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Senior Contributor

Farm rent is up?

The Iowa State Extension’s 2020 Cash Rental Rate survey is just out.

https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-10.pdf

Surprisingly, reported rental rates appear to be up by 5-7% in NE Iowa. Farmland auction prices also seem to be holding steady. Falling energy costs may account for some of the reported rental increases.

Still, given the current price of Beans & Corn, I was not expecting to see the Year to Year rental rates move so much. Any random thoughts on why this might be so?

 

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7 Replies
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Senior Advisor

Re: Farm rent is up?

Banking on the high likelihood that the gubmint will bail this year out and provide future policies that keep prices above the COP for the lower cost producers.

A very reasonable bet based on history.

Although an acceleration to the race to the glue factory for most.

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Honored Advisor

Re: Farm rent is up?

So much of agriculture is outside money these days, it has little to do with the current CBOT prices.  Probably a little to do with "9 billion people to feed in 2050!" and if your other business has $5 million to get rid of every year, why not buy a farm or 2? 

If below C.O.P grain prices was the fuel solely behind the land prices, top Iowa land would be $3,000/acre.  With rents "hey, I got (5) 45 foot field cultivators and a 36 row and 24 row planters and 8 hiredmen that finished planting in April are now playing Gin Rummy, why not rent another farm for `em?".

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Senior Advisor

Re: Farm rent is up?

Meh.

Would strongly support my conclusion that the Stormy Payments were excessive- that's exactly what you'd expect to see in that case.

I also assume that, like at Marketing at the time,  those rents were negotiated at a time when a lotta people were getting ready to dine on the fat hog of China trade.

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Honored Advisor

Re: Farm rent is up?

MFP payments were at least partially capitalized into rents.  However, the bulk of the land`s revenue, the "yield x`s price" was below cost of production, all MFP really did was bring everyone`s nostrils above the waves for one second. But if you own 1,000 acres free & clear and rent a farm or 2 you lose money on...it`s kind of like keeping around a couple horses that you never ride, when you should really call the rendering truck.

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Senior Advisor

Re: Farm rent is up?

They'll need to calculate the next round of Stormy Payments to make sure to cover that.

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Senior Contributor

Re: Farm rent is up?

Hey BA,

So if I am reading you and SD correctly, and given the different Ag variables of markets, current government subsidies, energy/seed/fertilizer & roundup/rent, and labor costs; you both feel that the current level of farmland rental rates are much more likely to either plateau or fall in the coming years. Do I have that right?

 

Here’s to living in interesting and memorable times...whether most of us really want to or not.

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Senior Advisor

Re: Farm rent is up?

Stuff happens, like weather problems here or elsewhere.

Beyond that, depends on how generous the government decides to be.

Lacking help from either of those quarters you’d expect rents to fall some.

Sorta highlights the hamster wheel nature of this for the majority of farmers- at least acres wise majority. Carrying an amount of acreage that is at or above the comfort level for their balance sheet.

 

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