FEATURING Land, Rent, Custom Rate Surveys Legal Considerations Worksheets Historical Data Written Forms Glossary Resources

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1 July 2016 The Farm Leasing Arrangements booklet offers many farmland leasing publica ons and resources in a single document. It is designed for use by farmland owners, tenants, and agricultural professionals. This book complements farmland leasing mee ngs, the Farm Leasing Arrangements online course, and provides a comprehensive set of current leasing publica ons from Iowa State University Extension and Outreach. FEATURING Land, Rent, Custom Rate Surveys Legal Considerations Worksheets Historical Data Written Forms Glossary Resources

2 Table of Contents Improving Your Farm Lease Contract 3 Developing a Farm Newsletter for Landlords 13 Iowa Farm Leases: A Legal Review 15 (footnotes not included) Reducing Nutrient Loss: Science Shows What Works 23 Surveys 2015 Farmland Value Survey (Iowa State University) 27 Farmland Value Survey (Realtors Land Institute) (April 2016) 35 Cash Rental Rates for Iowa 2016 Survey 37 Iowa Farmland Rental Rates, (USDA) 49 Farm Building Rental Rate Survey (North Central Farm Management Extension Committee) Iowa Farm Custom Rate Survey 52 Survey of Iowa Farm Leasing Practices, Worksheets Computing a Cropland Cash Rental Rate 65 Flexible Farm Lease Agreements 69 Data Cash Corn and Soybean Prices (July 2016) 73 Iowa Corn and Soybean County Yields 74 Estimated Costs of Crop Production in Iowa Historical Costs of Crop Production 91 Iowa Production Cost Report (Bi-weekly June 2016 report) 93 Example Written Forms Iowa Cash Rent Farm Lease (Short Form) 94 Notice of Termination of Farm Tenancy 97 Appendix Glossary 98 ISU Extension and Outreach Farm Management Resources 100 The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann Kress, Vice- President for Extension and Outreach, Iowa State University of Science and Technology, Ames, Iowa.

3 Ag Decision Maker Improving Your Farm Lease Contract File C2-01 A guide to help you better understand the business of farmland leases Importance of Leasing More than half of Iowa s farmland is rented to tenant operators. In parts of central and northern Iowa half to two-thirds of the land is tenant-operated. On the other hand, in south central and southeast Iowa, slightly less than one-half of the land is farmed by a tenant. The trend over the past several decades has been for more of Iowa s farmland to be leased rather than operated by its owners. In many cases, retired farmers or their heirs wish to continue to own farms, but do not want to operate them. Farmers with limited capital also find that they can more easily reach an efficient scale of operation by renting rather than owning. Leasing farmland involves a business agreement between the owner and the operator. A farm lease is a legal instrument that describes that agreement. The lease provides the basis for combining the landlord s and the tenant s resources of land, labor, capital, and management to efficiently produce farm commodities. Variations in leasing arrangements occur because of the differences in the productive capacity of the land and improvements, the contributions made by each party, and the personal goals of the tenant and owner. Rental terms need to be revised periodically to keep them up to date. The lease agreement also protects the legal rights of all parties involved. Reasons for Farm Leases Land is an expensive resource. A large capital investment is required to purchase enough land to provide the farm family an opportunity to earn a satisfactory living. A typical full-time farmer in Iowa today operates more than 800 acres. The average value of Iowa farmland is over $8,000 per acre. Therefore, the land investment for a commercial farm today can easily exceed $6 million. Many young farm families cannot afford to purchase farmland because they do not have enough capital for a down payment, or the income will not be sufficient to meet the financing payments. Young families often have labor, some operating capital, machinery and management ability that they wish to use in a farm business to produce income for living expenses and future investment or debt reduction. If they are not in a position to purchase land, they can rent land and build equity for a future purchase. A common trend is to operate a combination of owned and rented land. This allows the operator to have a home base with machinery and grain storage while leasing additional acres. Many individuals or institutions that own land are looking for someone to farm it to provide a return on their investment as well as maintain its productivity. Land ownership can also provide a hedge against inflation through appreciation in land values over time. Many landowners are former farm operators who have retired and who wish to retain their investment in the land for security, retirement income, income tax deferral, and sentimental reasons. Common Types of Leases The four most common types of leases used in Iowa are the fixed cash lease, the flexible cash lease, the crop-share lease, and the custom farming contract. The common terms of these leases are described below. Fixed Cash Lease Under a fixed cash lease the tenant pays a given amount of cash rent per acre per year for the use of the farm resources. The landlord may put some restrictions on what crops can be grown, or what tillage, conservation and pest control practices can be used. Other than this, the tenant has a free rein in planning the crop and livestock production program FM 1564 Revised July

