2013 Farm land leases; Cash Rent & Hybrid Leases

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2014 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.)

If you wish to terminate a cropland lease ending March 1, 2014, 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, 2013. 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.

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: http://www.extension.iastate.edu/Publications/FM1801.pdf]. As Hertz Farm Management, Inc., has noted, cash rental rates have tended to lag behind the run up in farm land prices [http://www.hfmgt.com/newsletter/pdf/2013summer.pdf]. Below is a table of farmland values and cash rents from last year's ISU surveys in counties for which I prepare farm land leases:

Hybrid Leases

There is considerable interest in deviating from the traditional cash rent model. By using a formula, tenants and landlords can avoid the often stressful exercise of negotiating a new rental rate every few years in order to keep up with changing economic circumstances. Flex lease formulas can also allow landlords to participate in windfalls during good years and tenants to reduce risk in bad, although current crop insurance revenue products go a long way in protecting farm operators from price and production risk.

There is also considerable interest in addressing soil conservation issues; including terms regarding cover crops; and leased hunting.

Please contact my office if you have questions. Good luck with your negotiations!

©2013