Tuesday, September 8, 2015

2016 Cash Rents May Need to Drop $100

2016 Cash Rents May Need to Drop $100
Gary Schnitkey, Extension Agricultural Economist - University of Illinois

Farm income this year is going to be dramatically lower than in the past. Next year doesn’t look any better even on highly productive central Illinois soils. Todd Gleason reports farmers must cut costs to survive, and that cash rents may need to come down by as much as one-hundred-dollars per acre.

Let’s start with this year’s income from an…
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Let’s start with this year’s income from an acre of corn. Today a central Illinois farmer that raises 200 bushel corn can expect, on average, to be paid $3.65 for each bushel. That’s an income of $730 per acre, plus any government payments - let’s make it $800 even. These are the numbers being used by Gary Schnitkey at the University of Illinois.

Schnitkey :41 …just be in the same ballpark of breaking even.

Quote Summary - We have $800 of revenue, and we have been running $580 of non-land costs; everything from seed, fertilizer, chemicals, overhead, and machinery costs. The 200 bushel land would be running (for cash rent) right at $300 per acre. The total expenses then are $880 an acre. Roughly then, if we want revenue at the same level as costs, on cash rented acres costs would need to drop by $100 per acre just to breakeven.

Cash rents on highly productive central Illinois soils - as the numbers stand today - need to come down sharply just so farmers can breakeven. There aren’t really any other expenses where the costs can be cut.

Schnitkey :42 …that’s just $30 of your $100 cost.

Quote Summary - We’ve already built in reductions for fuel costs. Even if you looked at halving the fuel cost it would be just $10 an acre. It is something, but not a lot. Fertilizer costs may come down some. We haven’t seen new nitrogen, DAP, and potash bids yet for this year, but they may come down $20. Seed is an open question, but no one is predicting large costs cuts there. So, even if you squeeze another $30 of non-land costs reductions out of the budget. That’s just $30 of your $100 cost.

…just to breakeven next year on some of the best corn producing farmland on the planet.