Farmland Leasing Resources

Farmland leasing is a popular topic of conversation right now due to the historical changes in cropland cash rental rates, September 1st lease termination date, and volatility in grain markets. Ag Decision Maker has a multitude of information relating to leasing arrangements under the Whole Farm – Leasing section, http://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 ISUEO and USDA, the Iowa Farm Building Rental Rate survey, 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. 

Computing a Cropland Cash Rental Rate explains ways to compute to a farmland cash rental rate.

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; Roger A. McEowen 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.

 

These documents and the information on AgDM can get an individual started on setting a farmland cash rental rate for the following lease year. The local ISUEO Farm Management Field Specialist can assist an individual with additional questions; you can find the specialist in your area by clicking on the respective county or area on the map on the following webpage, http://www.extension.iastate.edu/ag/farm-management-0.

 

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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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“Ag Cycles” and Iowa Agriculture

John Lawrence , ISU Extension Director for Ag and Natural Resources, provides an update of analysis completed and information available.

ISU Extension and the ISU Economics Department have put together a series of papers titled “Ag Cycles.” This collection of papers is an analysis of the current state of Iowa agriculture from the crop, livestock, and land market perspective. It examines the question of price levels and price risk going forward. It also includes a recent analysis and papers from the Federal Reserve Bank of Kansas City, which examines previous agricultural cycles and how they played out through borrower’s behavior. Combined, this analysis provides lessons from the past and milestones as potential guides to the future.

Agricultural production and prices have always been cyclical. The influence of weather on production is one factor. The tendency of individuals to react rather than anticipate market signals also contributes to boom and bust periods. The length of the cycle differs with the commodity, and the weather and cyclical prices in one commodity will influence cyclical behavior in another market.

 This analysis is not intended to be a forecast of annual prices in the coming months or years. Nor is it predicting gloom and doom for agriculture. Rather, it is intended to help put current economic conditions into a historic context, better understand the factors that will influence prices and margins in the future, and help you prepare for whatever direction the market turns.

This series of papers can be found in Ag Decision Maker at http://www.extension.iastate.edu/agdm/info/agcycles.html.

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Livestock Producers May Face Limited Feed Supplies

schultek_final Contributed by Kristen Schulte, Extension Farm Management Field Specialist, kschulte@iastate.edu and Lee Schulz, Extension Livestock Economist, lschulz@iatste.edu.  

The changing weather and crop conditions over the past year have raised questions again regarding quality and quantity of feed availability for livestock producers across parts of Iowa. Some producers stretched forage supplies over the winter due to the widespread drought that affected last year’s crops. Some of these same areas are facing a potential limited supply of forage or corn for the coming year due to a wet spring that caused prevented planting or inability to harvest early forages. As of the first week of July, over 70 percent of corn, hay, and pasture acres are in fair to good condition; however, crop progress in much of northeast and north central Iowa is behind the other regions of the state. Although it is unknown what the rest of the growing season will bring, livestock producers can start to plan if they anticipate limited feed inventories. Livestock producers should evaluate feed inventory, feed required and financial position.

Calculating Feed Inventory

Feed inventory can account for what is currently on hand and what is expected to be harvested this growing season as feed for the coming year. Inventory should be recalculated at the end of harvest. All forages and grain allocated for feed need to be accounted for. Forages in upright silos or bunkers can be calculated with estimated capacity tables based on dry matter (DM) and size of the silo or bunker. Feed grain stored on farm will need to be accounted for based on estimated capacity measurements or starting amount less shrink and amount fed. Also, pasture conditions should be monitored to account for supplemental forage if needed.

Feed Inventory Required

Livestock inventory needs to account for all animals that consume raised forage or grain. For each species type, total tons of raised feed fed per year is needed. Also, one needs to account for expected livestock inventory, accounting for expansion or fluctuation in inventory. Daily rations or weekly feed amounts can be used to reach a yearly feed intake value for all raised feed. Differences in DM or nutrient quality may influence amount of feed required over a years’ time. Total feed required will need to last until the following year’s harvest or feed availability date (e.g., alfalfa/grass – June 1; corn silage – September 15; corn – October 1); also, this time can be extended as some forages need to ferment before feeding.

The difference between raised feed available after 2013 harvests and annual feed inventory required will determine if additional feed is needed.

Low Feed Inventory

If feed needs surpass feed availability the producer has a shortage of raised feed. If there is a surplus of feed inventory, one should evaluate if there is an adequate amount of needed carryover. If there is a shortage, one should plan for purchase of additional feed and/or evaluate alternative feedstuffs with their nutritionist or livestock specialist. Although producers may want to save money when purchasing additional feed, it is important to keep in mind quality, feed efficiency, and adequate nutrition for long term viability.

Financial Impact Considerations

Some feed decisions may have an effect on the bottom line. Is purchasing feed a financially feasible solution based on projected breakeven and profitability? What funds are available to purchase additional feed? How do crop insurance proceeds from prevented planting acres correlate with purchased feed at market prices? What ration alternatives can be made to accommodate feed costs or limited feed availability and what are the associated costs? How do these changes affect feed cost per head and how does that compare to your desired feed cost benchmark? All of these answers are ones that each livestock producer will need to evaluate for their operation.

