COLUMBUS — Ohio cropland and cash rents are anticipated to level off in 2009, and in some cases, decline slightly, according to results of the Ohio State University Extension 2009 Ohio Cropland Values and Cash Rents Survey.
“High commodity prices and relatively low input costs drove up profits in 2007 and 2008, but this year is not the case. We are unlikely to see those profit margins in 2009,” said Barry Ward, an Ohio State University Extension economist and production business management leader.
“That’s going to put producers in a tough spot. Will they have made enough money in the last two years to weather the storm in 2009?”
According to the survey, produced by university economists within the Department of Agricultural, Environmental, and Development Economics, Ohio cropland values are expected to decrease by 2.4 percent to 4.9 percent, while cash rents may level off or decrease slightly by 0.24 percent.
In some cases, depending on the region and land productivity, cash rents could increase 1.24 percent. (See list in box at right for the breakdowns according to farm productivity.)
Ward estimates that more than 50 percent of Ohio’s cropland is rented. Of that, 75 percent is locked in cash rents.
Ward said that falling commodity prices, coupled with high input costs, are driving the potential declines, and the situation isn’t likely to change much in 2010.
“Input costs are lagging commodity prices and both producers and landowners are now in a squeeze,” said Ward.
Ward said that farmers have a few options to help alleviate some of the financial pressures:
— Pay rents as they come due and cut back costs in other areas, such as new equipment or equipment upgrades.
— Work with the landowner to renegotiate the rent to a lower price for the remainder of the lease term.
— Work with the landowner to renegotiate to a flexible cash rental, where the rent “flexes” with the market.
“This option gives producers some cushion if events or prices moved against them from the time the rent was negotiated initially,” said Ward.