Search Site   
Current News Stories
Aquaculture farm success dependent on water quality

Corn-derived chemical shows promise as a gun cleaning oil

Self-confidence and diversity message of FFA convention

Farmers’ market promotion programs grow opportunities


Three finalists from Indiana to compete for FFA Star honors

Milk production continues to outpace processors
Opponents of EPA's chemical nominee cite interest conflicts
People, farmers included, do stuff even MacGyver wouldn't
Fall into Kentucky agriculture at many fun farm destinations

EPA’s repeal of Clean Power Plan is a favor to all Hoosiers

National Milk wants FDA to protect the term 'milk'
   
News Articles
Search News  
   
Experts: Cash rent may stay flat, or decline, in near future
 

WEST LAFAYETTE, Ind. — Cash rents should remain flat or decline a bit over the next couple of years, according to two Purdue University professors of agricultural economics.

Nationally, average cash rents remained steady in 2017, according to the USDA’s National Agricultural Statistics Service (NASS). In this region, four states – Indiana, Kentucky, Ohio, Tennessee – saw small increases over 2016. Three states – Illinois, Iowa, Michigan – had declines of a few dollars.

Cash rents are influenced by yield and net returns, Michael Langemeier said. “Rents stabilized in 2017 because crop yields were so good in the fall of 2016,” he explained. “Looking to 2018, there’s a risk of small (rent) declines. Yields aren’t going to be bad this year but will be closer to trend.

“The most pressure for cash rents to decline is in the Corn Belt. As long as corn prices don’t significantly go down, I think you’re looking at fairly small changes in cash rents. Stable to down – less than 5 percent – is probably a pretty safe assumption.”

Looking forward, corn is projected to be in the $3.75 per-bushel range, which probably won’t be enough to cause an increase in rents, Langemeier noted.

“We had several years in a row of low net returns before cash rents hit bottom. I think there will still be downward pressure on cash rents. It takes a while for cash rents to adjust. If corn would pop above $4 and stay there, that would help immensely in stabilizing cash rents,” he said.

With margins remaining tight, cash rents probably need to come down more from where they are, said Craig Dobbins, Langemeier’s colleague at Purdue.

“One of the reasons we had some stability from 2016 into 2017 was when rents were negotiated for 2017, farmers were in the process of getting ready to harvest a pretty big crop, or they had just harvested a pretty big crop,” he noted.

“I have suspicions there was more optimism at the end of last year than in the first part of 2017. This year, harvest will be more normal. That’s going to make the outlook of ‘what can I pay in cash rents?’ a bit more pessimistic.”

Dobbins said cash rents could drop 3-6 percent in the next couple years.

National and state cash rents were released by NASS last month; county statistics were reported Sept. 8. National and state numbers are for all cropland. At the county level, statistics are for non-irrigated cropland.

The average nationwide cash rent for 2017 was $136 per acre, unchanged from 2016. California had the highest rents at $325, up $16; Montana had the lowest at $31.50, down from $32.

In the region, average Illinois cash rents were $218, down from $221; Indiana, $195, up from $192; Iowa, $231, down from $235; Kentucky, $145, up from $143; Michigan, $123, down from $127; Ohio, $152, up from $150; and Tennessee, $98.50, up from $97.

In Illinois, Logan County had the state’s highest average cash rent at $289 and in Johnson County, at $71.50, the lowest; Indiana’s highest was Carroll County, $245, and lowest, Perry County, $81.50; Iowa’s highest, Benton County $273, and lowest, Lucas County $144; Kentucky’s highest, Todd County $213, lowest, Lawrence County $20.

Michigan’s highest was in Huron County at $196, and lowest, Chippewa County, $17; Ohio’s highest, Darke County $209, lowest, Noble County $27.50; and Tennessee’s highest, Haywood County $135, lowest, Claiborne County $24.

Jon Marcus, principal at Lakefront Futures & Options LLC, based in Chicago, is more optimistic regarding cash rents. “I think they creep higher,” he stated. “I think there’s such a premium, especially on good tillable land. I can’t think why they would decline, unless there’s an interest hike or something happens with the stock market.”

Cash rents are generally the largest cost item in a farmer’s budget, Langemeier said. “It’s really important to negotiate cash rents with landlords. Try to make sure landlords understand that net returns aren’t very good. Communicate with them to try to explain what’s going on.”

Some landlords may be more willing than others to take the current farm economy into consideration when setting cash rents, Marcus noted. “The issue (of negotiating rents) becomes less about ‘we’re in a tight spot’ and more of a tug-of-war between wills,” he said.

Landlords must understand the economics of agriculture have changed from a few years ago, Dobbins added.

“With margins so tight, most farmers are not covering the total cost of production,” he said. “If they’re still paying a really high cash rent, they may not be (covering those costs). I suspect there are some farms where direct costs plus cash rent may not be covered.”

9/21/2017