Do more corn acres mean higher cash rent?May 16, 2014
As the intensity of corn acres on a farm increases, we tend to see cash rent acres increase. What we are seeing may really be as we increase cash rent acres, we are growing more corn because it can be a higher grossing enterprise. However, we also see that the accrual cash rent expense increases as corn becomes a higher percentage of the acres on the farm. We’ve seen that there can be a cost (total economic cost) disadvantage to more corn. This post shows how one of the accrual land costs (cash rent) leads to this disadvantage.
That data here span five years (2009-2013) from a group of central Illinois farms operating on higher-productivity soils that are members of the Illinois Farm Business Farm Management Association. All revenue is attributed to the accrual method of accounting netted against the total economic expenses associated with the production of that revenue to arrive at accrual based management returns.
For each of the five years, the farms were sorted into one of five groups based on the percentage of acres devoted to corn production. The five groups are:
1) Over 75% Corn Acres
2) 66% to 75% Corn Acres
3) 56% to 65% Corn Acres
4) 46% to 55% Corn Acres
5) Less than 46% Corn Acres
Read the article at farmdocDaily.