This 2023 webinar series addressed several topics where women farmland owners indicated an interest. The final episode focused on the use of buffers to slow water down, best practices and long-term impacts with Catherine DeLong, ISU Water Quality Program Manager. Learn more on this and other programs from Iowa State University Extension and Outreach Women in Ag website.
Farmland leasing is a popular topic of conversation year round in Iowa with much of Iowa farmland under a rental agreement. Ag Decision Maker has a multitude of information relating to leasing arrangements under the Whole Farm – Leasing section, https://www.extension.iastate.edu/agdm/wdleasing.html .
Ag Decision Maker (AgDM) includes rental rate surveys, forms, and information on agreements and types of leases. Survey information includes farmland cash rental rate surveys from ISU Extension and Outreach and USDA, and historical county cropland cash rental rates. Forms are available for lease agreements; lease supplements for farm, conservation, and drainage improvements; and farm lease termination notice. Information on types of leases covers cash, flexible cash, crop share, pasture, building, storage, or beef cow leases. Additional information related to leasing arrangements is available on improving a farm lease contract, legal considerations, farm resumes or newsletters, and self-employment tax.
Ag Decision Maker Resources:
Resources that are commonly requested related to farmland leasing include the following publications.
ISU Farmland Cash Rental Rate Survey includes cash rental rates for the listed year by state, region, and county. Rates are represented for tillable farm ground, hay, oats, corn stalk grazing, and hunting rights.
Flexible cash leases a topic that has brought about an increase of questions and interest over the past few years. The publication Flexible Farm Lease Agreements lays the groundwork for these types of leases. The publication Flexible Cash Rent Lease Examples gives additional examples of flexible cash lease agreements.
A farmland lease contract is an agreement between two or more individuals; the Center for Agricultural Law and Taxation provides insight to the legal and taxation issues surrounding farmland leases in the publication Iowa Farm Leases – Legal, Economic, and Tax Considerations.
Other Resources:
Ag Lease 101 a product of the North Central Farm Management Extension Committee which is represented by several universities across the Mid-West. On Ag Lease 101 under the documents tab, individuals can find lease publications and forms for fixed and flexible cash, crop share, pasture, and beef cow rental arrangements.
Web Soil Survey (WSS) is a resource that provides soil data and information. Individuals can use WSS to find the soil types and related information for their farm. Assistance for using Web Soil Survey to map and find Iowa Corn Suitability Ratings is also available on the Ag Decision Maker website.
Ag Decision Maker offers resources to assist landowners and producers with determining fair pasture rent arrangements.
Contributed by Melissa O’Rourke, retired Iowa State University Extension and Outreach Farm and Agribusiness Management Specialist
As cattle producers move cattle off winter feedlots, discussions are taking place regarding pasture rental rates for the grazing season. Iowa State University Extension and Outreach Ag Decision Maker – along with other university extension services – offer guidelines and resources to help Iowa landowners and producers discuss methods to determine appropriate pasture rental arrangements. Especially during these times of increasing land prices and input costs, parties want to be sure that they are having open discussions to arrive at fair agreements for pasture rents.
There is no quick answer to what is the right rent for a given piece of pasture. Parties must discuss and agree on costs and responsibilities such as real estate taxes, maintenance of infrastructure (fence, barns, water), insurance and fertilization. These issues and more are important factors in calculating a fair rental rate.
One key publication is found on the Ag Decision Maker website: Computing a Pasture Rental Rate. When visiting Ag Decision Maker, notice that the publication is available on screen or via download of a PDF document. There is also a Decision Tool spreadsheet that can be used to try out different calculations. The publication starts out by noting:
“Is there a simple and uniform method of figuring a rental rate for pasture and hay land? Probably not, but guidelines are available. There are several methods for computing a pasture rental rate, and several factors that influence the rental rate. Pasture rental rates vary according to the quality of stand, type of forage species, amount of timber, condition of the fences, availability of water, and previous fertility practices on the pasture. A pasture rental rate can be based on [the following]:
– current market rates – a return on investment in pastureland – forage value – rent per head per month (AUM) – carrying capacity – rent per pound of gain”
Colleagues at the Iowa Beef Center post a good discussion of Pasture Rental and Lease Agreements from the Midwest Perennial Forage & Grazing Working Group. Commentary in this discussion explains that the
“right” amount to charge for pasture rent is highly variable: “Both land owners (lessors) and grazers (lessees or renters) need to determine a fair rental or lease rate. What is a fair amount to charge for rent? The answer is always: “It depends”. The devil is in the details and there can be many details to work out.”
Related to the conversation between pasture landowners and tenants is consideration of fertilization alternatives and guidelines. Parties may wish to review information on pasture improvement alternatives (and costs) at two different ISU publications:
Estimated Costs of Crop Production in Iowa: This publication summarizes crop production costs of multiple rotations. In particular, Annual Production Costs for Established Alfalfa or Alfalfa-Grass Hay are provided on page 10; and Annual Costs per Acre to Maintain Grass Pastures are provided on page 11 of the publication.
Fertilizing Pasture: This publication address grass pasture fertilization rates, timing, and soil quality, including: types of nitrogen; nitrogen rates, response, and profits; and phosphorous and potassium (P-K) rates for legume-grass pastures.