4 Page 2 on the farm unit, and receives all the crop and USDA commodity program payments. Flexible Cash Lease A variation of the fixed cash lease is a flexible lease, in which the actual rent to be paid depends on the actual yields attained and the selling prices available during the lease period. This ensures that the rent paid is in line with the profitability of the crops grown that year. Sometimes government payments and crop insurance benefits are also included in calculating the gross revenue. The landowner shares some of the risk of low yields or declining prices, but also shares in the extra profits when prices and/ or production exceed expectations. Some flexible leases also take into account crop input costs when determining the final rent or bonus. Publication FM 1724 (AgDM C2-21), Flexible Farm Lease Agreements has more details. Crop-share Lease The distinguishing characteristic of a crop-share lease is that the owner receives a share of the crop and USDA payments as a return for the land resources used, but no cash payment. In Iowa, a typical division for corn and soybeans is for the landlord to receive one-half of the grain. A recent variation is a crop-share lease with a small cash payment to offset some of the seed technology fees or reduced tillage. In other regions where farmland values are lower, the owner may receive only 25 or 30 percent of the crop. The owner s share of a hay crop varies, depending on how the costs for establishing the seeding were shared. In some cases, the tenant pays a cash rent for land in pasture or hay. There may be a separate rental charge for a good set of buildings or grain storage facilities. The owner normally furnishes land and buildings and pays half of the costs of inputs such as fertilizer, seed, and pesticides when the crop is divided Owners are usually responsible for drying, storing and marketing their share of the crop, as well. The tenant usually furnishes all the labor, fuel, equipment, and the other half of the shared expenses. Many variations on sharing of expenses Improving Your Farm Lease Contract exist, however. Publication FM 1811 (AgDM C2-15), Survey of Iowa Farm Leasing Practices, provides more details about the sharing of expenses under a crop-share lease. Custom Farming Contract Under a custom farming contract the operator supplies all the labor and equipment needed to perform tillage, planting, pest control, harvesting and storing of crops. The landowner pays all other expenses, and receives all the crop and USDA payments. The custom operator receives a fixed payment per acre from the owner, or a fixed payment for each operation performed. Some agreements pay the custom operator a bonus for meeting certain planting date or yield goals. Others provide for the operator to receive a percentage of the crop instead of a cash payment, generally from 20 to 25 percent. This is sometimes referred to as a net share lease. If the custom operator takes responsibility for purchasing and delivering crop inputs, the cash payment or share of the crop is generally higher. Publication FM 1823 (AgDM A3-15) Custom Farming: an Alternative to Leasing has more details. Advantages and Disadvantages of Different Types of Leases All types of leases have advantages and disadvantages to each party. The tenant and owner should consider them before choosing the type of lease and the terms that should be incorporated in it. Fixed Cash Lease Advantages of a fixed cash lease are: The lease is simple with relatively few chances for misunderstanding. The owner is relieved of making day-to-day operating decisions. The owner has very little financial risk. The tenant has maximum freedom in planning and developing the cropping and livestock programs. The tenant has fewer records to keep when multiple landlords are involved. 4

