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.