Next Year’s Cash Rents Depend on This Year’s Production

Like other production costs in U.S. agriculture, cash rents have climbed in the last several years. Randy Dickhut is a farmland expert with Agricultural Economic Insights based in West Lafayette. He says cash rents usually lag behind other costs of production.
“Cash rents usually lag somewhat because it makes sense that there’s always uncertainty about how good the year’s going to be for the farmer, whether it’s grain price, yield, and cost of inputs, and it takes a while to catch up. So, you kind of predict as you negotiate the rent in the fall or early winter. You don’t know exactly what’s going to happen during the next fall when it combines roll in the field and they run it across the scales.”
He says strong commodity prices are pressuring cash rents higher in some areas of rural America.
“With these good grain prices over the last couple of years, coming off some good cash flow years even back to 2019 and 20… and the high grain prices, relatively, the last couple of years, that lag time on cash rents is starting to catch up, and then, they move up.”
Cash rents in the next couple of years are going to depend on yields. If yields are strong, rents will continue to go higher. If yields aren’t good, that will ease the pressure.
“This past year where some areas that the drought hit harder, you won’t see any pressure on rents to go up really. Again, because of that lag effect, you based on the previous year with the next year, so not as good an income for those farmers in those drought areas. Where the yields were good, again probably 10 to 15 percent up, maybe more.”
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Source: NAFB News Service

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