Now is the time dictated by Iowa law to begin negotiating crop land leases for 2010 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. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)
Rents this year are leveling off or declining, in general. Rent on one farm I am involved with that always has competition among renters, went from $250/acre to $230/acre, this year. On the other hand, rent for a farm with a CSR in the low 60’s went from $175/acre to $200. [See also Cash Rental Rates for Iowa 2009]. The huge corn acreage, rising input costs and the slow economy are causing farm operators to bid more conservatively. Nevertheless, low interest rates and fear of inflation continue to keep land values high, which directly impacts farm rental rates.
This does not mean rent for your particular farm should go down, if the rent you charge has been stagnant or lagged behind the run up in recent years. At a minimum, you want to keep up with inflation. Not doing so is like putting your money in a savings account and paying the bank interest to keep it there. Though low, inflation as measured by the CPI was 3.8% last year and had been hanging around 3% for the four years previous. If you only raise your rent every 3 or 4 years, you should consider raising your ask by 10-12.5% just to catch up with inflation.
Basing cropland rent on the CSR (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate]. As was the case last year, I think $3/pt will catch most of the rents on good quality farm land in this area.
If you wish to terminate a cropland lease ending March 1, 2010, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2009. This statute does not apply to forage land leases (pasture and hay) or custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1 and may become surly or even confrontational if notice is delayed past that date.
Speaking of pasture, the increase in corn acreage in recent years has resulted in a tighter supply of pasture land and correspondingly higher prices.
