It’s time to write a new playbook for the next generation of row crop farmers looking to expand their businesses. Economics show expansion isn’t possible by being a high cash renter.
This is according to University of Illinois economists Gary Schnitkey and Nick Paulson, who say the current plateau projected for commodity prices ($4 corn and $10.50 soybeans) is out of line with input costs. This is particularly punctuated by cash rent trends (Illinois 2025 average is $264/acre).
High Cash Rents Equals Negative Margins
While in the past a successful strategy could be to optimize row crop operations by expanding acres with cash rent, the economists say those acres now experience some of the worst margins, and therefore have completely undercut that a strategy.
“Since 2022, we saw cash rents and non-land costs go up,” Schnitkey explained on a recent webinar hosted by the Illinois Soybean Association. “We don’t expect to see much more moderation in costs for the next year or the year after. Break evens in this situation are above what the market is offering.”
While ad hoc farmer payments are helping with some operating costs, the economists say they aren’t enough to make up the difference in production costs.
“A combination of lower prices and higher costs have pushed us into a very low return period,” Schnitkey says. “When we do budgets for ’26, we come up with a return of -$17/acre.”
The economic projections specific for rented acres are even worse.
While recognizing averages don’t represent any one individual farm, Nick Paulson says analyzing the average cash rents do provide important and useful trend data.
With statewide averages for Illinois, Indiana and Iowa reporting at $264, $227 and $274/acre, respectively, Paulson says those have steadily risen since 2020.
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The economists observe there’s not enough returns on corn and soybean production to provide both the landowner and the farmer with historical normal returns. Paulson adds there’s pressure for lower cash rents, but so far, most have only reported small adjustments. While there have been a few dollars shaved off the averages from ’24 to ’25, he says, from a farmers’ perspective, those need to decline even greater.
“If we bid above average cash rents, we’re just burning cash quicker,” Paulson says.
Looking at the University of Illinois crop budgets for 2026, Paulson reports on a 50% corn/50% soybean farm in central Illinois, the average margin on rented acres is -$32/acre.
“We’ve seen farmers, particularly family farms, since the 1990s expand their farming operations by renting more ground, especially as a way to bring back more family to the farm and gain efficiencies with machinery over more acres,” Paulson says. “It’s been a strategy to rent land and use the resources built up on that rented ground to build the land base. It’s a much more challenging and infeasible strategy compared to what that strategy has done in the past.”
Take a Hard Look At All Rented Acres
While University of Illinois data points to a long-term average of $100/acre return for 50/50 corn and soybean farms in central Illinois, the current cash rent figures paint a stark contrast. As such, he says farmers should evaluate rental decisions selectively.
“It’s not even close to the $100 average,” Paulson says. “For the foreseeable future, that’s likely to be the case. We don’t see prices increasing. Costs are coming down slowly. I don’t know where farmers can find the difference anywhere in their production budget. And particularly, this will effect younger farmers. They can’t pay to farm those acres.”
Established farmers may have an advantage as low-debt owned farmland may be subsidizing rental farmland. Owned farmland, in the U of I 2026 crop budget, shows a positive return.
“For those established farms with a stable land base, it’s time to look at the cash rented parcels and ask why. It’s tough to let a farm go. You don’t know when an opportunity arises in the future under more profitable circumstances. That’s a tough trigger to pull. Given the size of the red numbers we’re looking at, it’s a question we need to seriously ask ourselves,” Schnitckey says.
New Strategy
Paulson says a strategy for next gen farmer revenue growth can come from two areas — generating revenue from on-farm businesses or off-farm income.
“We’ve got two problems. We don’t know when the high income years from farming will happen again — it could be next week or 10 years from now,” Paulson says. “And the other problem is, in the meantime, chances for profitability are extremely low.”
When reviewing data from Illinois Farm Business Farm Management participants, Schnitckey says it’s important to look at income versus living costs.
“Non-farm income is much more stable than net farm income over time,” he says. “And today, non-farm income is a significant part of funding sources for the farm operation — it’s probably growing in significance.”
Specific to 2024 data, living expenses exceeded net farm income. And while not the first time that imbalance has been seen, it’s important to note how that erodes equity on grain farms.
Additionally, younger farmers are challenged in these times because they are less likely to have assets accumulated, and it’s harder in current conditions to acquire assets.
“Ideally, what you want is a household to have a six-figure off-farm family income — with health benefits,” Schnitckey says. “And have other farm businesses that generate cash. If you can farm, you have business skills and entrepreneurial skills to take advantage of.”
Examples shared by the economists of on-farm alternative enterprises include:
- Decommoditizing commodity production (for example, organic or non-GMO), specialty grains, food grade, etc.
- Direct to consumer/branded products
- Seed sales
- Custom farming