More Pressure on Cash Rents to Come?

July 28, 2016 12:00 PM

As farmers know all too well, combination of cash rents and crop costs continue to be a punishing one. 

While average crop costs and cash rents eased a touch in 2015, slipping $16 per acre on cash rents and $8 per acre for inputs, growers with rented ground still face a considerable financial hurdle. Those four expenses—cash rents, seed, pesticide and fertilizer—add up to 72% of costs on cash-rent ground, according to Gary Schnitkey of farmdoc Daily.

Given current expectations for corn and soybean prices ($3.38 for December corn and $9.90 for November soybeans at midday Thursday), Schnitkey cautions growers that further cost cutting is inevitable.

But who will listen to the farmer’s arguments that their prices must come down—the seed dealer, the crop chemicals supplier, or the landlord? It looks like we may just have to wait and see.

“The source of cost cuts will be interesting and have broader implications. So far, most cost cuts have come from cash rents and fertilizer costs. Little of the reduction has come from seed or pesticides,” Schnitkey says. If seed and pesticide costs stay sticky, then the pressure will be on cash rents. If those fall, it could push down farmland prices. 

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Spell Check

Catlin, IL
7/29/2016 08:07 AM

  If your lucky enough, (if) to get a land owner to understand yours , and all producers situations right now with narrow and even absent profit margins, congratulations to you. The physical worth of the dirt is still present. Not buying that a $35 or $50 deduction in rent is going to rob a farm of $3000 per acre worth. I have yet to see the potential buyer or bidder at an auction say "oh no." "I need to quit bidding because the price of grain is too cheap and it won't cash flow." It's never cash flowed!!! We've all seen with an envious and questionable eye the guy or group at the auction that can pay $10,000 an acre here in the last year. There always someone who's going to pay for it. Whether it's bought or rented. Diminishing farm values? Not seeing it.

Too high
Big, AA
7/31/2016 08:59 PM

  We all know the simple truth that if it won't make money it will cease to be the norm. Time heals all wounds. Yes in every neighborhood there we the first biggest farmer to go broke and then everyone will pay attention. It is in the works now ,they are at Vegas throwing more money at their losing operation thinking ,hoping, it will turn around but history says it won't.


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