Farmland Rental Rates
May Tip US Crop Balance
Cash-rental rates for Midwestern farmland this season may look like an armadillo - high in the middle and low on both ends - potentially serving as the tipping point for final cropping decisions by corn-belt farmers this spring. “Fewer producers than normal know what they will plant for crops,” said West Bend, Iowa, commodity trade adviser Karl Setzer. “In a normal year, 85% of the spring acres have been dedicated to one crop or another at this time. This year however, only 30% of acres are locked in.” Setzer said “spring weather, input costs and market direction will help determine the remaining acres and the crop that is seeded on them.” High input costs - of which land expenses are the primary component - tend to favor the production of corn over soybeans across the central U.S., an area of intense competition for land, where the bulk of the nation’s two leading cashgrain crops are produced annually.“Corn is the ‘high input-high riskhigh opportunity’ crop, whereas beans are
the ‘get-your-money-back-and-maybe-abit- more’ kind of deal for the high cashrent operators,” said an Iowa grain merchandiser. “If you want a chance to gross $750-$900 per acre, it has to be corn.” When corn and soybean prices spiked to all-time highs last spring, many renters signed land leases at much higher rates, nearly forcing them into corn production this season, especially now that cash prices for corn and soy have declined sharply from those levels. “Average cash rent in 2009 [in Illinois] is projected at $180 per acre. Cash rents have increased by about $55 per acre in this decade,” said University of Illinois farm management specialist  Gary Schnitkey, who notes that ultra high productivity farmland in central Illinois is expected to cash-rent for around $200 per acre this season, leaving tenants in the red by an average of some $13 per acre. Expensive cash rents are also common in Iowa, the nation’s leading cornproducing state.“We have had some farms rented in the local area within the past 60 days at above $300 per acre,” said AMS Commodities market consultant Rich Balvanz, who is based in Marion, Iowa. “The rental agreements that will be the most difficult for producers to live with, are those that required 100% up-front payment, sometimes for multiple years.” The situation has added a new level of uncertainty to debates surrounding just how much land farmers intend to farm this season, a topic to be addressed Tuesday by the U.S. Department of Agriculture’s annual prospective plantings report. A survey of leading private analysts conducted by Dow Jones Newswires indicates that industry experts believe U.S. farmers will plant 5% more soybeans and 1.7% less corn in 2009 versus 2008. Costs are a big reason for the shift to soybeans. “Many producers claim they may be forced to give up acres that were previously locked in at high cash-rent levels,” said Setzer. “Several of these contracts were written when cash [grain] values were at record highs, and unless cash sales were made at the same time, there is little chance of making a profit in today’s market. In some cases this could significantly reduce farm sizes. Many producers are now asking to have cash rent re-negotiated.” Those negotiations have apparently borne fruit for farmers on the fringes of the Corn Belt - such as Nebraska and Ohio, where some soils are less suited for intensive row-crop production. “With recession clouds rolling in, leasing of farmland is a whole new ball game for 2009,” said University of Nebraska agricultural economics professor Bruce Johnson. “Compared with 2008, when cash-rental rates jumped significantly, this year saw little to no upward bounce. In fact, rates negotiated at the high end of the cash-rent scale last year were frequently adjusted downward as market participants factored in a lower and more uncertain farm-profit potential for 2009.” A survey conducted by Johnson indicates that, by one measure, Nebraska cropland-rental rates will fall about 2% in 2009. A similar story is being told on the other end of the corn belt. “Ohio cropland values show signs of falling slightly, while cash rents show signs of leveling off,” said Ohio State University extension business management specialist Barry Ward. “Cash rents are expected to range from a decrease of 0.24% to an increase of up to 1.24%,” in various regions of the state, he said.

I sure won't be feeling sorry for anyone who can't pay the rent they signed up for when prices were high.  I hope it does reduce the size of some farms.