Cash Rents Stall

January 27, 2017 08:02 AM
iowa farmland crop tour 2016

Most rates are the same as 2016

It’s true falling farm incomes are pressuring cash rents. But rates typically move slowly. 


Why? There are two reasons: contract duration and contract terms, says David Widmar, a Purdue agricultural economist.

“It’s rare to renegotiate every contract on every acre every year,” he says. “Therefore, it will probably take several years to get them all lower.”

There are a lot of agreement types beyond flat cash rents, Widmar adds. Bonuses or other incentives might make it advantageous to delay renegotiation.

Geography is also a factor. “Local conditions can really impact rates,” Widmar says.

There’s also a correlation between farmland value and cash rent rates, he says. For example, land values have really “popped” in the past decade in areas such as North Dakota, South Dakota, Iowa and Minnesota. Widmar expects those areas to adjust back more quickly than other areas.

On the other hand, in areas of the South and Southeast that didn’t see a big boom in farmland and cash rent prices, he doesn’t expect a large downward swing, either.

Widmar’s best advice for farmers looking to renegotiate cash rents is to be open and transparent during the process. Understand how the landowner is using the income from rented ground—do they depend on it as stable income or are they treating it as an investment opportunity? That will help identify the optimal type of contract to pursue.



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Spell Check

Walton, IN
1/27/2017 04:29 PM

  And yet, farm land values have risen slightly in many areas accept the far western areas. This divergence will NOT continue, just like in stocks, when earnings don't match the stock value, something eventually gives.

Mishawaka, IN
1/27/2017 08:23 PM

  Let's talk about something else. How about equipment cost. Or seed cost. Those are the real killers in input cost. Oh. That's right. They are the ones that pay to advertise in you papers and magazines. So you talk about the cash rents again. It's a broken record.

1/28/2017 10:10 AM

  Let's get right to will be the LAND OWNERS who will control the future of their county....these large commercial farming operations...CAFO's...can not operate without your land...they are going to make more manure everyday and we are NOT making anymore land...DO THE MATH! If your tired of the pollution then stop renting your land....spreading of liquid manure is the problem. You have many other income sources from your land without doing damage to the environment....we will get very little help from Washington, our State on this issue...and even less from our local is up to us, the landowners to take control....! Why not...because what these guys have been doing for the last 10-20 years is NOT WORKING....time for a change...! Ask a CAFO owner what he or she would do without....YOUR LAND....?


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