Credit Becomes Gatekeeper

A year ago, university economists warned that typical Illinois corn farmers would need to shave $100 an acre off average cash rent and production costs if they hoped to break even in 2016. Renters hesitated, landlords balked, most input suppliers held firm. Big savings didn't happen.  Now, worse prospects for 2017 grain markets mean many cash renters will have little choice but to plead poverty when renewing leases this fall. What's different this time is that farm lenders will be the referees making sure rent gets knocked down a serious notch or two, some analysts caution.  Three consecutive years of falling farm incomes from 2014-2016 will have "evaporated" working capital below acceptable credit standards for many producers, cautioned Sterling Liddell, an economist with Rabobank's Food and Agribusiness Research group. In a new report on cash rents and land values, Liddell wants landowners to get a wake-up call when land rents are renegotiated this fall.