Do You Want To Change Your Cropland Lease?

You need to deliver your termination notice soon, or the existing lease will stay in effect for 2009.

If you are a tenant who wants to change the terms in your cropland rental agreement, you need to notify your landlord soon. Likewise, if you are a landlord who wants to make a change, you need to notify your tenant. The deadline to cancel or make changes in your lease agreement is Sept. 1, according to Iowa law. You need to give a termination notice to your landlord or tenant before then.

With so much uncertainty over grain prices and crop production costs for 2009, there are a lot of questions being asked by farmers about cash rental rates--what is a fair amount to pay? Some people are interested in switching from a straight- cash rent to a flexible lease for cropland.

"You need to get to one of our farmland leasing meetings in Iowa, to learn more about this topic," suggests Steve Johnson, Iowa State University Extension farm management specialist in central Iowa. There are eight ISU Extension area farm management specialists such as Johnson scattered over the state, and ISU is holding 50 of these meetings in July and August.

Questions about flexible cash rent leases

"At these meetings you'll be updated on farmland values and cash rental rates, and anticipated crop production costs we see for 2009," says Johnson. "We are also discussing flexible cash leases, as there is a lot of interest in those. We will also give you an early glimpse at what the new 2008 farm bill means."

The workshops are designed to assist landowners, tenants and other agri-business professionals with issues related to farmland ownership, management and leasing agreements. "The meetings began July 17 and continue through Aug. 25," says William Edwards, ISU Extension ag economist. "Each workshop attendee will receive a set of useful materials about farm leasing arrangements."

Besides information from the latest ISU Extension cash rental rate survey and land values survey, other topics include comparisons of different types of leases, lease termination, impacts of yields and prices, calculating a fair cash rent, using spreadsheets to compare leases and available Internet resources.

You are encouraged to pre-register now

A list of scheduled dates, times and locations is at www.extension.iastate.edu/agdm/info/meetings.html. "To locate a meeting near you, you can also contact your county ISU Extension office," says Edwards. "You can either pre-register or pay at the door. You get a booklet from ISU which is a good resource on cropland rental topics."

For land owners and tenants to reach agreement on a rental arrangement for cropland, the people who own the land would like to have as much revenue as possible, while those who are renting land would like the landlord to also share in the risk. That's where a flexible leasing arrangement may fit in.

"The flexible rental arrangements are typically cash rent, but they are triggering an additional payment," says Johnson. "However, those payments aren't made by the farmer to the landlord unless that farm or that county has large yields and/or high prices."

Thus, with flexible cropland leases, the trend in Iowa is that landlords and tenants are moving to revenue triggers. "Being able to understand that as we have higher crop prices in years when we have good yields on those farms, that's when usually the tenant would be more willing to pay higher cash rent," says Johnson. "However, we are going to see all sorts of issues that affect rental rates and land rental arrangements across Iowa for the coming year."

For example, flooding and other weather-related problems that affected a number of farmers are a factor that will be considered by landlords and tenants.

What is effect of new 2008 farm bill?

What about the new 2008 federal Farm Bill recently passed by Congress and signed into law? What are the provisions in it that will affect your farming plans for next year? That's also a topic that will be explained at these meetings.

"First, you need to separate 2008 from 2009," says Johnson. "For 2008 you need to go now to the USDA Farm Service Agency office in your county and sign up for the traditional program we've had for the last six years. You'll get 22% of your direct payment now; the balance of the direct payment will be made in October."

You also need to certify your 2008 planted acres with FSA. That deadline was extended to August 15. Go to FSA and certify your acres by completing form 578, says Johnson. And if you have acres that were 'prevented planting' or are abandoned this growing season, you need to complete FSA form 576.

Go to FSA to update your yields for ACRE

Looking ahead to 2009, there is a lot of interest by farmers in the new ACRE program. USDA hasn't yet announced when farmers will be able to sign up for ACRE for 2009. Rules are still being written. Johnson anticipates that most everyone will want to update their yields on their farms for 2004 through 2008. That's because there will be a farm revenue trigger with this ACRE program.

Chances are the yield is going to be higher over those years than any other five before it. And with this ACRE program you get to use a 5-year Olympic average. So if you know what your yield is on a particular farm, by the FSA farm number, you can throw out the high yield. In many cases that was the yield you got in 2004. You also get to throw out the low yield.

"Olympic average means throw out the high and throw out the low, so it will be those three middle yield years that you use," explains Johnson. "For many of the farms in Iowa, it will be 2005, 2006 and 2007 that will be used."

For more information on cropland leasing and to watch for information about the new Farm Bill, go to Johnson's Website at ISU Polk County Farm Management or www.extension.iastate.edu/polk. "Also, most of our spreadsheets are on the Extension Ag Decision Maker website," says Johnson. Or contact your county ISU Extension office.

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