Sunday, November 04, 2007

Cash Rents on Sharp Upswing

I have heard of many cash rents going up in central Illinois this year, with many long term tenants being removed in favor of someone who will pay the highest price for the right to farm the parcel. The University of Illinois is no exception and is in process of bidding out several of it's farms:

Historically, the university has had crop-share arrangements with its tenant farmers, meaning the farmers and the university share the cost of getting crops in the ground and harvesting them. They then share in the profits. In cash rent or cash lease agreements, the farmer pays the landowner an upfront fee to rent the land. The farmer then handles all the decisions and costs of planting and harvesting the crops.

In recent years, the university has begun to shift its leases, and most of the UI's endowment farms have now been converted to cash leases. But the university has also decided to open up the bid process, inviting farmers who are interested in farming its various parcels to submit sealed proposals and bids on how much they'd be willing to pay to farm the land.

As a consequence, farmers say land leases in counties where this happens will become more expensive, and long-term farmers like the Thurmans could lose their leases.

The university's position is it must be a good steward of the gifts it receives and raise as much income as possible for scholarships and research. Plus, the new bid process is much more fair, according to the university.

How Ken Thurman sees it: "Pay up or get out. That's what's happening here," he said....

"This cash rent market is the craziest thing I've seen in 40 years of farming," said Steve Moser, who has farmed a UI endowment farm south of Urbana for about eight years. That parcel is one of the 16 up for bid.

Cash rents and farmland values have climbed in recent years. Farmland values for second quarter 2006 to second quarter 2007 increased 11 percent, according to the Federal Reserve Bank of Chicago's survey of its seventh federal reserve district, which includes portions of Illinois, Indiana, Iowa, Michigan and Wisconsin. Since 2000, farmland values in Illinois have risen 68 percent.

Like most farmers, the Thurmans and Moser farm a combination of parcels. They own some land, they rent some land.

"We don't farm that many acres to justify paying the high rent they're wanting, and unfortunately getting," Moser said.

Who can pay steep cash rents? Big ground farmers, Moser said. Those who farm in the neighborhood of 10,000 or more acres. The average farm size in Illinois is 374 acres, according to the most recent Census of Agriculture in 2002.

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