Cash Rent Wars Heat Up

Mid-size farmers hope someone puts rational thinking back in the system.

Published on: Nov 10, 2011

The stories of high cash rents have migrated from Iowa and Illinois to Indiana. According to farmers reporting to us who are in the 1,000 to 2,000 acre range, it's becoming a crisis. Landowners removed from the farm who see dollar signs and don't understand risk components are selling out to larger operations using a different set of numbers and willing to accept a higher level of risk.

Farmers who have farmed the same land for as long as 25 years are getting shut out in the process. The demise of the mid-size farmer has been on the radar screen for over a decade. Let's hope this doesn't accelerate his demise. Mid-size farmers tend to be willing to farm smaller, oddball patches, and typically invest more time in management and care of the land.

The University of Illinois proposed flexible leases this fall. It's not a new idea. Howard Doster, retired from the Purdue University Department of Ag Economics, has been promoting them for years. There are various variations, but some in effect I n Indiana set a base guaranteed income, than pay the landlord extra based on parameters both sides agree to. It may be just on yield, or on price, or a combination of both. Some complicated pones even figure in inputs to protect the farmer if input prices rise to very high levels.

One farmer who presented the idea to a landowner recently isn't so sure it's what landowners want to hear. Dollar signs are jumping in their heads, and they hear what others get, whether their land is that good or not, one source says.

The 800-pound gorilla in the room is whether corn and soybean prices will stay steady, increase or decrease. So far agriculture has been sheltered form much of the economic crisis that has gripped the rest of the economy around the world. How much longer that can continue is anybody's guess.

Can you make $250 per acre rent work on average land? Sure, if you don't put on fertilizer except nitrogen on corn, don't charge anything to machinery, don't cut weeds or do any improvements on the farm, and figure on 180 bushel corn and 60 bushel beans, at $7.50 and $15 per bushel, respectively.

Is that realistic? If you're a landowner, is that what's best for the farm? You decide. Decisions must be made soon, since the unofficial date for notifying tenants that they no longer have a farm in Indiana is traditionally December 1.