U.S. farmland rents for 2015 are on track to be down 5 to 10 percent from the top fees of a year ago due to lower grain prices, but landowners remain stubborn about deeper cuts and some are adding clauses to boost revenue if grain prices bounce back.
More than half the 230 million acres of corn, soybean and wheat land in the United States are rented. Rents, the biggest cost in growing crops, doubled during the farm boom of the past six years.
"Most of the bankers I've talked to indicate the market is more flat than what we thought. We are still seeing 5-10 percent down from the extreme tops in the really strong markets where cash rents had been above $400 an acre," said Jim Farrell, chief executive of Farmers National in Omaha, Nebraska, the largest U.S. farm management company.
Farrell, who expects most 2015 leases to be signed by year-end, said there has been less deterioration in fringes of the Corn Belt where rents are lower than in Iowa and Illinois.
"It's been holding fairly steady in response in part to the increase in grain prices that happened since the end of September."
Corn prices fell to a five-year low of $3.18-1/4 a bushel in October on abundant harvests. Prices are up $1 since then. Soybeans and wheat, which follow corn in acreage numbers, saw similar bounces.
Paul Taylor, Illinois Corn Growers Association director, said he has been able to cut his rents slightly but if a farmer was paying close to the average rate, the rent will change little.
Rent reductions remain subject to local relationships between farmers and landowners, and to farmer competition for land.
"Some land owners just don't want to" cut rents. Their logic is, 'Hey, you don't want to do it I've got five other guys who will pay what I'm asking," Taylor said.
Landowners must guess on any boost to farmer incomes due next October when farmers receive 2014 crop payments tied to the new federal farm bill.
But volatile grain prices have prompted landowners to get creative, with many adding "variable" clauses to 2015 leases. If prices bounce back, they will share the good fortune.
"Well over 50 percent of our cash rent leases for next year will have a variable rate component. It will be based on price or yield or combination of both," Farrell said. (Editing by Matthew Lewis)