Cash Rent Stays High Despite Low Corn Prices

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.
For three years, cash rent costs has stayed at about the same level, around $250 an acre, but crop prices have not stayed at the same level. In 2012, corn prices got as high as $7.80 a bushel and soybeans got above $16, which were record highs. Now, corn is more around $3.80 a bushel and beans are struggling in the $8 range. So, prices fell more than half in value, but cash rent is still the same.
The reason for that according to ISU Extension Economist Chad Hart, is the increase in profit margins during the high price years, "Farmers turned around and utilized those profits to, if you will, reinvest in themselves by chasing after more land, bidding up those cash rents. Sort of transferring that profit if you will from the commodity market into the land market and that chase is still holding on today and that's why we're seeing that profit gap as moving into the land market now. But that's also why we were seeing the pressure to reduce the cash rents now because the income is no longer there on the crop side."
Hart says the downtrend of commodities happens faster than cash rent or property values can react, just like an uptrend tends to increase profit margins faster than rent rises.
He says this "ebb and flow" is a cycle, "And as incomes fall from crops, you see that pressure on the input market fall off. And the input costs tend to fall back down again to match where crop prices are. A lagged relationship, but a strong one that's existed for quite some time."
Notice: you are using an outdated browser. Microsoft does not recommend using IE as your default browser. Some features on this website, like video and images, might not work properly. For the best experience, please upgrade your browser.