Rabobank: Land Rent Values Must Decline

A new report from Rabobank says land rent values must decline for U.S. agriculture commodity production activity to remain economically viable. The report explores the impact of low commodity prices on land values and rent prices. Rabobank says from 2006 to 2013, significant increases in commodity prices, due to surging demand, signaled the need for more land to be converted to row crop production.

The subsequent steep increases in agricultural land values have pulled enough acres into row crop production to oversupply most commodities, both domestically and globally. Now, Rabobank senior analyst Sterling Liddell says “after two years of economic losses at the farm level – which resulted largely from the significant drop in commodity prices – the cost of renting land remains sticky and unsustainably high.” Moving forward, the report says rent values need to begin dropping to balance with lower commodity prices over the long term.