Higher Crop Prices Are Boosting Cash Rents

Jump in grain prices is prompting landlords to ask for increased cash rental rates for crop ground.

At the annual Integrated Crop Management conference at Iowa State University last week, the talk often turned to how recently higher grain prices are expected to continue strong for corn and soybeans in 2007.
"I've had several calls from landlords who want to increase the amount of rent per acre they are charging farmers for cropland," says George Cummins, ISU area extension crop specialist at Charles City, Iowa. These landlords point out that they reached an agreement with their tenants last August, based on expectations of $1.80 corn. Since early fall, however, corn has shot up to above $3 per bushel and the landlords think the farmers who are renting the land could afford to pay more for cash rent.

What can you do, and can't you do, legally at this point, with regard to cash rental rates in Iowa for 2007? Steve Johnson, ISU extension farm management specialist in central Iowa, offers the following guidelines.

What is a "privilege rent"?

Legally, if you have not provided some sort of legal termination notice on or before September 1, 2006, the cash rental agreement will stay the same for the 2007-growing year, says Johnson. "I think what we're seeing now is a lot of landowners who want cash rents because they see these higher corn and soybean prices and would like to be rewarded," he adds.

In some cases, landlords and renters are getting together and making some adjustments in their previously-agreed upon rental agreements. One such adjustment is called the "privilege rent."

The landlord says to the tenant—"If you give me an extra $5 or $10 per acre you get the privilege of farming my farm in 2007."

Pressure mounts to increase cash rent

That may rub some farmers the wrong way, as their costs are going up as well, but landlord-tenant relationships have always been a tough issue. "I think they will continue to be," observes Johnson. "I would anticipate that we're going to see even more pressure on cash rents in 2008 and perhaps 2009 too, depending on where we go with these higher crop prices."

For 2007, Johnson anticipates cash rents are going to go up 5% to 10% per acre in a number of cases, as higher corn prices lead the way.

Johnson encourages tenants and landlords to be good listeners and understand some of the financial issues farmers face. "As you raise cash rent, you also raise the likelihood of corn on corn, especially on the ground that is well-drained," he says. "Let's be discussing these things out-front. Landlords and tenants need to talk to each other and get their concerns resolved."

TAGS: Soybean
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