Setting Cash Rents and Variability in Returns
Returns to farmland likely will vary considerably over the next several years. This variability will make it difficult to set a cash rent that can remain the same for several years. Prices projected for 2015 are lower than likely long-run prices. As a result, cash rents based on 2015 returns may have to be raised in the future. Similarly, rents may need to be lowered if those cash rents were set based on returns in 2010 through 2013, particularly given that prices in 2010 through 2013 were above likely long-run average prices.
The New Era of Crop Prices --- A Five-Year Review
In a 2008 report and a 2009 article we addressed whether the trend towards higher crop prices that started in the Fall of 2006 was here to stay. Our analysis was motivated by the need of farmers, landowners, and others in the agricultural industry to have some reasonable way of assessing long-term price prospects. From a farmer’s standpoint, the question basically came down to this, “What is a good price for corn, soybeans and wheat?” We argued that corn, soybean, and wheat prices moved to a new, higher nominal price level beginning in about December 2006. We suggested that the new price level would persist for an extended period of time and we projected the likely average Illinois monthly price and range in monthly prices for those commodities in the first five years of new era. Based on average monthly prices through February 2011, we evaluated the accuracy of those projections in a post on March 29, 2011. The projection of the expected distribution of monthly average prices was presented in a post on November 18, 2011. Here, we briefly review the methodology for projecting the average monthly prices, the range in monthly prices, and the distribution of monthly prices and then provide an evaluation of those projections based on average monthly prices in Illinois for the 73-month period from December 2006 through December 2012. The prices used are those reported by the USDA’s National Agricultural Statistics Service in the monthly Agricultural Prices report.
The Use of Qualitative Information in Macro-Economic Policy Analysis
The majority of macro-economic policy models takes for granted that conflicts among objectives can be assessed by means of a tradeoff analysis. Such tradeoffs imply that sacrifices and benefits of various impacts of decisions can be measured on a cardinal scale, so that a conventional macro-economic utility or welfare analysis can be applied.