5 Improving Your Farm Lease Contract Disadvantages and potential problems of the fixed cash lease are: A fair cash rental rate may have to be renegotiated each year. Cash rents are likely to be too low in times of rising prices and increasing yields, and too high in times of low prices or low yields. Selling prices and production costs may be higher or lower than anticipated when the rental rate is set. Tenants are required to supply more operating capital. Tenants bear all the risk of production shortfalls. Flexible Cash Lease Advantages of a flexible cash lease are: The amount of rent to pay increases or decreases automatically from year-to-year as prices and yields change. The need for the owner and tenant to renegotiate the rental rate each year is significantly reduced. Disadvantages and potential problems of the flexible cash lease are: Both parties must agree on a formula for setting the cash rent each year. Both parties must agree on how to determine the prices and yields to include in the formula. There is uncertainty about how much the tenant will pay and the owner will receive each year. Crop-share Lease Advantages of a crop-share lease are: Risks associated with price and yield variations are shared. The owner is more involved in making decisions and marketing the grain during the year. Both parties share the benefits from adoption of yield-increasing technology, or unexpected high yields or prices. The owner receives more information about yields and inputs used each year. A second USDA payment limit is created. Disadvantages or potential problem areas of a cropshare lease include: The landlord and tenant must agree on how production expenses will be shared. Page 3 Adjustments for sharing costs for storage and drying facilities, herbicides that reduce field work, or fertilizer and pesticide application may have to be made. The cropping plan to be followed and whether or not the farm participates in government programs must be agreed on. Added cash rent for the use of buildings and storage facilities may have to be negotiated. If the owner s and tenant s grain is stored in the same bin, marketing decisions have to be made jointly. The landowner may be considered a material participant, and farm income will be subject to self-employment taxation. Custom Farming Contract Advantages of a custom farming contract are: There is very little financial risk for the operator. The owner benefits from any unexpected high prices, yields or government program payments. Only one party is responsible for marketing grain and making production decisions. Agreements are usually fairly simple to negotiate. Disadvantages and potential problems of custom farming contracts are: The owner bears all the risk of low yields or prices, or high input costs. The number and timing of field operations to be done each year may have to be modified, depending on weather conditions. The operator has to set priorities among the custom farmed land and other rented or owned land. The owner must communicate to the custom operator the cropping system, fertility program, and type of pest control to be used. Crop inputs such as seed, fertilizer and pesticides must be purchased and delivered in a timely manner. The landowner may be considered a material participant, and farm income could be subject to self employment taxation. 5

6 Page 4 Key Areas of Decision Making There are certain key areas in developing a farm lease that should be given very careful consideration by both parties. The answers to these questions will depend on the intent of the parties in the leasing arrangement and the bargaining position of each. Sharing Costs A question that frequently comes up is the landlord s responsibility in sharing herbicide costs for weed control that may be a partial or complete substitute for cultivation or other tillage methods. Most landlords agree to furnish half of the cost of these materials under a crop-share lease. Some feel that where no-till or minimum tillage practices are used they should not have to pay a full 50 percent of the cost of herbicides. See publication FM 1811 (AgDM C2-15), Survey of Iowa Farm Leasing Practices for more information. There are many variations in how the costs for custom application of fertilizer and pesticides are divided. Therefore, it is advisable to discuss these items in advance and state in the lease whether or not the landlord will share in any of these costs. Harvesting How will costs associated with combining, drying, transporting, and storing crops be shared under a share lease? When the corn drying facilities are part of the rental unit, the landlord often furnishes the dryer and storage facilities. If the corn drying unit is portable it may be jointly owned, or either party may own it and charge the other party an established amount for its use. The fuel and power costs for drying are normally shared in the same proportion as the crop is divided. In some cases the tenant is paid extra for delivering the owner s share of the crop from farm storage to an elevator or processor. Removing Corn Stover Under Iowa law a farm tenant has the right to remove stover (stalks, leaves, cobs) left in a field after harvesting unless the lease states otherwise. Stover can be used as feed or bedding, or sold off the farm. Tenants and landowners can specify a different arrangement in a written lease, or limit the amount of stover removed. Improving Your Farm Lease Contract Maintaining Fertility Farm owners often worry about whether a tenant will maintain or improve the level of fertility on the farm. Regular soil testing can establish whether additional nutrients are needed. While tenants should be discouraged from mining the soil, applying additional fertilizer (especially phosphorus and potassium) when levels are already testing high or very high not only wastes money, it contributes to nutrient run off and downstream pollution. Applying lime to soils contributes to productivity by controlling the acidity of the soil. Since lime applications usually last for several years, their cost is usually the responsibility of the landowner, and is reflected in the rental rate of the land. Tenants may pay for the lime and pro-rate the cost of the lime over future years with the landlord agreeing to reimburse the tenant if the tenant doesn t rent the land in future years. Some long-term crop-share tenants may divide the cost of lime. Controlling Weeds and Maintaining Buildings Weed control in crops has improved considerably in recent years with the introduction of herbicide resistant seeds. However, many landowners also place a high value on controlling weeds along fence rows, in ditches and around building sites. Indeed, cutting or spraying weeds classified as noxious is required by law. Iowa Code Section (amended 2010) prohibits mowing ditches before July 15, except within 200 yards of dwellings and in certain other situations. Maintaining the appearance and functionality of farm buildings and fences is often a high priority for landowners, as well. Even if some buildings provide no substantial benefits to the tenant, he/she may be able to provide labor and machinery for carrying out repairs at a considerable savings to the landlord. Owners should generally pay for materials and supplies, especially if the tenant is providing labor. While such practices may have little economic payoff for a tenant, they can contribute to a longer and more harmonious leasing agreement, and often require a minimal amount of time and cost. 6

