by David A. Widmar
Producers manage farmland by two means: ownership and rental. It’s fairly intuitive that younger producers, being more capital constrained, rely more on rented acres. Conversely, older producers, who have accumulated decades of equity, own more of the acres they manage. And while we know this anecdotally, we decided to look at the details behind the balance of owned and rented farmland and how the relationship has trended over time.
Rent versus Own
In figure 1, the proportion of acres that are rented and owned is broken down by age. For each age group, the two bars sum to 100%. For the youngest producers, rented acres are very important and account for more than 62% of their total acres. For mid-career producers, those 35 to 54 years of age, owned acres represent the majority of their land, more than 56% of total acres. For the oldest producers, those older than 65 years, owned land accounts for nearly 75% of their acres.
The share of rented (and owned) acres for producers 25-34 years compared to producers 35-44 years stands out for a couple of reasons. First, the shift is the largest between any two consecutive age groups; rented acres shifts from representing 63% of total acres for producers 25-34 to only 43% for producers 35-44. Second, during this shift producers transition from renting a majority of their acres to owning the majority. The underlying driver of this shift is likely a reflection of the producers reaching the point in their tenure where they have more interest and financial ability to purchase more of their acres.
Finally, it is worth noting that even the oldest group of producers, those 65 years and older, still rely on rented acres.
Figure 1. Share of rented and owned acres by age group. Source: USDA 2012 Census of Agriculture.
Often we evaluate data over time to see what trends have emerged and how conditions have change over time. When evaluating the trend of rented versus owned acres we observed a very intriguing trend; consistency.
In figure 2, the average percentage of total farmland that an operator owned is shown, by age, for three Censuses; 1969 (green), 1992 (blue), and 2012 (yellow). The yellow bars in figure 2 are the same data as shown in the yellow bars of figure 1, allowing us to look at the data over time.
Overall, we observe that the percentage of total owned acres has been fairly consistent across the evaluated time periods (total bar). While total ownership is higher in 2012 (63.8%) than in 1992 (59.1%) and 1969 (60.3%), the changes are very modest.
When looking across age categories, the share of land owned generally declined slightly over time but, again, the difference are very modest. The one exception, however, is producers 35-44 years of age.
Producers 35-44 years of age in the 2012 census owned a larger share of their land than in previous censuses. In 2012, owned acres accounted for 56.7% of total farmland for those producers; higher than 46.3% of total acres in 1992 and 50.7% in 1969. The magnitude of this age group’s shift is significant enough to drive a change in the national trend; while there is more land owned overall, five of six age groups have trended lower.
The trend for producers 35-44 owning more of their acres is one to monitor moving forward, especially given the forecast decline of net farm income to levels more in line with historic averages.
Figure 2. Percentage of total acres owned. Source: USDA Censuses of Agriculture.
Wrapping it up
Both ownership and rental of farmland is important for all producer age groups; no group was singularly concentrated on rented or owned acres. Even at the extremes, the youngest producers owned more than 37% of their acres and the oldest producers rented 25% of theirs. Additionally, in recent years producer’s willingness and ability to rely on farmland purchases and ownership seems to take place during the 35-44 years of age period.
Over time, the balance between owned and rented acres has been fairly consistent. With one exception, any variation was fairly modest. Producers 35-44 years of age, however, own a higher percentage of their acres in recent years. This trend will be one to observe moving forward to determine if this is a reflection of high farm incomes or something else.
In an earlier post, the concentration of farmland acres by age group was evaluated. We found that the oldest groups of producers currently control nearly one-third of all acres, an unprecedentedly large share. As a large proportion of farmland transitions in the future, it will be important to watch how the balance of rented and owned acres plays out.
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Photo by Johnny Klemme