Iowa State University Extension holds a series of farmland leasing meetings across the state each summer where you can pick up valuable information. The meetings are designed for both landlords and tenants.
At the meetings ISU farm management specialists explain the various types of crop leases and how to determine a fair rent. They will also review the results of ISU's cash rental rate survey for 2008.
The meetings are held in July and August and approximately two dozen of these meetings will be held at various locations. The first one will be held July 17 at Le Mars in northwest Iowa. You can contact your county ISU Extension office to find the date when the nearest meeting to your location will be held. The dates and locations are also posted on ISU's Ag Decision Maker Web site www.extension.iastate.edu/agdm.
Deadline for renewing leases is Sept. 1
The reason the meetings are held in July and August is to help farmers and landowners prepare for the next crop year, says Steve Johnson, ISU Extension farm management specialist in central Iowa. The deadline for serving notice of termination if either party wants to make changes in their existing farm lease is on or before September 1 of each year. In Iowa, this is the law when 40 or more acres are involved.
"In Iowa you must serve notice to the other party if you want to terminate or revise your rental agreement for the coming year," he explains. "Of course, the lease can be terminated or changed after September 1 if both the landlord and tenant agree to the change. But if neither party serves notice on or before September 1, the lease stays in effect for another year. In other words, the lease automatically renews for another year with the same terms and conditions as the original lease."
Johnson suggests you send a written notice to your landlord or tenant if you wish to change the terms of the lease for next year. Do it at least a week prior to the September 1 deadline, which falls on Labor Day in 2008. In fact, he says you may want to hand-deliver your termination letter to the other party or send it by certified mail. In both cases you should request a signature to have proof that the other party received this notice to terminate the current lease.
Cropland rental rates up 18% for 2008
The latest ISU survey shows farmers in Iowa are paying an average of 18% more in cash rent for cropland in 2008 than in 2007.
"Cash rent for cropland has increased significantly in 2008, driven by the sharply higher corn and soybean prices of the past two years," says William Edwards, Iowa State University Extension economist.
Results from the statewide survey taken this spring were released recently. The survey indicates the average cash rent for corn and soybean land in the state for 2008 is $177 per acre, compared to $150 in 2007. This is the largest increase in a single year since the statewide survey was initiated in 1994.
Average tops $200 per acre in many counties
All of the 12 areas in Iowa showed increases, ranging from $18 to $32 per acre. Average estimates exceeded $200 per acre in many counties.
The intent of the ISU survey is to report typical rents in force for 2008, not the highest or lowest values heard through informal sources. Rental values were estimated by asking over 1,000 tenants, landowners, farm managers, lenders and other people familiar with the land market what they thought were typical rates in their county for high-, medium- and low-quality row cropland, as well as for hay and pasture acres.
Opinions about rental rates varied widely in this year's survey, even within counties. That indicates a great deal of uncertainty this year, notes Edwards.
Soaring grain prices are big factor
The most positive factor affecting rents has been higher grain prices, especially for corn. Consistently good yields in recent years have also lent support. On the negative side, escalating costs for fuel, fertilizer, seed, pesticides and machinery have offset some of the higher revenues. Wet, cool weather and flooding in Iowa may dampen competition for rented land for 2009.
The latest survey also presents typical dollars of rent being paid per bushel of corn and soybean yield for each county, based on the county average yield for each crop during the last five years. This year the rent per bushel ranged from $1.00 to $1.20 for corn and from $3.35 to $4.24 for soybeans across the 12 areas. The average rental rate per point of corn suitability rating was also estimated, and ranged from $2.15 to $2.50 for most counties.
These values are useful for adjusting rental rates for higher or lower than average productivity levels on individual farms, he notes.
How do you figure a fair cash rent?
The survey results are intended to be used only as guidelines. The appropriate rent for an individual farm should take into account factors such as fertility levels, drainage, USDA program parameters, size and shape of fields, existence of seed production or manure application contracts, local grain prices, and other services provided by the tenant.
What is a fair rent to pay for corn and soybean land in Iowa? There are resources to help you figure that, says Edwards. Those resources include ISU's Ag Decision Maker information file C2-20, "Computing a Cropland Cash Rental Rate," and file C2-21, "Flexible Farm Lease Agreements." Both of these include decision file electronic worksheets to help analyze leasing questions.
ISU's Ag Decision Maker Web site is at www.extension.iastate.edu/agdm. Look under "leasing."