Now is the time dictated by Iowa law to begin negotiating crop land leases for 2023 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 or pasture lease ending March 1, 2023, 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, 2022. This statute does not apply to custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1.
Basing cropland rent on the current CSR21 of the soil in question is the most accurate and fair way to arrive at a comparable rent.2 Below is a table of farmland values and cash rents in counties for which we prepare farmland leases:
The table above is based upon averages from sometimes limited survey results, but it does give a general idea of what the market for Iowa farmland looks like. The predicted annual rental is based on a 3% ROI. Farmland appraiser Jim Rothermich notes that farmland values have increased 35.3% over the past six months,3 while Extension economist Alejandro Plastina tells us cash rental rates rose at a comparatively modest rate of 10.3% over the last year (even so, the third increase in a row and largest since 2013).4 Both are being driven higher by food shortages and correspondingly high commodity prices, but rental rates are being tempered by equally high input prices. Nevertheless, an auction in Calhoun County in March pegged rent at a whopping $438.50/acre on a quarter section of 84.8 CSR2 land. Look for rising interest rates and a slowing economy to temper those increases.
Please contact our office if we can be of assistance. Good luck with your negotiations!
Sincerely,
VARLEY LAW OFFICE, PLC ©2022
1Updated “corn suitability rating” assessment You can calculate a CSR2 for your farm [http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx]
or get it from your assessor information [http://www.iowaassessors.com/].
2 See Computing a Cropland Cash Rental Rate: https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-20.pdf
3 Jim Rothermich MAI ARA ALC theLandTalker@iowaappraisal.com https://www.iowaappraisal.com/media/cms/May_2022_Iowa_Land_Auction_Results_D90F044F42244.pdf
4 Iowa State University Agricultural Economist Alejandro Plastina https://www.extension.iastate.edu/agdm/articles/plastina/PlaMay22.html
