Leasing farmland for 2015 will face two dynamics we have not dealt with in quite some time. Potential income to be generated by the 2015 crop will be in hot debate. The two factors are expectations for lower prices and higher yields.
After four years in a row of below trend line U.S. corn yields, we are anticipating smashing the previous high national corn yield of 164.7 bushels per acre set back in 2009. Excellent growing conditions are finally combining with advances in plant genetics and improved farming methods. The debatable question will be what is an average yield going forward? With the projected record 2014 corn yield, will expectations for average yields be substantially increased or will expectations revert back to historic averages?
Total U.S. corn usage increased to its highest level ever during this time of lower than average yields, resulting in record high corn prices. With low supplies and high prices, usage was curtailed. Expectations for record high 2014 U.S. corn production and curtailed usage has resulted in the lowest corn price in four years.
Back in 2013, the University of Illinois stated “There are good reasons to believe the long run price for corn will average $4.60 per bushel. There will be periods in which the price will be $1.00 or more higher than this average, as happened in 2011 and 2012. There will be periods in which corn price averages below $4.00 per bushel. Currently, it appears that we are moving into a period of lower commodity prices.”
With present corn prices below average, will expectations be for these prices to continue or will expectations be to revert back to historic corn price averages?
Lease negotiations are setting up to be more contentious than in the past with wider fluctuations in projected farm revenues. We can help analyze your farm’s specific characteristics including:
- Yield Potential
- Price Expectations
- Fertility and pH levels
- Local Rental Markets
Knowledge of the factors affecting rental rates is key when negotiating a lease that meets the landowner’s goals and objectives. If you would like to discuss your farm’s situation, please feel free to contact our staff of farm managers.