The Illinois Society of Professional Farm Managers and Rural Appraisers and the University of Illinois conducted a survey regarding 2014 leases. Respondents expected small to moderate decreases in cash rents from 2013. The main driver affecting lower rents is the expected lower corn prices. Partially offsetting lower corn prices is the expectation of lower production costs led by lower fertilizer costs.
Respondents indicated that share rent and modified share rent leases declined in use. Variable cash rent leases were the lease type with the largest increase followed by cash rent.
There is much information on “average” cash rent lease levels. Once you dig into the details, you find that these averages vary by as much as $100 per acre or more. The level of change for 2014 leases will have several factors.
Present cash corn bids for 2014 are under $5.00 per bushel. This time last year, new crop corn was valued at over $6.00 per bushel. Depending on how this year’s crop finishes out, the price expectations for the 2014 corn crop might very well be over $1.00 per bushel lower than last year.
The lone bright spot appears to be a decrease in fertilizer prices. While these prices have still not been set in many markets, it appears the cost for crop nutrients will be 20% less than last year.
Factors affecting lease terms are very liquid and changing rapidly with time. We keep up-to-date on the ever-changing economics of farm leases and the market for cash rents.
Management fees are relatively small when compared to the large range of lease terms. Please feel free to contact us, and we can work with you in developing appropriate lease terms to meet your goals and needs.