CONTINUING COVERAGE: FLOODS OF 2016

Report Says Land Rent Needs To Decrease

This week Rabobank reported a stark outlook on land rent values in agriculture, namely in the Midwest.
The report says land rent has to go down for agricultural commodities to stay economically viable.
Senior analyst with Rabobank Sterling Liddell says ag has gone through a "super-cycle". Starting in 2006, commodity prices increased dramatically and inputs have followed.

Liddell says, "Subsequently, we increase production, we increased acreage, the price of the commodities came down and now has dropped well below break even. In fact, anyone who's renting land is struggling with these prices. The cost has just become too high."Liddell says as a general rule, they see land rent go for a $1.50 to a $1.60 per expected bushel. Even though it can vary from county to county, they'll need that to go down to a $1.25 to a $1.30 per bushel to be sustainable.

Moving forward, he says farmers must reduce acres on corn, wheat, and soybeans, "In those crops, throughout the United States, we're going to have to contract acreage somewhere between 3-5 million acres in order to bring supply back to where we see the long term balance with demand."