ISU Extension Resources

Estimated feed rations for beef, swine, ewes, and dairy can be found in the livestock budgets on Ag Decision Maker, http://www.extension.iastate.edu/agdm/livestock/html/b1-21.html. A sample feed inventory worksheet can be found on the ISU Extension Dairy Team website, http://www.extension.iastate.edu/dairyteam/sites/www.extension.iastate.edu/files/dairyteam/ISURecovery44FeedInventoryAidMgmt.pdf.

 

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A Few Fireworks before the 4th (6/28/13)

Chad Hart , ISU Extension Grain Marketing Economist, provides a summary of the latest USDA report.

97hartsmWhile the stocks numbers were a little tighter than expected, the big news in the Acreage and Grain Stocks reports was the corn planted area.  The consensus was for significantly lower corn area, with some shifting to soybeans.  The reports came back with a slight increase in corn area and a more sizable increase in soybeans.  Needless to say, the corn number was a blow to the markets.  But beyond the corn planting number, the more interesting story may be the harvested area projection.  Based on the June survey, USDA projected that 89.1 million acres of corn would be harvested.  Will the soggy conditions in the western Corn Belt, especially Iowa, lower this number as we move through the growing season?

 

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Communicating with Landlords, Lenders, and Grain Dealers

Leibold_K03-LContributed by Kelvin Leibold, Extension Farm Management Field Specialist, kleibold@iastate.edu.

If you haven’t already started to talk to your landlords, lenders and grain dealers you may want to take some time to bring them up to date with what is going on with your farming practices. Plans that were put in place months ago are being revised due to events beyond anyone’s control.

Keeping them up to date with what is going on with your farm operation is critical. Some farmers are going to take “Prevented Planting” option for corn and possible for soybeans. Many of the landowners will not understand why tenants took that option. The idea of not planting may seem unreasonable. Producers are trying to maximize returns considering unpredictable outcomes such as yields, prices, and input costs such as drying costs or cover crops. You need to communicate this to your landlords. Negotiation of rental rates for 2014 will soon be underway so providing information such as satellite pictures of the farm can help “tell the story”.

Lenders, for the most part, understand the challenges you face. Most of the producers have some level of crop insurance. However, if the timing of the payments for claims or the total income available to service debt is going to be an issue you need to visit with your lender about restructuring or adjusting the timing of payments. You may also have some issue regarding your income tax liabilities and may need to spend some time with your tax advisors on how to deal with the change of timing of your income. There may be options if you need to defer income if you may end up with two years of income in one tax year.

Many producers have forward contracted grain to end users. These end users need the commodity to operate their plants, make feed, or meet their export contracts. The sooner these people are aware of challenges you may have in meeting these contracts the sooner that both of you can start to work on ways to mitigate the impact. Defaulting on these contracts is not a viable option.

Communicating early and often will go a long ways to deal with these issues. The Ag Decision Maker has several articles on improving your communication skills.  File C5-116 Improving Business Communication Skills https://www.extension.iastate.edu/agdm/wholefarm/pdf/c5-116.pdf gives some suggestions. In addition to landlords and lenders you may face challenges with your own family or co-workers in these stressful times. File C6-56 Good Communication Can Help Solve Problems http://www.extension.iastate.edu/agdm/wholefarm/pdf/c6-56.pdf can help with communication with family.

If you feel overwhelmed or are looking for some answers check out the Iowa Concern website    http://www.extension.iastate.edu/iowaconcern/ or call the HOTLINE at 1-800-447-1985.

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Farmland Values Continuing to Rise

Mike Duffy
Mike Duffy

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

Participants at this year’s Iowa State University Soil Management and Land Valuation (SMLVC) conference projected Iowa farmland values would average $9,425 per acre on November 1st of this year.  This would represent a 14% increase over the Iowa State University land value survey the increase would be from November to November.

The conference participants also estimate land values 18 month in advance.  The estimate for November 1st 2014 is an average $10,042 per acre.  This is a 6.5% increase over their projection for November 1st 2013.

The SMLVC is the longest running conference at Iowa State.  This was the 86th year.  Since 1964 the participants, mostly farm managers, rural appraisers, lenders and real estate brokers, have been asked to project land values 6 and 18 months in advance.  In addition they are asked to estimate the value for two distant years.  The conference is approved for continuing education credit for real estate brokers and appraisers.  This year 280 people attended the conference.

The participants are usually very accurate for the 6 month projection.  Since 1964 the 6 month projections have averaged 2% below the final Iowa State land value estimate.  The group is slightly worse for the 18 month projection averaging 6% below the ISU value.  For the past decade the group has averaged only 1% higher for 6 month projection but the 18 month projections over the past decade have averaged 9% below the final ISU land values for that year. 

The estimates have varied widely in times of rapidly changing land values.  The group missed the major turns in land values over the past 50 years.  Nonetheless they have averaged very close to the final land value for the year.

The group projected the high one-third of Iowa farmland would average $11,599 per acre on November 1, 2013.  They also projected the average and low third would be $9,260 and $7,379 per acre respectively. 

What will land values do in the coming months is an open question.  Will the experts’ projection miss a major turn or will they continue to be quite accurate with their forecasts?  No one knows for sure but the groups’ projections do represent the collective thinking of a large number of farmland experts in Iowa.

There is considerable discussion whether or not Iowa farmland is on a speculative bubble.  For now the fundamentals of high income and low interest rates continue to hold.  For how long is a legitimate question but at least for now the experts expect land to continue to increase but at a slower rate.

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