What is in this article?:
Obviously, actual realization of 2014 yields, prices, and costs will cause results to vary from those shown in Table 1. While actual results will vary, the above provides an accurate portrayal of expected returns at the time of this post's writing.
In most cases, farmer returns at average cash rent levels will be marginal. "High" cash rents will result in negative returns. How quickly these high cash rents come down likely depends on the willingness of farmers to take losses on "high" cash rent farmland.
A farmer's willingness to sustain loses likely depends on a farm's land tenure and ownership positions. Those farms most vulnerable to suffering large losses on a total farm basis have a large percentage of the acres cash rented (90% or higher) at high average cash rent levels (see farmdoc daily post "Proportion of Farms with High Cash Rent Percentages and Levels"). These farms may quickly face financial difficulties.
Many farms have a small proportion of their acres with high cash rents. These farms will be able to have overall positive financial results while still taking losses on farmland with high cash rents. In essence, other farmland will be used to subsidize the high cash rent farmland. It would be prudent for farmers to evaluate financial returns with and without high cash rent acres as part of their operations. Financial results may be improved if high cash rent are not farmed and the farm contracts in size.
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