Cash rents have been “persistently high,” despite the recent agriculture sector slowdown, according to Brent Gloy, visiting Purdue University ag economist who also writes for the blog “Agricultural Economic Insights.” Even so, there’s ample evidence that they are now trending lower.
A February 2016 poll of Indiana farmers suggests an 8% cash rent decline this year, for example. Creighton University’s Rural Mainstreet Index (RMI) reported a similar dip in its April report, down 7% from 2015.
“If realized, a decline of that magnitude would be one of the largest since the 1980s,” Gloy notes.
Looking at historical cash rent values for Indiana farmland, Gloy points out that since 1988, cash rents have only declined three times, and each decline was less than 2%. Between 2005 and 2015, cash rents zoomed ahead 86%, from $126 per acre to $229 per acre.
Cash rents have been known to fall just as swiftly, Gloy says of the same Indiana data. From 1981 to 1987, Hoosier State cash rents fell 32%.
Will cash rents continue to fall? Gloy argues that unless revenues improve substantially, odds are cash rents will continue to come under great pressure.
“Farmland rental agreements are made under great uncertainty,” he says. “Given that rental expenses are the single largest input on a farm, in a down-trending market, parties are reluctant to overbid for farmland knowing that a bad decision can greatly impact profitability.”
In a recent Farm Journal Pulse poll, more than 1,000 farmers shared the current highest cash rent per acre they pay. Of the respondents, 20% pay $300 or more per acre for their top ground. Most of the high-end responses came from the I-States and Nebraska.
Another 32% say they pay between $200 and $299 per acre, while 29% say they pay between $100 and $199 per acre and 20% pay less than $100 per acre. A poll conducted in 2012 yielded similar results.
Article by By Ben Potter@AgWeb.com. Photo credit Farm Journal Pulse.