Varley Law Office PLC

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

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Wednesday, September 17, 2008

Boundary Line Dam Easements

Here is a tidbit from my agronomy days applied to agricultural law: Soil is composed of four solid constituents: sand, silt, clay, and organic matter. The most productive soil is a loam, which contains roughly equal proportions of sand, silt, and clay (and as much as 4 or 5% organic matter). Most of western Iowa is blessed with clay loam and on the riverbottoms with silty clay loam thanks to wind-blown silt particles called loess (pronounced “luss”) left behind by the glaciers after the last ice age. Silt is, by far, the most easily eroded soil component. Hence the need for silt dams and fences to prevent bodies of water from filling up with silt. Structures that catch silt such as dams and terraces have to be cleaned out periodically to maintain their water holding capacity. For instance, when one builds terraces with state conservation cost-sharing money, one signs a maintenance agreement that ensures that the terrace’s design capacity will be maintained. By the same token, because of its erosive nature, silt makes a poor dam material. Earthen dams and terraces must be built of clay, which is a much smaller particle, but which has high particle adhesion.

It has been my experience as a farmer that nothing is harder on dams than cattle. In fact, if you build a dam with conservation cost-sharing assistance, you will be required to sign an agreement requiring you to fence cattle away from the dam and allow grazing of the dam only under limited circumstances. It is also for this reason that conservationist are encouraging farmers to fence cattle away from river banks.

My adversary suggested in his letter that a dam is higher or longer than the original easement signers contemplated. Because there is a fence across the dam, I think it is safe to say that the dam height has not changed at least since the fence was put in. In addition, the original dam height may have been too short. When I worked for the Soil Conservation Service we used to call home-made under-capacity dams (which seemed to be common in the 70’s) “doodle dams” because they would be washed out by the first heavy rain. Any structure designed to retain surface water should be designed with the capacity to hold the runoff from a Q-25 storm. The parties could have the Natural Resources Conservation Service (NRCS) evaluate the dam to see if it is sized appropriately for the watershed it serves. There may even be cost-share money available for the structure. But even without that, the clear purpose of the easement was to protect the clients’ pond from silt runoff and the current size of the dam no doubt reflects the wisdom of the years with respect to the sizing of the dam, regardless of the size speculated in the original easement agreement.


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

Thursday, June 05, 2008

Chris Nelson for Iowa House seat 58

Support new ideas and intelligent leadership on the local level, too!

Go to Chris Nelson's website to see how you can help:

http://www.putnelsoninthehouse.com/

No cost (and probably no value) for this plug.

All opinions expressed are strictly those of the blog author.

Thursday, March 27, 2008

Iowa Crop Land Cash Rent

We had a cash rent auction for 312 acres of cropland with an average CSR of 69.52. It is an unusual way to set rent, but required in this instance because the land is held by an estate with litigating beneficiaries. The auction started at $310 per acre and ended at $334 per acre-- by far the highest rent in my practice. It is even higher when you consider that the 312 acres includes 5.1 acres of required waterways and another 5.5 acres of permanent pasture and hay ground. The crop acres will be planted to corn. High prices, high yields and high crop revenue insurance are required for that kind of rent price to make sense. Good luck to all the farmers out there. This year has the makings of a higher stress growing season than usual.

ISU cash rent survey