln cash rental series. The cash rates forthe center pivot whole parcel average reflect the lowerrental rates on the outer dryland corners of an 80 or 160acre parcel, which a conventional pivot cannot reach. Arelatively small difference between these two rates im-Extension is a D ivision of the Institute of Agriculture and Natural Resources at the University of Nebraska–Lincolncooperating with the Counties and the U.S. Departm ent of Agriculture.University of Nebraska Extension educational program s abide with the non-discrim ination policies of the University of Nebraska–Lincoln and the United States Departm ent of Agriculture.Table 1. Reported Center Pivot Cash Rental Rates for Selected Districts in 2013aReported Survey StatisticsAgricultural Statistical DistrictNortheast Central East South Southeast------------------------------ Dollars Per Acre ----------------------------Center Pivot Irrigated Only Parcel Average . . . . . . . . . . 397 296 388 350 356Center Pivot Whole Parcel Average . . . . . . . . . . . . . . . . 379 287 355 313 345Rental Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9 33 37 11SOURCE: 2013 UNL Nebraska Farm Real Estate Market Developments Survey.Table 2. Weighted Irrigated Whole Parcel Rental Rates and Bidding Differences for Selected Districts in 2013  aReported Survey StatisticsAgricultural Statistical DistrictNortheast Central East  South Southeast---------------------------- Dollars Per Acre --------------------------Estimated Irrigated Whole Parcel Rental Rate . . . . . . . . 369 266 358 311 324Rental Bidding Difference . . . . . . . . . . . . . . . . . . . . . . . . . 10 21 -3 2 21SOURCE: 2013 UNL Nebraska Farm Real Estate Market Developments Survey.plies the land tenant does not discount very much for thedryland corners when bidding on the parcel. In a highlycompetitive rental market bidders may not discount forthe dryland corners as much in an effort to obtain thelease. In analyzing the economics underlying thesereported differences we assumed a typical 160 acrecenter pivot irrigated quarter with 132 acres irrigated bythe pivot, with the remaining 28 acres (7 acres in eachcorner) not reached by the pivot and farmed as drylandcropland. We could then arrive at a weighted rental ratefor the entire 160 acre parcel, using the reported peracre average rates for irrigated and dryland croplandfrom the 2013 UNL Nebraska Farm Real Estate MarketDevelopments Survey.The difference between the reported center pivotwhole parcel averages of Table 1, and the weightedaverage rental rate per acre on an irrigated center pivotby Agricultural Statistical District are reported in Table2. A large positive dollar per acre difference suggeststenants in the Northeast, Central and Southeast Districtsmay be overbidding when negotiating on a single ratefor the entire parcel. In contrast, the small dollardifference in the East and South Districts would seem toindicate that tenants are not overbidding on wholeparcel arrangements.Several factors may account for the differences inthe reported versus estimated rates on center pivotirrigated land across the regions. Rental markets in theNortheast District have been highly competitive inrecent years. Producers in the Northeast and CentralDistricts may also have manure from animal feedingfacilities which needs to be spread on high yieldingground, and the irrigated parcels may provide the bestarea to spread the valuable fertilizer. Also, extensivecattle feeding in parts of the Northeast and CentralDistricts of the state leads to more competition of rentalland for spreading the manure S which is increasinglybecoming recognized as a valuable fertilizer and soilconditioner. Irrigated parcels are also seen as some ofthe best land for that purpose. In contrast, non-irrigatedcorners in the East District are somewhat more uniform,and therefore, rental rates for dryland in the East Districtmay be more in line with the irrigated rental rates.Producers in the South District may discountsignificantly for dryland corners since precipitation inthis area is lower than in the eastern third of the state,which allows reported and estimated whole parcel rentalrates to align fairly closely. Irrigation is not as prevalentin the Southeast District due to limited wateravailability, but when possible, producers are willing tobid more per acre on average for the entire parcel just toobtain the lease. One key institutional factor behind the biddingprocess in every area of the state is crop insuranceprovisions. Crop insurance policies have an impact onproducers’ bidding patterns when renting irrigated land,where quite often tenants will farm multiple parcelsfrom different land owners. Producers basically havetwo different crop insurance unit options. One involvesselecting policies which have separate insurance unitsand guarantees for the dryland and irrigated acres.  Theother option insures the entire irrigated and drylandparcel as an enterprise unit, having one guarantee. Landtenants can typically purchase a higher level of coveragefor an enterprise unit policy for about the same cost aslower levels of coverage on separate dryland andirrigated policies. The prices for these policies reflectthe anticipated level of yield risk associated withseparate versus an enterprise combined unit. The policyholder receives a discount on enterprise crop insurancepremiums versus pricing separate policies for drylandand irrigated units. Producers using an enterprise crop insurance unit forthe irrigated and dryland acres on a parcel may chooseto bid one rate for the entire tract of land. The yield riskfor irrigated and dryland acres basically becomesaveraged across the entire parcel. For this particularcase, the land tenant may have a complete loss ondryland corners, but still raise enough on the irrigatedacres that the yield damages does not trigger anyindemnities from the enterprise crop insurance policy.Producers utilizing an enterprise crop insurance policymay better align irrigated and dryland yield risk onparcels where the irrigated and dryland yielddifferentials are not highly substantial. In our multi-areaanalysis example the irrigated and dryland yielddifferentials may be lower in the Northeast, East andSoutheast Districts, relative to those in the Central andSouth Districts.  In summary, operations may be willing to bid highaverage rates across all irrigated and dryland acres ofcropland to obtain the lease. But, careful considerationshould be given on weighting the bid for an entireirrigated parcel to take into account separate rates on theirrigated and dryland acres. Also, the operation’s cropinsurance strategy and the resulting guarantee areimportant factors to consider when renting irrigatedtracts of land.          Jim Jansen, (402) 472-4624Research AssistantDepartment of Agricultural EconomicsUniversity of Nebraska-Lincolnjim.jansen@huskers.unl.eduBruce Johnson, (402) 472-9673ProfessorDepartment of Agricultural EconomicsUniversity of Nebraska-Lincolnbjohnson2@unl.edu

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Center Pivot Rental Rates With and Without Adjustments for Dryland Corners

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