Strains in America’s grain farming sector are becoming more evident. Plunging grain prices in the Midwest are creating financial tensions between landowners and the tenant farmers they lease land to. The owners want to maintain rental incomes, but the farmers that lease the land are worried about making rent payments. Margins are tight for farmers: inputs (such as fertilizer and seeds) are high, and grain prices are low. Some farmer tenants are breaching lease contracts. And that could cause ripple effects.
The USDA recently estimated that net farm income – which reached $129 billion in 2013 – could slip by almost a third, to $74 billion this year. Grain prices have reached a four-year low. Last week, farm equipment manufacturer John Deere cut its profit forecast; lower grain prices, and falling sales have reduced farm income, and thus, the ability of farmers to purchase equipment.
“The stakes are high because huge swaths of agricultural land are leased: As of 2012, in the majority of counties in the Midwest Corn Belt and the grain-growing Plains, at least 40 percent of farmland was leased or rented out, USDA data shows.
“It’s hard to know where the bottom is on this,” said David Miller, Iowa Farm Bureau’s director of research and commodity services.”