By Ann Johanns, Alejandro Plastina, Kelvin Leibold, Iowa State University Extension
Negotiating leases can be complicated, especially for farmers and land owners who are unsure of future grain prices, yields and government payments. Iowa State University Extension and Outreach’s Ag Decision Maker website has updated information on various types of leases and forms to make the process easier for farmers and renters.
“This year’s lower grain prices are forcing many farmers to revise their budgets in an effort to remain profitable,” said Alejandro Plastina, assistant professor of economics and extension economist with Iowa State University. “Where can farmers cut costs without impacting yields? One way to cut costs and save money may be by negotiating cash rents to a sustainable level.”
Ag Decision Maker specialists say tenant and landowners are in negotiation on leases through the winter months. “The deadline to terminate a lease was Sept. 1, but many lease negotiations will go on now through early next year,” said Ann Johanns, program specialist with ISU Extension and Outreach. “It helps to get rental agreements decided early so the tenant can plan for those acres when purchasing inputs for next year.”
The Ag Decision Maker website has leasing decision tools to help farmers, according to ISU Extension and Outreach farm management specialist Kelvin Leibold. “There are resources on the website to help when updating or negotiating a lease. If you are seeking help with rental agreements, our extension farm management specialists can help address questions that landowners, tenants or other agri-business professionals may have about current issues related to farmland ownership, management and leasing arrangements,” he said.
Johanns said that more than half of Iowa’s farmland is rented and strong landlord and tenant relationships are important. Typical Iowa farmland cash rental rates decreased by $14 an acre from 2014 to 2015; every district in Iowa showed a decline in reported rental values. The decreases ranged from $24 in central Iowa to $4 in northeast Iowa – which reported the highest average in 2015 at $273, and the lowest district value was $187 in south central Iowa. Recent surveys (Realtors Land Institute, Federal Reserve Bank of Chicago) have shown continued declines in land values, and that trend will appear in 2016 rental values as well.
Other considerations
While the rental rate often is the main discussion point when it comes to lease negotiations, there are other factors the tenant and landowner also may want to consider this year. If the lease has been done over a handshake or by phone in previous years, consider putting it in writing for 2016. Also, consider having a discussion on conservation practices, either those being done by the tenant that the landlord may not be aware of or new practices that the parties might be interested in implementing. Additional information including lease supplements for adding long-term improvements such as conservation practices or tile drainage can be found on the Ag Decision Maker website.
Source:iastate.edu