Economist: Cash Rental Rates Won’t Fall In 2009

USAgNet reports that farmland owners and their tenant farmers might have to negotiate longer and harder to come up with a mutually acceptable rental rate for the 2009 crop season, Craig Dobbins, a Purdue University agricultural economist said.

“Will cash rents come down? That’s a big question,” Dobbins said. “At this point I’m not so sure that we’re going to see much of a decline, but I would expect that the increase we thought was going to occur last summer certainly isn’t in the cards either.”

In recent years both landowner and farmer have profited from high commodity prices. As a result, average cash rental rates for all classes of Indiana cropland jumped 12% to 13.5% in the year ending this past June, Dobbins said. Rental rates for the most productive land averaged $194 per acre, while the least-productive land fetched an average of $123 per acre. But like most things, farm profits began to erode when the economic slowdown set in this fall.

Prices are falling, lowering profit margins to around $145 per acre, Dobbins said. Production costs and projected revenue should be carefully calculated when estimating margins on the 2009 crop, Dobbins said.