7 Improving Your Farm Lease Contract Financing Improvements There are three ways to handle the costs of making permanent improvements to a farm property such as buildings, storage structures, conservation structures, fences, waterways, and drainage tile. Option 1. The landlord provides the improvement as part of the rental agreement with an understanding that the rental rate will be increased as a result. Option 2. The cost of the improvements is shared by the landlord and tenant in some form. If the improvement is constructed on the farm, the tenant may furnish labor and machinery for the job, and the owner may pay for materials. It is useful to negotiate a provision in the lease for the tenant to be reimbursed by the landlord for the undepreciated value of the improvements if the lease period ends before the useful life of the improvement is over. Option 3. The entire cost of the improvements is paid by the tenant. As in Option 2, a provision for reimbursing the tenant for the undepreciated value of the investment is important. For more information see: AgDM C Lease Supplement for Investing in Improvements on a Rented Farm AgDM C Lease Supplement for Obtaining Conservation Practices & Controlling Soil Loss AgDM C Lease Supplement for Drainage Participating in Government Programs Most crop producers in Iowa participate in some of the commodity programs offered by the U.S. Department of Agriculture. They are usually designed to reduce price or production risk for major grain crops. Every few years new farm legislation is passed which requires landowners and tenants to make decisions about program participation. Under a cash rent lease the farm program benefits usually are paid to the operator, because that is the Page 5 person bearing the risk. With a flexible cash lease, the commodity program payment can be included in the gross revenue used to determine the rental rate each year. Under a crop-share lease the owner and tenant usually share in the program benefits in the same proportion as they share the crop. If there is a cost to participate in the program, the owner and tenant must carefully analyze the potential benefits to each party. Government program decisions can affect the rental value of a farm for several years. Conservation programs may offer short-term payments for following certain practices, as well as long-term benefits in the form of reduced erosion, increased fertility, and cleaner water. If the incentive payments do not completely offset any extra costs or reduced income to the tenant for following the conservation practices, he or she may be reluctant to participate. If the lease has only a short duration, such as one year, the long-term benefits of the practices do not offer much incentive to the tenant. The landowner may have to reduce the cash rent to offset the tenant s short-term loss of net income. Setting the Length of Lease Many farm leases are in effect for only one year at a time. In fact, in Iowa oral leases cannot be valid for more than one year. However, a recent survey showed that 43 percent of cash rent leases and 66 percent of crop-share agreements had been in effect between the same parties for more than 10 years. The maximum fixed term for a lease contract in Iowa is 20 years, but leases can be routinely renewed if both parties agree. Multi-year leases provide owners and operators with an incentive to invest in long-term improvements to the land and maintain soil fertility and conservation structures. They also avoid the uncertainty of building new relationships frequently. In Iowa, significant beginning farmer income tax credits are available to owners who rent to qualified tenants under a 2- to 5-year lease contract. In determining whether or not a lease is fair and equitable to both parties, it is necessary to consider the lease in total rather than looking only at individual provisions or sections of the lease. One 7

