A question heard frequently these days: "How is the drought and excessive heat going to affect my cash rent?" It is being asked by both landowners and tenants. The best answer is, "It's too early to tell." People are also asking, "Are farmers going to survive?" In many parts of the Midwest, the answer to these questions depends on a farmer's financial stability, marketing talents (or luck) and on good soil tilth and crop insurance.
In the following article, Mark Gannon and Kevin Brooks of U.S. Farm Lease, a company based in Ames, Iowa, offer their ideas and observations on this situation. They are farm management consultants who work with both landowners and tenants in developing farm lease agreements. If you have questions or need more information, contact Gannon and Brooks at 877-232-4002 or by email at info@usfarmlease.com.
Farm Rents And Drought - Now What?
Forward pricing and crop insurance will make big difference
Row crop agriculture, in general, has had good years for a while; enabling many operators to build up equity and reserves, which will help carry them through leaner times. Some who took this opportunity to expand in various areas, such as buying equipment, buying land or renting more land, may be second guessing themselves but may still be fine financially depending on how they handled their financial and production risk.
If they rented land that was adequately protected by crop insurance or if they had adequate financial reserves, they should come through this year in ok shape. If the producer chose lesser amounts of crop insurance coverage or spent extra cash reserves, then, the picture becomes less clear.