March 6, 2009

With recession clouds rolling in, leasing of farmland is a whole new ballgame for 2009. By now most leasing contracts are in place for this year, but not without a great deal of uncertainty and economic tension for both landowners and tenants.

For information on other Nebraska farm management issues, see the Cornhusker Economics Newsletter

Compared with 2008, when cash rental rates jumped significantly, this year saw little to no upward bounce. In fact, rates negotiated at the high end of the cash rent scale last year were frequently adjusted downward as market participants factored in a lower and more uncertain farm profit potential for 2009.

For those using crop-share leases, 2009 will likely fall far short of 2008 returns. Both landowners and tenants are sharing in the economic vulnerability and recent commodity price downturns that will throttle back earnings. But considering the economic woes currently being experienced in other sectors of the economy, most farm landowners and tenants can still consider themselves relatively fortunate.

As for grazing areas of the state, economic downturns in the livestock economy do place limits on grazing land rental rates. While 2009 rates may still be relatively close to year-earlier levels, leasing participants are being more cautious.

All-in-all, 2009 is already shaping up to be a challenging year for all land rental market participants. It will be all the more important for landowners and tenants to be aware of these extreme economic forces that will impact the farm economy and to partner together to weather the economic storm.

Bruce Johnson
Professor, Department of Agricultural Economics