Minding Ag's Business

Landlords Win This Round

By Marcia Zarley Taylor , DTN Executive Editor
Renters report little change in average rental rates despite the commodity collapse and poor prospects for 2016.

Final results are in for the latest DTN 360 online poll. On the question of how much cash rents have adjusted since commodity prices peaked in 2013, the answer is not much. As I mentioned in my last post (when counting tentative poll results), that bodes ill for high cost operators who rent the majority of their land. Land costs typically account for a third to a fourth of all corn production budgets. Without economizing there, growers will have a hard time achieving the $100/acre or more savings needed to make ends meet in 2016.

Of 552 renters DTN surveyed from 22 states during late December, nearly half (46%) report their average base cash rents haven't budged. Another 23% say their average rents have slipped 10% or less since 2013. And 18% say their averages have actually increased during this time frame.

Interestingly, that cash rent hotbed of Iowa led the pack in reductions. Nearly half of Iowans responding (45%) reported base rent cuts of 5% to 15%. Illinois trailed with 29% of its rents being cut in that 5% to 15% range; Indiana, Minnesota and Missouri ran close behind.

All tolled, $25-$35/acre rental cuts won't be enough on their own to bring operators back to breakeven in 2016. Nathan Kauffman, an economist for the Kansas City Federal Reserve hadn't seen the DTN poll results when we talked last week. But Kauffman told me he worries about those operators who rent a high share of their land and shoulder a lot of machinery debt. "There's evidence that cash rents haven't moved as much as hoped, and that's putting a group of producers at more risk," he says.

Follow Marcia Taylor on Twitter@MarciaZTaylor

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andrew mohlman 1/13/2016 | 9:03 PM CST
Tom must be in a different country than I am only fuel is down substantially rent will only go down slowly because of outrages property taxes. nobody cares about the older people who need the rent to live in retirement or family's paying for there care. When peoples 401k takes a loss its all over the news.Thirty to fifty percent devaluation in a short period is bull and created to steal commodities and resources by those with little to none figure that out tom.
tom vogel 1/12/2016 | 8:10 AM CST
Marcia: Have you adequately figured in the lower fuel, equipment, and fertilizer costs? They are all coming down and thus operating costs for the farmers are declining substantially.
Farmer Johnson 1/9/2016 | 8:27 PM CST
Oh boo hoo to all the big operation idiots who ran rent up and took land from good small operations who knew it would never work at those big inflated numbers. You reap what you sow.