As farmers begin to pencil out budgets for 2014, one of the priorities will be what they can afford to pay for cash rent. While the Schnitkey numbers suggest that cash rents should decline if farmers want to remain in the black that may not be what the majority plans to do.
Doane Agricultural Services of St. Louis recently surveyed farm operators and found 48 percent have agreed to 2014 cash rents higher than what they paid in 2013. Only 14 percent reported that rents declined. The balance of 38 percent saw rent stability, despite owner desires to raise the rent in the coming year.
When competition for farmland fuels the fire in one’s belly, the result could be a serious case of financial indigestion.
Farm profitability in the coming year could be challenged with low returns to operator and land, in the wake of low commodity prices, regardless of yield. Whether yields are exceptional or drought reduced farm revenue may not be able to meet current cash rent obligations, and much less any increased rent for the 2014 crop year.
Source: FarmGate blog