8 Page 6 provision in the lease may be favorable to one party, while another provision may be more favorable to the other party, and the two factors may balance out. Factors that Influence Leasing Terms Many factors influence the terms of an individual farm lease. The productivity of the land as measured by historical yields, its corn suitability rating (CSR2) index, satellite photos, drainage maps and soil type. The value of the contributions made by each party in the leasing arrangement, such as labor, land, crop inputs, machinery or management. The bargaining position and bargaining ability of each party, and the competition for rented land in the immediate area. What has been customary in the community in the past. Family considerations that cause lease terms to be highly favorable to a relative when compared with other leases, because the owners do not need as much income, want to help a child get started, or desire to keep the farm in the family. Improvements and facilities on the farm, and the condition and usefulness. Location relative to paved roads, grain processing plants, and grain buyers. The USDA farm program crop acreage bases and proven yields assigned to a particular farm. These will affect the size of some commodity program payments that are paid to the operator and owner. Incentive payments for following certain conservation practices may also be attached to the land unit. Income tax credits that may be available if the land is leased to a beginning farmer. This allows a lower rental rate to be negotiated without reducing the net return to the owner. Contracts for producing seed or other specialty crops, or to receive livestock nutrients. Access to such contracts can enhance the value of a particular property. Improving Your Farm Lease Contract Economic Considerations There are several important economic factors to consider when developing a farm lease agreement. Some of the key economic questions are: Does the lease provide a business framework for the most profitable long-term operation of the farm? Does the agreement encourage the use of the most profitable levels of capital, labor, and management in the farm business, as well as adoption of new technology? Are the returns shared between the landlord and tenant in an equitable manner when the value of the contributions made by each party is considered? Is the level of cash rent to be paid consistent with the current land market and the productivity of this particular tract of land? Is the farming unit large enough to achieve an efficient level of operation and provide a satisfactory return to both landlord and tenant? A larger tract of land may be more attractive to potential renters than a small tract. Legal Considerations Several federal and state laws affect lease terms. Such legal considerations promote an efficient business, ensure that lease provisions are carried out as intended, and protect the interests of each party. Self-employment Income A materially participating landowner must report farm income as self-employment income rather than as passive investment income. As such, it is subject to the normal self-employment tax rate. On the other hand, paying some self-employment tax will boost Social Security benefits in the future. A cash rent lease rarely qualifies a landowner as a material participant, but a crop-share lease may do so. An owner must be in the trade or business of farming in order to deduct certain expenses such as interest on operating capital or applications of fertilizer and lime. 8

9 Improving Your Farm Lease Contract Social Security Benefits Landowners under age 66 or 67 may have their Social Security benefits reduced if they are actively involved. This depends on the amount and timing of the income received. When landowners reach full retirement age there is no limit on the amount of active income that can be earned with respect to Social Security benefits. See AgDM C2-41, Leasing Arrangements and Self-employment (Social Security) Tax, for more details. Estate Tax Valuation Many farm properties can qualify for special use valuation when the estate goes through probate, which often results in a valuation below current market value. This can be advantageous for estates large enough to trigger federal estate taxes. However, one requirement for special use valuation is that the decedent or a family member must have materially participated in the business five out of eight years prior to death, and a qualified heir must materially participate for 10 years after the death of the decedent. Landlord s Liens In Iowa, a statutory (created by state law) landlord s lien exists. The lien is applicable whether the lease is for cash rent or crop-share. The statutory lien is a lien upon all crops grown upon the leased premises, and upon all other personal property of the tenant which has been used or kept thereon during the term and which is not exempt from execution, and gives the landowner preference over other security interests such as those of lenders. The UCC1 form must be filed with the Iowa Secretary of State s office within 20 days of when the lease goes into effect to perfect the landlord s lien. More details on legal issues affecting farm lease agreements can be found in AgDM C2-06, Lease Termination and Other Legal Considerations for Lease Contracts. Page 7 Communication Good communication between tenants and landowners is essential for building a successful leasing relationship. Landowners are concerned about the use and care of their farm. Nonresident owners cannot observe conditions first hand. Some spouses or children who have not been heavily involved in the management of the property may feel unsure about how to proceed with decisions. Provide Reports Tenants can borrow a technique from professional farm managers who provide their clients with written reports on a regular basis. Obviously, a report is more important with a crop-share lease than a cash lease. It may be beneficial for a tenant with a cash lease to develop an abbreviated form of reporting, especially for landowners who have a strong interest in the productivity of the farm. Sending photos to a landowner who is not close enough to observe crop conditions regularly is a very effective communication tool. Digital camera photos or video files can be easily transmitted by , or pictures can be printed and sent by regular mail. Some tenants are setting up password protected websites for individual landowners to provide information such as soil maps, fertilizer tests, and yield data. For a crop-share lease keep the accounting of expenses current. Most input suppliers will invoice each party individually. However, informing the owner beforehand that he or she will be receiving a bill, and its purpose, is recommended. Tenants renting from several owners may purchase supplies in volume and prorate the bill to each of the owners. In this situation a copy of the original invoice should be included. Explain each item on the bill, as names of farm inputs change frequently. The owner may not be familiar with commercial product terms for seed, herbicides, and insecticides, but nonetheless may have to categorize the expenses for income tax reporting. 9

