Expect More Pressure on Cash Rents in 2018

July 12, 2017 04:23 AM

Summer might seem a little early to be thinking about 2018 cash rents, but it might prove useful to keep operator budgets in mind as landowners and tenants visit during summer inspection tours.

Obviously, prospective margins are extremely tight, reports the University of Illinois’ Gary Schnitkey. Using records of more than 5,500 farm operators handled by local Farm Business Farm Management (FBFM) Associations across Illinois, Schnitkey developed the following projections for this year’s budgets. He used a projected sales price of $3.70 per bushel for corn, which is based on current projections for this year’s total harvest, potential use and old-crop carryover of 2.295 billion bushels. USDA currently projects carryover from the 2017 crop will total 2.11 billion bushels. Much can still happen between now and when those bushels are in the bin.


Projected 2017 Illinois Corn Budgets

The projected margins leave little room for farmers to pay cash rent. The state average cash rent is $221 an acre, according to USDA. This means only those operators farming high-productivity farmland in central Illinois will have a positive margin of $9 an acre to go toward family living expenses.

This is not a blanket situation for all operators. Not all farmers cash rent 100% of their cropland. Also, not everyone is strictly a cash grain operator—some have dairies, pork or cattle operations that could contribute to family living expenses.

But, tight margins are real. And based on USDA projections for 2018, the likelihood of another year of tight crop margins is quite high. So be prepared for tough conversations about the need to trim costs when you discuss cash rents for 2018.  


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