2016 Cash Rents Decline 7% from Year Earlier

April 22, 2016 04:06 PM

Average cash rents declined 7% from a year earlier, according to a monthly survey conducted by Dr. Ernie Goss, Creighton University. Goss regularly polls attitudes of rural bank CEOs and presidents in 10 Midwestern states, releasing his findings as part of his monthly Rural Mainstreet Index (RMI). The index ranges from 0 to 100 with 50 considered growth neutral. This month's survey asked bankers about cash rental rates versus a year earlier.

While reporting an overall average decline of 7%, Goss notes bankers state cash rents vary significantly from farmer to farmer. Goss includes this comment from Jeffrey Gerhart, chairman of Bank of Newman Grove, Newman Grove, Nebraska, said, "Cash flow is king and will continue to be the difference maker for producers. Those who manage it well will benefit, those who don't manage it well will not."

The farmland and ranchland price index, included the monthly RMI, rose to 26.7 in April from 20.2 in March. This is the 29th straight month the index has moved below growth neutral. The April farm equipment-sales index climbed to a frail 11.1 from March's record low 6.7. "Weakness in farm income and low agriculture commodity prices continue to constrain the sale of agriculture equipment across the region. Reductions in farm prices have negatively affected the agriculture equipment dealers and manufacturers of farm equipment in the region," says Goss.

The RMI overall sank to 38.2 from March's 40.2, following two months of increases. "This is the eighth straight month the overall index has moved below growth neutral. Even though agriculture and energy commodity prices have increased recently, they remain well below prices 12 months earlier," says Goss. "Compared to 12 months earlier, prices for farm products are down by 16% and energy products are 8% lower," he notes.