2021 Iowa Farm Leases

Varley Law Office, PLC

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2020 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, 2020, 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, 2020. 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 CSR2 (updated “corn suitability rating” assessment) 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]. In addition, you can calculate a CSR2 for your farm. 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 3.25% ROI.  Land prices have risen this year, driven by low interest rates and favorable commodity programs. To a lesser extent, rental rates followed land prices as they rose. Currently, there is a strong demand for land, but a limited supply. In addition, there has been an increase in the number of landowners engaging in custom farming. Ag commodity programs such as subsidized crop insurance and the market facilitation program have reduced risk, encouraging land owners to engage farm management companies such as Hertz Farm Management and Peoples Company, rather than opt for cash rentals, so they can take advantage of tax incentives available to operators. Things to keep an eye on include whether interest rates will remain low, the global response to the pandemic, and our trade policy with China.

Finally, with its growing popularity, it is important to know a little information regarding Hemp production in the State of Iowa. In May 2019, the Iowa Hemp Act was signed and this year the Iowa Department of Agriculture & Land Stewardship began issuing licenses to grow hemp. However, it is important that landowners know who they are leasing their land to if they plan on growing hemp on their land. If the hemp licensee grows hemp that fails the THC test, the entire crop will have to be destroyed. If the licensee fails to destroy the crop, the State of Iowa will come onto the land to do it. Moreover, if the operator cannot be found, the landowner will be assessed the costs of destroying the crop grown on their land.

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

Sincerely,                                  

VARLEY LAW OFFICE, PLC     

Warren A. Varley • Attorneys-at-Law • Karen K. Varley

201 NE Second Street

P. O. Box 235 

Stuart, Iowa 50250-0235

(515) 523-2456

FAX 866-297-7985

varleylaw@iabar.org

©2020

2014 Farm Leases: Cash Rent & Hybrid Agreements

--> Now is the time dictated by Iowa law to begin negotiating crop land leases for 2015 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, 2015, 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, 2014. 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 CSR2 (“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]. In concert with the slight decline in farm land values and the dramatic drop in grain prices, cash rental rates have remained steady or dropped during the current year. 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:

--> 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 farm land looks like. The leases I have prepared so far this year continue to fall in the $2.50 to $3/CSR point range, with the higher quality land falling at the higher end of that range. There continues to be 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. If you would like more information, I encourage you to contact your local ISU extension office.
--> Water quality issues and increased scrutiny of farm nutrient runoff is currently the prime topic of interest on the political front.
--> Please contact my office if you have questions. Good luck with your negotiations!

©2014

Renegotiating Farm Leases

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2011 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.)
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 was the case last year, I think $3/pt will catch most of the rents on good quality farm land in this area. 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. Increased rain this year has resulted in a tighter supply of quality hay and correspondingly higher demand for hay land for next year.
If you wish to terminate a cropland lease ending March 1, 2011, 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, 2010. 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.
There is some uncertainty regarding whether mailed notice will be sufficient to terminate a farm lease because of an Iowa Supreme Court case this year ruling that mailed notice was unconstitutionally insufficient due process to give to a residential renter in an eviction case. I believe certified mail is still a constitutional form of notice under Iowa Code chapter 562, so long as it is mailed early enough that you know it will arrive before September 1. However, the Iowa Supreme Court has not ruled on that question. If you want to be absolutely certain that you have given adequate notice, you should either have a signed acknowledgment of notice from the opposing party (landlord or tenant) or you should have notice personally served by law enforcement or a private process server.