2023 Cash Lease Adjustments for Irrigation Equipment on Cropland

Center pivot in soybeans
According to 2023 Nebraska survey results, the skill, interest and time of the landlord and tenant engaged in an irrigated cropland lease arrangement strongly influence negotiations for which entity maintains irrigation systems on rented land.

2023 Cash Lease Adjustments for Irrigation Equipment on Cropland

The University of Nebraska-Lincoln’s Nebraska Farm Real Estate Market Survey and Report 2022-2023 provides insight into recent trends in the market value of agricultural land and cash rental rates across the state. Each year, the special feature section covers topics on new or emerging issues related to the agricultural land industry in Nebraska. These topics reflect the interest expressed by panel members and readership of the Nebraska Farm Real Estate Market Highlights Reports. The 2023 special feature section focuses on cash lease adjustments on irrigation equipment for cropland rental arrangements across Nebraska when the tenant provides a component of the irrigation system.

As a leader in the irrigation industry, Nebraska utilizes center pivot and gravity systems across the state on cropland acres for grain and forage production. These systems require large capital outlays for purchasing and installing irrigation equipment. Upkeep of the systems involves repair and maintenance each year. Basic upkeep, such as checking the air pressure in tires or fluid levels in gearboxes, may be necessary for period system maintenance. More significant repairs, such as replacing worn-out tires or gearboxes, may cost considerably more and require different types of equipment depending on the time of the year.

Landlords and tenants commonly negotiate the maintenance or repairs to irrigation equipment on rented cropland as part of the lease arrangement (Jansen and Stokes, 2018). The ability and willingness of landlords and tenants to contribute to annual maintenance and repairs to an irrigation system depend upon each party’s skill, ability and financial responsibility. Some landlords may take an active approach to the upkeep of the irrigation equipment if the owner has the knowledge or equipment. In other cases, with an absentee landlord, the tenant might take a much more active approach to maintaining the irrigation equipment or hiring an outside company.

As part of the special features section of the annual survey, panel members reported on the entity responsible for maintaining an irrigation system as part of a cash lease arrangement in Nebraska for 2023. Continue this article on Cornhusker Economics to read about the 2022-23 impacts of irrigation systems on cash lease arrangements in Nebraska.

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