Cash rental rate tools
Each spring Iowa State University Extension and Outreach conducts a statewide survey for cash rental rates. In 2017, survey respondents indicated the average cash rents for tillable acres planted to corn or soybeans were down by 4.8 percemt or $11 per acre to $219 per acre. This is the fourth consecutive year that average cash rents have declined in Iowa accumulating to nearly a 19 percent drop since 2013.
Detailed cash rent results by county are available in AgDM File C2-10, Cash Rental Rates for Iowa 2017 Survey, found on the ISU Ag Decision Maker website. There will be considerable variability across counties in year-to-year charges, as is typical of survey data. Besides the survey data, what might be some other methods for determining a fair cash rental rate for your farm?
For the purpose of calculating a fair cash rental rate, consider using the “Computing a Cropland Cash Rental Rate” decision tool, C2-20. This Excel spreadsheet provides six different methods for calculating a cash rent amount per tillable acre. Farmers, landowners and agribusiness personnel can use this decision tool in making farm cash rental rate calculations that more accurately reflect a fair cash rental rate.
Consider the advantages of a “flex lease” versus a cash rent lease. The latest ISU survey data indicated that nearly 20 percent of all Iowa’s cash leases are deemed “flex leases” rather than a fixed cash lease amount. These “flex leases” typically provide a guaranteed base rent that will likely be slightly lower than the amount of a typical fixed cash rent. Most fixed cash leases rarely reflect the farm’s actual yields, local cash prices and/or crop costs. A “flex lease” could reflect all three; with the flexible portion providing a potential bonus to the landlord depending on the farm’s actual yields,cash prices offered and total crop costs. That flexible portion if triggered could then be paid after harvest.
So a “flex lease” would likely trigger a more appropriate rental rate that more accurately reflects the annual revenue potential for the tenant operator. The tenant would then share the farm’s actual yield information with their landlord. In many cases, the base rent is set at a level that an operator can cash flow at breakeven prices based on their crop insurance actual production history (APH) guarantees.Besides the potential bonus the landlord might receive with a flex lease, they could receive the same yield information the tenant provides for their crop insurance purposes. In addition, the tenant operator might share factors attributed to yields such as rainfall data, soil tests, fertilizer use and other agronomic practices in addition to the actual yield maps of the harvested crop.
Most farm operators have a wealth of crop related information that they could share with their landlord. Consider the use of the ISUs Ag Decision Maker website including “Flexible Cash Farm Lease Arrangements a Cropland Cash Rental Rate” decision tool, C2-21.
The Sept. 1 deadline for terminating 2018 farm leases is fast approaching. Without a legal termination notice provided by the tenant operator or landlord before that date, the farmlease will automatically reset with the same terms and conditions as the 2017 lease.
In response, Iowa State University Extension and Outreach is conducting over 70 farmland leasing meetings statewide in late July and in August where farm lease arrangements information will be discussed.
For a list of meetings, check the ISU Extension calendar or contact your local county Extension office.
Steve Johnson is an Iowa State University Extension farm management specialist. Contact him at firstname.lastname@example.org.
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