September webinar on leasing trends kicks off TCF’s 2020-21 season

    Dr. Gary Schnitkey, agricultural and consumer’s economics professor at the University of Illinois, Urbana-Champaign, had good news at the Chicago Farmers’ September 2020 webinar meeting when he shared, “The income outlook for 2020 in Illinois is better than we thought.” However, he did add the caveat that a lot still depends on whether there will be more ad hoc disaster assistance in the near future.

    In response to a question from the webinar audience about the upcoming election’s impact on agriculture, Dr. Schnitkey said that it is believed that if President Trump is re-elected, he will not bring forward any proposals for ad hoc disaster payments because there is no need since he has been returned to office. On the other hand, if the Democrats win the White House and are the majority in the Senate, they won’t issue the payments either because farmers did not support them.

    “But both parties historically have supported farm programs and I don’t see any reason for that to change,” said Dr. Schnitkey. “However, the nature of the support will change if the Democrats are in control because I believe that more of the payments will be tied to conservation.”

    In reporting that the income outlook was better in 2020 than analysts originally had forecast, Dr. Schnitkey said the higher income is based on the fact that in Illinois, corn yield was 223 bushels per acre and the soybean yield was 62 bushels per acre, both were above the trend line.

    The original dire outlook was due to the hot, dry weather in Illinois, Indiana and Iowa during the summer months. Additionally, a severe wind storm in August in Iowa added to the negative impact on yields.

    Dr. Schnitkey went on to say that the USDA changed its Iowa yield forecast for soybeans to 54 bushels per acre in September, down from the forecast of 58 bushels in August; the US yield was downgraded to 51.9 bushels in September from 53.3 bushels in August. Good income increases came about as a result of the lower yields and concern about the yields in China.

    “At this point in September, we are looking at higher yields than we were in August,” said Dr. Schnitkey. He noted that the national yield for corn was 178.5 bushels per acre, with a market year price of $3.50 per bushel for 2020, down slightly from the 2019 price of $3.60.

    Regarding soybeans, the national yield in August was forecast to be 53.3 bushels per acre and in September the forecast was changed to 51.9 bushels. The market value price was forecast in August by the USDA to be $8.35, but upgraded in September to $9.25. The USDA put the corn market value price at $3.10 in August but revised it to $3.50 in September.

    Dr. Schnitkey said that the Coronavirus Food Assistance program has a September 11 deadline. Thus far, payments have been made for livestock and many grain farms. Corn payments were set at $0.335 per bushel and soybean payments were $0.475 per bushel. Currently, there is no indication of ad hoc disaster assistance for 2021.

    Regarding cash rents, Dr. Schnitkey said they were holding steady in 2020. He said the average cash rent for Iowa is $230; Illinois, $222; and Indiana, $194. He noted that the ad hoc federal payments have been important in adding to the stability of the cash rent levels.

    Based on a survey in August, projections for the average cash rent per acre for professionally managed farmland in 2021 include:                                                                                                                        

    Excellent, $297 ($305 in 2020)

    Good, $253 ($270 in 2020)

    Average, $212 ($224 in 2020)  

    Fair, $160 ($173 in 2020)

    Dr. Schnitkey said that 50 percent of Illinois farmland is rented; in Indiana it’s 45 percent; in Iowa it’s 41 percent; and in Ohio it’s 37 percent.  He added that larger grain farms tend to be more involved in rent situations.

    What are the farming arrangements throughout Illinois?

                            Northern                      Central                         Southern

    Owned             19 percent                    14 percent                    22 percent

    Share-Rent       21 percent                    42 percent                    36 percent

    Cash-Rent        60 percent                    44 percent                    42 percent

    Custom farming, in which the landowner pays for the field operations, bears all of the costs, and receives all of the revenue, involves six percent of the state’s farmland.

    He noted that over time, it is becoming apparent that people switch from share-rent to cash-rent due to the ease of making arrangements.

    Dr. Schnitkey advised that a written lease is the best way to go, although there are many instances where this is not the case. If there is not a written lease and the landowner wants to terminate a relationship, he must provide notice by October 31, according to law; however, specifications in a written lease will supersede the October 31 deadline. Dr. Schnitkey said it is rare to see a lease arrangement for more than two or three years. “I would discourage the longer leases because you have no idea what the future holds,” remarked Dr. Schnitkey.

    Dr. Schnitkey added, “The outlook now is bright, not great, but still greater than we thought just one month ago.”

    Written by The Chicago Farmers Editor, Denise Faris