Videos provide financial tips, explain mediation

Chad Hart, ISU Extension Grain Marketing Economist, highlights new Iowa State University Extension and Outreach videos for today’s current farm financial situation.

With commodity prices low and projected to stay that way over the next couple years, farmers have begun to feel the pinch in their pocketbooks. This has made managing the finances of the farm that much more important. With this in mind, Iowa State University Extension and Outreach has released two videos that deal with the current farm financial situation and what can be done to alleviate financial pressure.

I host the first video, titled Tips for Managing Margins. It offers ideas for how to weather the next few years of low crop prices like protecting capital, reviewing production costs and renegotiating loans.

The second video, called Understanding Farm Mediation, was created in partnership with Iowa Mediation Service and is about the process of mediation. Mediation is an option available to farmers as they work with their creditors to find a mutually beneficial solution to a delinquent secured agricultural debt of $20,000 or more.

This short video provides tips to help farmers better understand what mediation is and when it may be necessary. It describes the process and provides a step-by-step guide on how to prepare for mediation.

While mediation is available should it be needed, ISU Extension and Outreach also provides these financial resources to help farmers create a financial plan for their operation:

  • The Iowa Concern Hotline provides free legal information to both rural and urban Iowans. Services are available 24 hours a day, 7 days a week by calling 1-800-447-1985.
  • The Center for Agricultural Law and Taxation provides information about the application of developments in agricultural law and taxation.
  • Farm Financial Associates are available to provide a no-cost look at a farm’s complete financial situation.
  • The Beginning Farmer Center helps inform and support those who are getting started in farming. It also works with established farmers on succession planning for when they leave the industry.

How accurate and useful is the ISU Cash Rent Survey?

Alejandro Plastina, extension economist, explores results of a follow-up survey on the accuracy and usefulness of the ISU Cash Rental Rate Survey.

plastina_alejandro_photoCash rents, land values, and rates for custom work in Iowa are topics that usually attract lots of attention from a number of stakeholders in the agricultural sector. Even more so when the economic outlook for the sector is particularly promising or particularly discouraging. So it comes as no surprise that the Cash Rental Rates for Iowa Survey is received with different degrees of acceptance by different groups depending on the economic outlook. This year we requested feedback from the online respondents to the Cash Rent Survey about the accuracy and usefulness of the survey results.

Who responded?

The Cash Rental Rates for Iowa 2016 Survey had 1,585 responses, of which 320 responses were submitted through the online questionnaire (the rest were mailed using USPS). All online respondents were invited to participate in a short follow up survey about their perceptions of the Cash Rent Survey. One hundred and forty-five respondents completed the follow up survey. All of them reported being familiar with the survey (figure 1).

Comparing the participation of different categories of participants in this opinion poll versus the corresponding participation of the same categories in the Cash Rent Survey (figure 2), farm operators accounted for the same share (47%); but agricultural lenders, professional farm managers and Realtors had a greater share (21% vs. 14%, and 16% vs. 12%, respectively); while landowners had a smaller share (15% vs. 25%).

Figure 1. How familiar are you with the ISU Cash Rental Rates for Iowa Survey?Figure 2. How would you classify yourself?

How accurate are survey results?

Ninety-one percent of the respondents indicated that the Cash Rent Survey reflects typical cash rents by county moderately, very, or extremely accurately (figure 3). Forty-seven percent of the respondents indicated that the Cash Rent Survey reflects typical cash rents by county very or extremely accurately.

The most prevalent response among farm operators, landowners, and agricultural lenders was that the Cash Rent Survey reflects typical cash rents by county very accurately, followed closely by moderately accurately (figure 4). The most prevalent response among professional farm managers and Realtors was that the Cash Rent Survey reflects typical cash rents by county moderately accurately.

Figure 3. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect typical cash rents by county?Figure 4. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect typical cash rents by county, by type of respondent?

The accuracy of the Cash Rent Survey in reflecting annual changes in typical cash rents by county was perceived to be better than the accuracy in reflecting their levels. Ninety-six percent of the respondent indicated that the Cash Rent Survey reflects year-over-year changes in typical cash rents by county moderately, very, or extremely accurately (figure 5). Fifty-seven percent indicated that the Cash Rent Survey reflects year-over-year changes in typical cash rents by county very or extremely accurately.

The most prevalent response among farm operators, landowners, and agricultural lenders was that the Cash Rent Survey reflects typical cash rents by county very accurately, followed by moderately accurately (figure 6). The most prevalent response among professional farm managers and Realtors was that the Cash Rent Survey reflects typical cash rents by county moderately accurately, followed by very accurately as a close second.

Figure 5. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect year-over-year changes in typical cash rents by county?Figure 6. How accurately does the ISU Cash Rental Rates for Iowa Survey reflect year-over-year changes in typical cash rents by county, by type of respondent?

How useful are survey results?

Ninety-seven percent of the respondents indicated that the Cash Rent Survey was at least moderately useful to them (figure 7). Seventy-six percent of the respondents indicated that the Cash Rent Survey was very or extremely useful to them.

The most frequent answer among farm operators and agricultural lenders was that the Cash Rent Survey was extremely useful, followed by very useful and in a distant third place moderately useful (figure 8).

The most frequent answer among landowners was that the Cash Rent Survey was very useful, followed by extremely and moderately useful.