Our colleagues at North Carolina State University Extension (NCSU) have a suggestedform for a pasture lease agreement. As with all such templates, this is only a suggested form that the parties can use to start conversation and make decisions about responsibilities. This NCSU lease agreement indicates some of the details to be worked out between a landowner and a livestock producer – such as improvements, seeding, fertilizer, repair of fences or buildings (if any) or water supply improvements. There is not a single “right way” to do things.
The ISU Cash Rental Rate Survey released each May. Landowners and producers should read the first two pages of the publication describing this opinion survey and definitions of terms used within the report. On the last past of the survey data, readers will find (see bottom of page 12) a summary of typical cash rents from survey respondents on rents for pastures by Crop Reporting District. Remember—these are only the responses of those who completed the survey, and the results can be highly variable and dependent on conditions and the agreement on various items between the landowner and the livestock producer. Note that on page one of the survey, there is a list of variables that may justify a higher or lower than average rent – and one of these is “Other services provided by the tenant.” Again, such services can include stewardship practices (weed control, fertilizer) and repairs (e.g., fencing) – depending on what terms are agreed upon by the parties. It is important for a tenant (livestock producer) to keep track of the costs of services and improvements to the pasture (including labor), and provide that information to the landowner – otherwise, the landowner cannot have a good understanding of these costs.
Overall, communication is key to determining a fair pasture rental rate that works for both the producer and the landowner.
William Edwards, retired extension economist, on issues from flooding regarding crop insurance, rented acres and looking ahead to 2017.
Some Iowa corn and soybean producers are facing substantial if not complete crop losses due to flooding. Fortunately, nearly 90% of Iowa’s corn and soybean acres are protected by Multiple Peril Crop Insurance (MPCI).
Crop insurance
Most Iowa producers purchase crop insurance policies with a 75-85% level of coverage. This means that if crops are a total loss, the producer must withstand the first 15-25% of the loss. However, in 2016 nearly 90% of the crop acres insured in Iowa were covered under Revenue Protection policies, which offer an increasing guarantee if prices increase between February and October. So far, this has added about $.80 per bushel to soybean guarantees, while the current corn futures price is actually below the February average. Moreover, since Revenue Protection (RP) policies are settled at the average nearby futures price during the month of October, rather than local cash prices, farmers receive a bonus equal to the fall grain basis in their area.
Producers with crops that have been totally destroyed by flooding will not have to incur the variable costs of harvesting. This could save around $20 per acre for soybeans and perhaps $50 per acre for corn, depending on potential yields and drying costs. Nevertheless, even producers who carried insurance at a high coverage level could be looking at net revenues near or below those obtained from normal yields this year.
Potential losses
For example, assume an insured tract has an expected corn yield and insurance proven yield of 175 bushels per acre. A normal crop marketed at $3.00 per bushel would bring $525 per acre. The insurance indemnity payment for an 80% RP guarantee, zero yield, and a February futures price of $3.86 would equal 175 bu. x $3.86 x 80% = $540. Saving $50 in harvest costs would give an equivalent of $590 per acre, or $65 above the value of a normal crop.
For soybeans, assume both the expected yield and the proven yield are 60 bushels per acre, and the crop could be marketed at $9.00 per bushel. Gross income for a normal crop would be $540 per acre. The insurance payment for a complete crop failure and a $9.65 October futures price would be 60 bu. x $9.65 x 80% = $463. Savings of $20 in harvesting costs brings the equivalent of $483 per acre, or $57 below the value of a normal crop.
In many cases, of course, flooded acres will make up only a portion of the insured unit, so production from non-flooded acres will be averaged in with the zero yields from the flooded acres.
The real question is how much will it cost to clean up fields and bring them back into production next year? Most Iowa farmers have not had experience with fields being under water for extended periods of time, so effects are difficult to estimate. Problems will range from physically removing debris to leveling eroded areas to restoring fertility.
Rental contracts
What do these questions imply for rental contracts? A great deal of uncertainty, for one thing. Lease agreements in Iowa continue in effect for another year under the same terms if they were not terminated on or before September 1.
Landowners will have to bear the burden of mitigating flood damages – that goes with owning property. But, a better solution may be for renters and owners to work together to repair the damage and bring the land back into production. Farm operators may have access to machinery that can help accomplish the job that owners do not. In return, tenants should be compensated for their efforts, either directly, through a significant discount on the 2017 rent, or with a long-term lease.
Next year
In some cases there may be doubt as to whether land flooded this year can even be planted next year. Risk Management Agency rules state that land must be physically available for planting to be insurable. Land that cannot be planted due to weather events that occurred before the sales closing date (March 15 in Iowa) is not eligible for prevented planting payments. When operators report their 2016 production, they can request that their 2016 yield histories reflect a value equal to 60 percent of the county “T-yield” rather than a zero or very low yield.
Close communication and cooperation between owners, crop insurance agents and renters can be a “win-win” strategy in the long run, but recovery may take several years.
Additional information about managing flood damaged cropland will be available from Iowa State University Extension and Outreach as the waters recede and the situation is assessed. Keep in mind, dealing with issues from flooding can be stressful. Reach out to resources such as the Iowa Concern Hotline, with trained staff who are available to listen.
Iowa Concern –All calls, chats, and emails are free and confidential. Language interpretation available.
24/7 Phone Support – Trained staff take your calls via a toll-free hotline at 1-800-447-1985.
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