Reducing Illinois Cash Rents Imperative

ifr150529–70
Reducing Illinois Cash Rents Imperative
Gary Schnitkey, Ag Economist - University of Illinois

An ag economist on the University of Illinois campus is continuing his calls for farmers and landowners to lower cash rents. Todd Gleason has more on the reasons why.

It’s all about the math says Gary Schnitkey…
2:07 radio
2:17 radio self contained

It’s all about the math says Gary Schnitkey. The U of I ag economists has done the crop budgets for this year and suspects next year, 2016, won’t be any better. If cash rents don’t go down almost all row crop farmers in the state will be faced with some acres that lose money.

Schnitkey :25 …at an average cash rent.

Quote Summary - Right now the average cash rent in the state is in the two-nineties and, if we have a $3.75 corn price, operator and land returns would be in the two-twenties. Cash rents would have to come down sixty to seventy dollars to match that $3.75 price. Given normal yields farmers would lose sixty to seventy dollars (per acre) at an average cash rent.

That’s for the crop in the ground and growing right now. It gets worse. Schnitkey is using as average corn price of $3.75 a bushel, but USDA is projecting the season’s average cash price at $3.50 a bushel. Even if the price of corn goes up, this year looks like a loser.

Schnitkey :31 …the prices we are currently seeing

Quote Summary - Normal yields sold at a $3.75 cash price will produce a loss on cash rented acres. If the cash price of corn manages to get into the four dollar range it will produce less of a loss, but even a $4.25 cash price would produce a thirty dollar per acre loss. So, cash rents increased in response to a $5.00 per bushel corn price and now those rents need to come back down to match the prices we are currently seeing.

The numbers Schnitkey uses to develop crop budgets are aggregated from the state’s Farm Business Farm Management record keeping service. He says the sixty to seventy dollar per acre loss is consistent across the whole of the state using local average cash rent bids (by county) and the $3.75 cash price for corn. The farms most at risk, generally, will be those with more than 1500 row crop acres - usually about 80 percent of those acres are cash rented - and the really big farms. The biggest farms in the state generally pay the highest cash rents and own less than five percent of the cropped acres.