The record-setting corn and soybean crops forecast by USDA — the latest in a string of bumper crops — will drive down commodity prices and put pressure on growers to cut their costs, says economist Gary Schnitkey of U-Illinois. Midwestern growers will lose money at current rental rates, says Schnitkey, and will not break even until rates drop by $50 an acre, or roughly one-fifth.
“For farmland with an expected corn yield of 200 bushels per acre, cash rents would have to be below $218 per acre before farmers would be projected to have a non-negative return. A $218-per-acre rent is well below current, average levels of cash rents,” writes Schnitkey at farmdoc Daily. Average rent for high-productivity farmland in the Midwest is around $268 an acre this year, he says.
As an example of the challenge facing growers, Schnitkey prepared a budget for costs and returns from corn and soybeans in 2017. The budgets include cutbacks on machinery, fertilizer, seed, ag chemicals, storage and crop insurance along with overhead. With that belt-tightening and an average rental rate of $245 an acre, farmers growing a 50-50 mix of corn and soybeans would operate at a loss.