Varley Law Office PLC

Varley Law Office PLC
201 NE 2nd ST, Stuart, Iowa 50250; (515) 523-2456

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Wednesday, July 30, 2008

Cash Rent Leases

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2009 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (That requires mutual consent in the case of multi-year leases.)

Rents on the whole will rise this year. Aside from high grain prices, cash rents are at a historically low level in terms of their percentage of land value. (See William Edwards' excellent analysis for ISU extension.) As interest rates rise, land values will decline and with them, so will cash rental rates but at a slower rate as the return on investment moves back toward historic levels.

In the meantime, we are dealing with the current environment. Based on recent sales, land prices in the Adair and Guthrie County areas seemed to have topped out in the $60 to $65 per CSR point range. Using a 5% ROI on $60 per CSR yields a $3 per CSR point cash rent. I have seen cash rent as high as $4.75 per CSR point, but I think $3/pt will catch most of the rents on good quality farm land in this area.

A number of landlord/tenant negotiators are switching from cash rent to a hybrid lease in which the rent is paid in whole or in part in bushels of grain. The production decisions and production risk remain with the tenant (and its crop insurer) but the landlord assumes some of the market risk and relieves the tenant of some cash flow requirement, which is attractive to the tenant in this period of rapidly escalating input prices.

Good luck with your negotiations!

Tuesday, July 15, 2008

Iowa Smoking Ban Rules

Is your business or public place in compliance with Iowa's new smoking ban rules?

Smoking Ban Resources

You must post signs with the violation reporting phone number and website at each entrance and in each vehicle.

Tuesday, July 01, 2008

Tax Tip

Remember: Internal Revenue Code Section 179 was amended for 2008 to allow the expensing of up to $250,000 of machinery and equipment purchases (more in some areas).

Land Auction Results

A farm land auction was held in Stuart, Iowa on June 30, 2008. Here is my analysis:

Parcel 1: 240 acres; crop acres 224.4; FSA corn yield 108; CRP acres 10.5;
ave CSR 60.66; $3,750/acre; $61.28/CSR pt
Parcel 2: 198 acres; crop acres 169.5; FSA corn yield 117; CRP acres 15.6;
ave CSR 56.08; $3,575/acre; $63.84/CSR pt
Parcel 3: 155 acres; crop acres 150.7; FSA corn yield 106; CRP acres 0.7;
ave CSR 62.61; $4,000/acre; $63.89/CSR pt.
Parcel 4: 130 acres; crop acres 115.9; FSA corn yield 108; CRP acres 9.7;
ave CSR 52.94; $2,950/acre; $55.72/CSR pt.

Other factors: Tile & terraces; Parcel 2 included 15,000+bu of grain bins and drying system; Parcel 4 bisected by creek