Illinois farmland rents decrease for second year running

Rents could fall even more dramatically in 2017 if commodity prices do not rebound.

Cash rents for farmland in Illinois are projected to decline for the second year running and into 2017 if commodity prices do not rebound, according to a report from the University of Illinois at Urbana-Champaign.

Average rents are expected to fall from $228 per acre in 2015 to $220 per acre this year, a 3.5 percent year on year contraction compared with a 2.6 percent decline between 2014 and 2015.

The steep decline is attributed to falling incomes, which are not projected to recover this year. If corn prices remain near current levels into 2017, farm rents could fall by an additional 10 percent.

“If prices or yield are not above expectations, 2017 will be the third year in a row of losses on cash rent farmland. […] In particular, working capital at the end of 2017 will be at levels requiring many farmers to cut costs,” the report’s authors warn.

Until 2015 average farmland rents in Illinois had not contracted since before 1992, the earliest year for which numbers are provided by the United States Department of Agriculture (USDA).

Illinois farmland is among the highest valued in the US, according to the USDA. Data going back to 1992 suggests average farmland rents in the state have been closely tied to overall US farmland rents.

Iowa State University’s Dermot Hayes told Agri Investor in February that downward pressure on US farmland prices has probably been masked so far by tenants absorbing losses first, but these will eventually be borne out in lower rents.

“[Farmers] are going to try and squeeze money everywhere and that includes using less phosphorus and potassium fertilisers, adjusting their seed choice downward to save money, and eventually they’re going to have to call the landlord and renegotiate the lease, but that’s going to take some time,” he said.

Source: USDA.