Cash rent lease agreements are popular because they are intended to be simple, relieving the owner of making decisions throughout the year and giving tenants the freedom to make their own decisions for raising a crop.
Fluctuating markets, the risk and returns from changing prices, yields and costs are all borne by the tenant, making it a challenge for a landowner to decide a fair price for the land.
The Iowa State University (ISU) Extension and Outreach Ag Decision Maker (AgDM) website provides several resources to address that challenge.
The Ag Decision Maker leasing page is a portal to all Iowa State resources on improving farm lease contracts.
The decision tool, Cash Rental Rate Estimation, is a user friendly spreadsheet to compare different methods for computing a cropland cash rent. It includes inputs for current prices, typical farm yields and estimated production costs to provide answers based on projected returns to the land.
Users can estimate rents based on a share of gross income, yield potential, CSR, land value, tenant’s residual or a crop share equivalent. Detailed information on each method is available in the coordinating information file, Computing a Cropland Cash Rental Rate.
According to Tim Eggers, ISU Extension specialist, many lease rates are being negotiated through the winter months. “There is a common misperception that rents are set before the lease termination deadline of Sept. 1,” said Eggers.
“Landlords or tenants who want to make a change in their existing lease, whether it is oral or written, need to provide a notice of lease termination to the other party prior to Sept. 1. However, the leasing year doesn’t begin until March 1. Many lease rates and conditions are negotiated after harvest and even in the winter.”
The leasing page, www.extension.iastate.edu/agdm/wdleasing.html, is a portal to rental surveys, lease forms and advice on how to improve farm lease contracts. The cropland cash rent decision tool and information file are available online, at county ISU Extension offices, or by contacting Ag Decision Maker at: [email protected].