10 Page 8 Crop insurance policies and some USDA programs require information about historical crop yields before a farm can be enrolled. Landowners need to have this information each year for making future decisions about participation in such programs. Have a Written Lease Written leases make the lease terms more definite and leave less chance for disagreement and misunderstanding. People tend to selectively recall only those portions of conversations that reinforce their point-of-view. It protects not only the original parties, but also assignees and heirs in case either party should die, or the farm is sold. A written lease encourages both parties to consider all aspects of the lease before the lease period begins. Decisions are made before the problems occur. In subsequent years, it provides a basis for changing provisions when conditions change. Written leases also provide documentation in case of a tax audit or for settling an estate. Lease agreements that cover more than one crop year are required to be in writing, and leases written for five years or more must be notarized and recorded at the county recorder s office by the tenant. The document should meet at least the following minimum requirements: It should contain an accurate description of the property. It should specify a definite period for which the lease is to run. It should state the kind and amount of rent, and time and method of payment (cash lease). It should specify how production, USDA payments, and input costs are to be shared (cropshare lease). Sample lease forms are available. See publications FM 1538 (AgDM C2-12) Iowa Farm Lease Form or FM 1874 (AgDM C2-16) Iowa Cash Rent Farm Lease (short form). Improving Your Farm Lease Contract Termination of a Farm Lease A farm lease automatically continues from year to year unless either party gives a notice of termination. In Iowa, a lease termination notice must be properly served by September 1, prior to the end of the lease year. This applies to both cash and crop-share leases, but not to custom farming agreements. A written lease may state a date earlier than September 1 for serving a termination notice. The requirement to terminate a farm lease by September 1 does not apply to tracts under 40 acres in size (in Iowa). However, even an oral lease is automatically renewed if it is not properly terminated in time. The termination notice must fix the termination of the tenancy to take place on the following March 1. If notice is not served, the lease continues for another crop year under the same conditions and terms. However, if mutually acceptable to all parties concerned, a lease can be terminated or modified at any time, and can have a different stated expiration date. Iowa law specifies three methods of serving a farm lease termination notice to terminate the tenancy on the following March 1. The following is quoted from the Code of Iowa, Section 562.7: Notice How and when served. Written notice shall be served upon either party or a successor of the party by using one of the following methods: 1. By delivery of the notice, on or before September 1, with acceptance of service to be signed by the party to the lease or a successor of the party, receiving the notice. 2. By serving the notice, on or before September 1, personally, or if personal service has been tried and cannot be achieved, by publication, on the same conditions, and in the same manner as is provided for the service of original notices, except that when the notice is served by publication no affidavit is required. Service by publication is completed on the day of the last publication. 10

11 Improving Your Farm Lease Contract 3. By mailing the notice before September 1 by certified mail. Notice served by certified mail is made and completed when the notice is enclosed in a sealed envelope, with the proper postage on the envelope, addressed to the party or a successor of the party at the last known mailing address and deposited in a mail receptacle provided by the United States postal service. A form titled Notice of Termination of Farm Tenancy is available as AgDM C2-19. Other forms are available from attorneys. Summary A good lease is the first step toward a satisfactory operating relationship between a landlord and a tenant. Although it is difficult to develop a lease that will provide for all possible situations, the parties should try to anticipate areas where problems could arise and include provisions in the lease to handle them. Only the parties involved can determine what is fair to each and what the final agreement should be. Many factors influence a leasing agreement, and each contract should be modified to fit the individual situation. Additional References Publications from Iowa State University Extension and Outreach Available at: store.extension.iastate.edu or Ag Decision Maker files are available at under Whole Farm, Leasing. Rental Rate and Land Value Surveys FM 1728/AgDM C2-09, Iowa Farmland Rental Rates (USDA) FM 1851/AgDM C2-10, Cash Rental Rates for Iowa Survey (Iowa State University) FM 1811/AgDM C2-15, Survey of Iowa Farm Leasing Practices FM 1825/AgDM C2-70, Iowa Farmland Value Survey Leasing Forms FM 1538/AgDM C2-12, Iowa Farm Lease Form Page 9 FM 1874/AgDM C2-16, Iowa Cash Rent Farm Lease (short form) Lease Agreement FM 1801/AgDM C2-20, Computing a Cropland Cash Rent FM 1724/AgDM C2-21, Flexible Farm Lease Agreements FM 1823/AgDM A3-15, Custom Farming: An Alternative to Leasing AgDM C2-03, Do I need a Written Lease? Other Resources AgDM C2-05, Leasing and Land Ownership Terms AgDM C2-06, Lease Termination and Other Legal Considerations for Lease Contracts AgDM C2-41, Leasing Arrangements and Self-employment (Social Security) Tax PM 1947/AgDM C2-33, Considering Sustainable Agriculture on Your Rented Land PM 1982/AgDM C2-31, Adapting Crop Share Agreements for Sustainable and Organic Agriculture Iowa Farm Leases Legal, Economic, and Tax Considerations. ISU Center for Agricultural Law and Taxation at Farm Leasing Arrangements. A home study course on the Internet, is available at: www. extension.iastate.edu/ames. A series of farm lease forms and publications are available from Midwest Plan Service at: www-mwps.sws.iastate.edu or Lease forms for crop land, pasture land, farm buildings and farm equipment can be downloaded at no charge. Ag Lease 101 (aglease101.org) helps both land owners and land operators learn about alternative lease arrangements and includes sample written lease agreements for several alternatives. Ag Lease 101 was created by and is maintained by the North Central Farm Management Extension Committee. 11

