Cash rent changes for 2016

Cash rent changes for 2016

Cash rents on professionally managed farmland likely will decrease for the 2016 cropping year. Rents on non-professionally managed farmland likely will decrease as well. However, projected rent decreases are not large enough to cause farmers to have positive returns in 2016 given current projections of commodity prices and costs. The lagged relationship between returns and cash rents still exists.

Each year, the Illinois Society of Professional Farm Managers and Rural Appraisers conducts a survey of its membership. In this survey, managers are asked the cash rent for the current year and expectations for next year. This survey provides a good indicator of rents on professionally managed farmland. Managers give averages and expectations for four classes of farmland productivity:

  • Excellent - expected corn yields over 190 bushels per acre
  • Good - Expected corn yields between 170 and 190 bushels per acre
  • Averages - expected corn yields between 150 and 170 bushels per acre
  • Fair - expected corn yields less than 150 bushels per acre

For excellent quality farmland, the average cash rent on professionally managed farmland was $374 per acre in 2014. Cash rents decreased to $350 per acre in 2015. Current expectations are for cash rents to continue the decrease in 2016. Expected rent in 2016 is $318 per acre, a $32 decrease from the 2015 level. Similar decreases are projected for all land classes:

  • Good quality farmland: a $28 per acre decrease to $267 per acre
  • Average quality farmland: a $31 decrease to $219 per acre
  • Fair quality farmland: a $23 decrease to $177 per acre

These professionally managed cash rents typically are higher than "average" cash rents, which include all farmland, the majority of which that is not professionally managed. In 2014, for example, excellent productivity farmland had an average cash rent of $293 per acre, $81 less than the $374 per acre for professionally managed farmland. While $293 per acre is the average, there is a large range in rents, with some rents considerably below average, just as there are rents above average.

Returns and rents over time

In recent years, professionally managed averages have reacted faster than the "average" rent to changes in operator and land returns. Operator and land returns are the returns left to split between farmer and land owner. If the operator and land return equals $300 per acre and cash rent is $250 per acre, the farmer receives $50 per acre ($300 operator and land return minus $250 cash rent). Operator and land returns for high-productivity farmland in central Illinois are shown in Figure 1 for the years from 2000 to 2014, with projections given for 2015 and 2016. Note that operator and land returns increased beginning in 2007 and reached highs in 2011 and 2012. Since 2012, operator and land returns have decreased.

operator land returns

Read this at farmdocDaily.

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