We'd Like To Mention

"Something has to give." That's a comment a farmer recently shared with me as he contemplated cash rents for 2025.

He's not alone. No doubt many farmers who lease land have already started conversations with landowners as they evaluate, calibrate and negotiate terms for next season.

Conversations between parties can be complex since each has different priorities and purposes. On the other hand, you and your landlord also have similar goals -- namely, to maximize profit per acre. The dilemma is how to achieve that to the satisfaction of both parties.

Above-average farm income from 2020 to 2022 helped drive up current cash rents (2022 was a record year for net farm income). In Illinois, for example, per-acre returns on a 50/50 corn/soybean rotation on highly productive farmland in central Illinois during that period was $125, $314 and $249, respectively.

Higher cash rents followed. According to the National Agricultural Statistics Service (NASS), the average rate in Illinois in 2024 was $269 per acre, a new record for the state, while county cash rents ranged from a low of $71 per acre to a high of $377 per acre. Between 2020 and 2024, average cash rents in Illinois increased by $47 per acre.

Cash rents on professionally managed farmland in the state are even higher, averaging $79 more, according to the Illinois Society of Professional Farm Managers and Rural Appraisers (ISPFMRA).

ECONOMIC PRESSURES PERSIST

Illinois offers but a snapshot of the nation's cash rents. Rates vary widely across regions depending on the type of crops grown, soil productivity, supply and demand for farmland, and many other factors.

Regardless, low commodity prices have soured the state of the farm economy, as have higher costs for labor, interest and taxes, as well as reduced government support. Crop farmers, in particular, are examining their budgets and looking for ways to cut expenses, as many are seeing negative returns on every acre. USDA projects 2024 cash receipts from corn sales to plummet 20% from a year ago, with soybean receipts falling 14.6%.

Low returns are also expected for 2025.

ADJUSTMENTS AHEAD

Faced with this economic environment, many farmers will be sitting down with landowners looking for cash rent relief. The challenge will be coming to a bottom-line agreement acceptable to both. I've known many situations over the years where negotiations became contentious because of unreasonable demands and/or expectations by either party. It certainly doesn't have to -- and shouldn't -- come to this.

Successful negotiations require both sides listening to and understanding each other's rationale and viewpoints.

It also helps to stick with the facts. The goal is to remain objective, not emotional. Present a numbers-based analysis that supports your position. For farmers, include your actual profit and loss, input cost and cost of production data, and university cost of production budgets, recommends Nick Horob, founder of Harvest Profit, a financial software company for farmers that was acquired by John Deere in 2020.

In addition, include farm details such as a recently completed improvement project and ideas for the landowner to improve his or her farmland. Show that you both share a vested interest in continuing the business relationship.

Also, present other options. While most landowners prefer a straight cash rent arrangement, you would be remiss not to present additional choices, such as some sort of flex rent/crop share structure. Either offers more flexibility than cash leases since both parties can benefit from splitting the revenue of an especially successful harvest, Horob points out.

Cash rent negotiations can be tough. You can agree to disagree, but a candid conversation can still result in a satisfactory outcome for all parties.

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-- Email Gregg Hillyer at gregg.hillyer@dtn.com, or follow Gregg on social platform X @GreggHillyer

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