12 Page 10 Improving Your Farm Lease Contract... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and July 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. Revised by Kelvin Leibold kleibold@iastate.edu Originally prepared by E.G. Stoneberg, former extension economist store.extension.iastate.edu 12

13 File C2-14 July Developing a Farm Newsletter for Landlords The 2012 Iowa State University Farmland Ownership Survey indicated that 55 percent of acres in Iowa are under a rental arrangement. Twenty-one percent of Iowa land was owned by someone who lived out-of-state at least part of the year. Whether a landowner purchased and farmed the land themselves, inherited it, or purchased it as an investment, communication is important. If rental settlement is the only time of communication between a landowner and tenant, it may be difficult to make changes when necessary. The Farm Newsletter One way to improve communications between tenants and landowners is for tenants to develop a farm newsletter. Producing a farm newsletter does not have to be a difficult or time-consuming task. A 2015 USDA survey found that 74 percent of Iowa farmers owned or leased a computer, 53 percent of Iowa farmers used a computer for farm business, and 74 percent of Iowa farmers had access to the Internet. In some cases, it s possible that the tenant has never met the landowner. A quarterly or semi-annual synopsis of what the tenant plans to do, and or has done, can be simple to write and update. In times of significant change, it could be crucial to maintaining the relationship. A farm newsletter could be compared to a Christmas Newsletter. Many people use this format to help friends and family catch up with each other. Much like a "Christmas Newsletter", a farm newsletter lets the landowner know what is going on. This is particularly true when the landowner lives too far from their farm to visit frequently. A farm newsletter can take several forms. It can be colorful and technical with multiple pages, or it can remain simple and be a single page. The goal of a farm newsletter is to establish a regular communication link between the tenant and the landowner. If a landowner understands how their land is being farmed, they may develop a greater investment in who is farming their land. The level of production or management information in the newsletter depends on the rental arrangement between the tenant and landowner(s). A cash rental arrangement may require little technical information. A crop-share rental arrangement requires more information, because the tenant s management decisions have an impact on landowner profitability. A flexible cash lease arrangement could benefit from sharing updates on the variables in the formula used to set the lease rate. Tenants often rent from multiple landowners. Those landowners may have multiple interests. A common component of the newsletter could provide general information about the crop situation. Tenants may want to discuss topics such as the importance of biotechnology in their farming operation and how it may have a positive environmental impact. They may want to share how they are using precision agriculture. If information has been compiled for the landowners farms, yield or fertility maps, those could be shared as well. The tenant could also provide updates on the costs of crop production. Discussing issues will allow landowners to better understand the economic and environmental impacts of current technologies. There are crucial elements of a farm newsletter that should be included. The newsletter should have a readable font, clear and concise wording, and be a reasonable length for the reader. It may be helpful to limit the length to the front and back of a single sheet of paper. Using a friendly tone should help to keep the reader interested. Relevant photos of crop progress or land improvements may encourage continued connection. If a weather event has caused the need to repair structures, before and after photos show the results and allow the landowner to stay informed. Key Elements of the Farm Newsletter A farm newsletter should include the following. Title A simple title will do. If the title is reflective of your operation, name that could help set the tone. 13 Revised by Ann Johanns, aholste@iastate.edu Tim Eggers, teggers@iastate.edu Original Authors Joe Parcell, University of Missouri J. Bob Wells, Iowa State University

