Pressure on Cash Rents for Midwest Farmland

Ken Anderson reported yesterday at Brownfield that, “2016 cash rent agreements for Midwest farmland are about five to 10 percent lower than 2015. And some ag economists predict an even bigger drop next year.

“Iowa State University Extension farm management specialist Kelvin Leibold says low commodity prices will be the main factor in 2017 cash rent discussions. But he says additional pressure will come from an expected decrease in Agricultural Risk Coverage (ARC) payments in 2017.

“‘Those payments really ended up getting transferred to the landlords in the form of higher rents,’ Leibold says. ‘So as those government payments disappear, that will put additional pressure on the revenue side and on the rental rate side.'”

Recall that back in May, an Iowa State University survey indicated that cash rents were down slightly, and a separate survey back in March noted that the value of Iowa farmland had dipped by 9%.

More recently, a report from the Federal Reserve Bank of Kansas City stated that, “Persistently low profit margins, increased financing needs for operating expenses and a general softening in the farm economy have continued to place downward pressure on farmland values.”

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