Negotiating Down Cash Rent for 2015
Jul 23, 2014
The subject of cash rents between landowner and tenants is always a touchy one, frequently with lots of emotion tied to the conversation as well. With this year's crop margins cut dramatically from recent years and prospects of potentially even tighter margins for 2015, conversations between high-rent-paying operators and landowners may become more frequent. Traditionally, rents are "sticky," slow to rise when margins widen and slow to decline with margins compress. Work by former Purdue Economist Dr. Brent Gloy, which we cover thoroughly in our July 24 issue of LandOwner, shows rents declined only nine times in the 38 years from 1976 to 2013. Of those nine declines, five were greater than 5% but only one exceeded 10%.
Dr. Gary Schnitkey at the University of Illinois highlights some of the keys to consider when looking ahead to cash rent negotiations for 2015. There's interesting analysis for both opertors and landowners in his report. Plus, he points out how a variable cash lease can help solve some of the issues of a fixed cash rent -- except for one. That's the landowner's desire to have a known revenue for planning purposes.
Click here to read the full report by Dr. Schnitkey.
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