Professional managers and Realtors indicated most frequently that the Cash Rent Survey was moderately useful, followed by very and extremely useful.

Figure 7. How useful is the ISU Cash Rental Rates for Iowa Survey to you? Figure 8. How useful is the ISU Cash Rental Rates for Iowa Survey to you, by type of respondent?

Summary  

Although this opinion poll about the usefulness and accuracy of the Cash Rental Rates for Iowa Survey was not designed to be representative of all stakeholders in Iowa, it shows that most farmers, landowners, agricultural lenders, professional farm managers and Realtors, and other agricultural professionals that participate in the survey find it useful and accurate.

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USDA Conservation Reserve Program: Early Outs for Some Contracts

The Agriculture Act of 2014 (the 2014 Farm Bill) requires the U.S. Department of Agriculture (USDA) to allow a limited number of CRP participants who meet specific qualifications an opportunity to terminate (referred to as “opt-outs”) the CRP contract during fiscal year 2015, if those contracts have been in effect for at least five years and if other conditions are also met. View the USDA FSA Conservation Fact Sheet for details on the opt out conditions.

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Iowa Farmland Ownership

Contributed by Mike Duffy, Extension Farm Management Specialist, mduffy@iastate.edu.

duffyFarmland is the major resource for Iowa.  Who owns the land and how it is farmed determines what kind of agriculture we have across the state. Every five years Iowa State University does a survey to examine the ownership of Iowa farmland.

The Iowa farmland ownership survey examined land ownership as of July 1, 2012. The final report (Farmland Ownership and Tenure in Iowa, 2012 – publication PM 1983 revised) will be available in the coming months.

One of the interesting aspects of the 2012 survey is that it shows the changes in land ownership patterns over a boom period. The last ownership survey was done in 2007 and during the intervening five years Iowa farmland values more than doubled going from $3909 per acre to $8296. This increases rivals any similar time period.

The latest Iowa farmland ownership survey is compared to previous surveys dating back to 1982, during the time when farmland values first started collapsing after the boom of the 1970s. Looking at the various surveys over the past 30 years shows some of the changes in farming technology, demographics and other patterns. The 2012 survey also shows the impact of the current land boom on these trends.

Iowa farmland is increasingly in the hands of the elderly.  In 2012 30 percent of Iowa’s farmland was owned by someone over the age of 75 years old. The percent of land owned by people in this age category had been steadily increasing since 1982, when 12 percent of the land was owned by someone over 75 years old. The trend towards increasing age does appear to have been slowed by the boom. There are younger owners although they represent a small percentage of the acres. Over half, 56 percent, of the farmland in Iowa is owned by someone over the age of 65.

Another trend that seems to have slowed is the percent of land owned by people who don’t live in Iowa full time.  In 2012, 21 percent of the farmland in Iowa was owned by someone who didn’t live in the state or only lived in Iowa part time.  This was the same percentage as found in the 2007 survey. However, in 1982, only 6 percent of the land was owned by someone who didn’t live in Iowa or only lived here part of the time. It appears that the higher land values had an impact on the ownership by non-Iowans.

Ownership of Iowa’s farmland and access to the use of the land is critical for the future of the State. The impact of the ownership on both beginning farmers and the retiring farmers will be crucial. The current situation with respect to farmland ownership in Iowa is a good topic for discussion among landlords, family or heirs, and agribusiness professionals.

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Client Corner: Who has rights to corn stover?

Contributed by William Edwards, extension economist and Melissa O’Rourke, extension field specialist

Client Corner: On a farm with a cash rent lease, if the corn stover is harvested and sold, who gets the payment, the tenant or landowner? Could those rights be sold to someone else?

From a legal standpoint, Iowa Code 562.5A provides:  “Unless otherwise agreed to in writing by a lessor and farm tenant, a farm tenant may take any part of the aboveground part of a plant associated with a crop, at the time of harvest or after the harvest, until the farm tenancy terminates as provided in this chapter.”

This code section tells us that in the absence of a written agreement to the contrary:  (1) The tenant has the right to take the aboveground plant residue at any time during the tenancy (until March 1st).  (2) The tenant also has the right to leave all that residue, if that’s what he wants to do.  (3) Nobody else has the right to that plant residue unless the tenant agrees to it, in writing.  (4) The landowner does not have the right to sell the plant residue to anybody else.  (5) If a processor – such as a biodiesel or cellulosic ethanol plant — wishes to contract with someone to harvest and remove the plant residue, the contract and any associated payment must be with the tenant. 

An additional question raised in relation to this issue is whether the tenant has the right to subcontract with another party, such as a biodiesel processing plant, to allow someone other than the tenant to enter upon the property of the landlord to remove the stover?  Again, in the absence of written lease provisions to the contrary, Iowa Code 562.5A does not limit the tenant’s right to subcontract.  In practice, many tenant farm operators already subcontract with others to perform a variety of operational functions, from planting, application of fertilizer or chemicals, or combining of corn or beans.  Similarly, the tenant may arrange for another party to remove plant residue. 

From an economic standpoint, the tenant has paid all the expenses of producing the crop and the stover is part of the crop, so the tenant should get the payment. The tenant would also be responsible for replacing the fertilizer nutrients removed in the stover for next year’s crop.  The potential income from the sale of the stover would be reflected in the cash rental rate.  The tenant and the landowner should agree on how much stover can be removed without significantly increasing the potential for soil and wind erosion.

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