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.

Staying out of trouble online

Here is a good article about staying out of trouble (both ethical and practical as well as legal) while using the internet: Doing the Right Thing -- 5 Tech Pitfalls by Dan Reilly

CASH RENT FARM LEASES

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.

Good luck with your negotiations!

Check out Kiva.org

Kiva is a microlending institution that has been featured on a number of programs and publications. It makes loans to individual and groups of entreprenuers in developing countries through local non-governmental organizations with a proven track record. When the loan is paid back you can lend it to a different entreprenuer or you can withdraw the money through a paypal account. Paypal is donating its services to this project for free. If you don't do anything for 90 days, the money gets donated to Kiva to support what they are doing. Otherwise, none of your money goes to administration unless you make a direct contribution.

I think this is a great way to teach capitalism to underdeveloped countries and I think helping to generate wealth in the poor half of the population will do more to stimulate the world economy than having Americans borrow money they don't have so they can continue to spend beyond their means. It might also spread a little good will and help undo the damage of the last 7 years.

Personally, I tend to favor the agricultural projects and other enterprises where the individual is actually making something rather than retail or reselling, but in the end, I think it all helps. http://www.kiva.org/lender/warren3455

So go to kiva.org and check it out.

HAPPY HOLIDAYS

I hope you are having a very Merry Christmas and wish you all a Happy New Year. May we all find innovative and resourceful ways to meet the daunting economic, environmental, and political crises we face.

In Johnston High School News

 CONGRATULATIONS to Mr. Yenger and students who competed in an academic competition, “We the People”, on 11/24. The purpose of the program is to foster a high level dialogue about the Constitution and to understand the principles and how they relate back to modern day events. JHS won 1st place in the state and will compete in the National Finals in Washington, DC in April. Students competing were: Kevin Shi, Fred Shen, Jennifer Ajluni, Alma Jovancevic, Joseph Payne, William McDowell, Ethan Nutter, Neal Herink, & Yelena Varley

Farm Land Real Estate Auction; Adair County, Iowa

Real Estate Auction Report:

November 19, 2008:

An 80 acre tract of level to moderately sloping riverbottom with 70.3 acres of HEL crop land with a CSR (corn suitability rating) of 79.4 on the tillable acres brought $304,000 at an auction conducted by Hertz Real Estate Services. There were a couple of grain bins on the property and an ROW easement through the middle of the parcel, but I don't think those factors affected the price appreciably. The price comes out to $4,324 per crop acre or $54.46 per CSR pt/a. That is an 8 to 10% drop from the way land was selling this summer. The biggest factors in that drop are the fall in commodity prices, uncertainty about the health of the world economy, and a tightening of credit (though ag credit and particularly ag land credit seems pretty solid compared to the rest of the financial industry).
Here is an interesting side note: The previous purchaser of this property paid $15,750 for the whole 80 in 1964. Even with inflation, a nineteen-fold increase is a pretty good return on investment (42.9% per year), and a stepped-up basis at death, to boot.