2014 Cash Rents Equals Negative Returns For Farmers
In a post from the University of Illinois today, they essentially said that based on current crop prices, farmers who are cash renting ground in Illinois will either make about $10 per acre or in the case of Southern Illinois farmers lose about $30 per acre.
These numbers are for the averages. In areas where high cash rents are projected, the loss per acre will range from about $45 in Central Illinois to over $100 in Southern Illinois. Farmers have enjoyed several good years (assuming adequate crop insurance coverage), however, unless crop prices rise a $1 or so for corn and couple of dollars for beans, not much profit will be there for cash rent tenants.
Farmers who have a good mix of cash rent and owned property (at lower prices) should be in fairly good shape. The farmers I worry about are the ones that are primarily cash rent with high rates locked in for three or more years. Those farmers tend to have the lowest amount of liquidity and maybe in big trouble if low prices continue for more than one year.
Spring wheat farmers may be in for a tough year or two with news out of Canada that their crop is about 10% larger than originally projected and Australia seems to have a larger crop too. Farming is cyclical and these facts are just pointing to more subdued profits over the next year or so.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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