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USDA’s National Ag Statistics Service (NASS) recently released 2017 cash rent values. Cash rents in Maryland and Delaware declined in 2017 from 2016 highs. Maryland cash rent for 2017 is $103/acre, down $1 from 2016. Delaware cash rent for 2017 is $109/acre, down $1 from 2016. The average U.S. cash rent for 2017 is $136 and remained unchanged from 2016.
Irrigated cash rent in 2017 for Maryland is $190/acre, up $15/acre from 2016. Delaware irrigated cash rent for 2017 is $145/acre, down $5/acre from 2016. Nationally, irrigated cash rent for 2017 is $212/acre, up $6/acre from 2016.
Cash rents have trended upward from 1998-2014 nationally, and locally they still appear on an upward trend. Until recently this upward trend could be attributed to strong corn and soybean prices, but prices have declined since 2013.
What do these cash rents in 2017 mean for a Maryland producers’ bottom line? Using the 2017 University of Maryland Crop Budgets and a USDA World Agricultural Supply and Demand Estimates (WASDE) projected corn price of $3.70/bushel, cash rents must decline more for producers to experience a profit. Using the 2017 cash rent for cropland, a Maryland producing no-till corn farmer would lose $16.37/acre. A conventional corn farmer in Maryland would lose $31.01/acre at current cash rents. A producer leasing irrigated cropland in Maryland would lose $259.71/acre on no-till corn. Maryland producers would need corn prices to return to $5/bushel to break even leasing irrigated cropland at current cash rent levels. It is important to point out I’m using a budget to calculate this and not looking at how to cut costs as many of you would. Many of you may be making profits even with cash rental rates at these levels.
Why have cash rents not declined? Producers received high returns from 2006 to 2013 that might have increased liquidity and net worth positions, thus allowing producers to pay higher cash rents (Schnitkey, 2017). Many may expect higher prices in the future and may be concerned that asking to reduce rents could lead to losing land in a highly competitive market (Schnitkey, 2017).
Will there be pressure to lower cash rents in 2018? As Dr. Schnitkey points out, that will probably depend on various factors in play that could lower 2017 farm incomes compared with 2016. If we experience lower farm incomes in Maryland in 2017, we might see additional pressure to decrease cash rents.
References
Schnitkey, G. “Illinois Farmland Rents: 2017 State Values and 2018 Outlook.” farmdoc daily (7):143, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, August 8, 2017.