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Roller coaster rents

02/14/2011 @ 2:29pm

If Yogi Berra followed the land rental market instead of baseball, he might be saying, “It’s déjà vu all over again.”

Think back to February 2007. At that point, grain prices were significantly higher than they had been in September 2006, and much of the 2006 crop had been priced before prices started increasing. The 2007 crop could be priced at relatively high levels, but producers were reluctant to sell a large percentage of that crop in advance. Yet there was also concern that those prices might drop between February and harvest. Input costs were going up. And the land rental market was in turmoil.

That’s a lot like the current situation, and the land rental market is once again in turmoil. Corn and soybean prices started going up last summer, but most of the increase came after August. Futures prices for the 2011 crop were relatively strong through the fall, input costs started going up, and land values have increased dramatically in many areas. An Iowa survey released in December shows that land values had increased 16% from November 2009 to November 2010.

Fixed cash rent agreements don’t respond well to volatile markets. “If everyone went back to or stayed with crop share leases, the volatility in grain and fertilizer prices wouldn’t be nearly as problematic,” Kansas State University ag economist Kevin Dhuyvetter said in late December.

At that point, he was partway through a series of land rent meetings around the state. At a mid-December meeting in Clay Center, he asked the attendees what they thought of fixed cash share leases compared to equitable crop share leases.

The group was about equally split between landowners and producers.

• 23% thought fixed cash rent was a good thing.

• 23% thought it was a bad thing.

• 54% thought fixed cash rent was neither good nor bad, just different.

At that same meeting, Dhuyvetter asked the attendees how much they thought rent would increase for 2011.

• 45% said up 2% to 5%.

• 38% said up more than 5%.

• 14% said remain steady.

• 3% said down 2% to 5%.

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