Cash Rent Reset

Cash Rent Reset

Posted: Updated:

August 16, 2016

As farmers begin to negotiate next year's cash rents with their landlords, economists say there needs to be a reset. 

Working capital has evaporated after three consecutive years of falling farm incomes, now more farmers rely on operating loans.

Iowa Farm Bureau President, Craig Hill, says that should force some tough decisions about high-rent land. "There will be some volatility there. They will probably see some land change hands. You don’t like to see that, but some of the landlords will be stubborn for cash rents, and some of the tenants will be very cash short and the bankers will probably be putting their thumb down on some of these cash rental rates."

The average cash rent in Illinois dropped only $6 per acre in 2015 and another $7 per acre in 2016. A recent Rabobank report argues that if corn prices continue to average less than $4 a bushel, cash rents will need to fall by $30-$50 per acre, just to get growers to break even.

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