Thursday is the deadline for farmers’ oral and written agreements on cash rent or lease arrangements and ag industry officials anticipate a large number of renegotiations for 2017.
Rex Wilcox, a farm management specialist with Stalcup Ag in Storm Lake, says after three years of losses, operators need cash rent concessions to shrink operating costs. Income has been falling, he says, while input costs remained steady.
“Farm operators are in a position financially where they’re looking for the rents to come down,” Wilcox says. “In some cases, their loan officers are putting pressure on them to have the rents come down. The cash flow is just not there anymore and they have to have some break on the rental rates.”
Wilcox says some landowners have been adjusting rents downward the last few years with lower commodity prices. However, with a bumper crop expected and corn prices very low, they may need to lower rents again for the year ahead.
“We’ve seen some decreases of around 10% since 2013,” Wilcox says. “So, 2014 was 10% less than 2013 and 2015 was 10% less than 2014 and it might take that kind of decrease to make things work again.” Many multi-year leases will expire this year, which may mean some ground will see new renters. He’s also hearing about some operators trying to break long-term arrangements.
“I think you’re going to see more terminations of farm leases by operators this year than we’ve seen in a long time,” Wilcox says. “That’s the indication I’m getting from talking with attorneys. They say they’re doing a lot of business with farm operators that are coming in and asking to produce a termination to send to their landowner.”
Wilcox expects farmers to work hard to renegotiate because if they lose that rental land, they may never get it back. If possible, he says they might want to delay agreements to see how the crop turns out or if there is a rebound in grain prices this winter.
(By Jerry Oster, WNAX, Yankton)