14 Page 2 File C2-14 Tenant contact information Include your name, US Mail address, address, cell phone, and any other information that identifies the person to contact with any questions. Indicating your preferred contact method is encouraged. Content - The content is where you ll build familiarity. You may want to sketch out what you intend to share over time and when you plan to share that information. The newsletter could be used to share struggles, successes, and failures as you manage the landowner's land. Happenings since the last farm newsletter - This section should be a short synopsis of what has happened since you sent the last farm newsletter. General statements should be used in this section. For example, We wrapped up harvest the second week of November. The much-needed rain in mid- July must have helped because there was about average production. You may want to customize this section for each landowner with reports about improvements the owner prioritizes like fences, buildings, waterways, and wildlife habitats. Crop progress/pasture condition/livestock development - If the rental arrangement is a cropshare or flexible cash lease agreement, the landowner may be interested in knowing about crop progress. If the rental arrangement is a cash rental arrangement, an update on crop progress will help the landowner feel more connected to the farming operation. You will need to decide whether one newsletter serves landowners with different lease types or if there a common base and an additional page for landowners with each type of lease. Weather update Weather has a great impact on productivity. If the landowner lives on the farm, they can observe current effects on the land. The further a landowner is separated from their land, the less likely they are to be aware of seasonal impacts of weather. Sharing the recent and anticipated weather can help landowners understand its impact. Landowners should be made aware of the effects of severe weather, e.g. high winds and hail. Commodity prices The tenant could also provide a brief synopsis of relevant commodity prices and price trends, and discuss what futures markets are suggesting. Relate current prices to historical prices and remind the landowner of the historical variability in prices. Technology - This section can help landowners better understand technology changes in the farming operation. A growing percentage of landowners do not have experience in production agriculture. Even landowners with prior experience in production agriculture may not have knowledge of current agricultural technology. Technological adoption varies between farm operations. Competition for land is significant, and communicating your approach could be beneficial. Summary Include a paragraph or two summarizing the current situation. Use this as an opportunity to thank the landowner for the relationship and share how the different components come together. Upcoming events - Share what is being planned for the upcoming months. A winter newsletter may discuss planting intentions and the crop acreage mix being considered. A summer newsletter might include Extension and Outreach events such as leasing meetings in July and August or near-by field days. Questions to Answer Consider the purpose of a farm newsletter. How can it best establish a regular communication link between tenant and landowner? How often should tenants plan to send landowners a newsletter? Answering these questions and setting a regular schedule for distribution will make writing the newsletter a smooth task and encourage open communication between tenant and landowner.... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. 14

15 IOWA FARM LEASES: A LEGAL REVIEW By Kristine A. Tidgreni June 20, 2016 As of 2012, Iowa had 88,637 farms. ii Of those, 40 percent were farmed under a cash rent lease, and 7.1 percent were farmed pursuant to a crop share lease. iii Given these numbers, it is crucial that Iowa landowners and producers understand the legal implications and requirements of their farmland leases. Contract Considerations A lease is a contract under which a right to use and occupy real property is conveyed. A farm lease is a binding legal contract, whether or not that lease is reduced to writing. To ward off disputes over agreedupon terms, it is very important that those terms be put into writing, signed by both parties. The writing should be definite and certain and should include all of the terms the parties wish to enforce. The parties to the lease should not execute side agreements or additional promises separate and apart from the written lease. These agreements are difficult to prove and can lead to expensive litigation. Likewise, if parties choose to modify their lease, they should always record those modifications in writing. Lease Terms Iowa State University s Ag Decision Maker provides several sample leases and supplementary provisions parties can use to create a farm lease. iv It is advisable, however, for landlords and tenants to consult with an experienced agricultural law attorney before entering into any new contract, including a farm lease. At a minimum, a farm lease should always contain the following terms: Full Names and Mailing Addresses of Parties Legal Description of Property and # of Contract Acres Amount of Rent and Date Due Length of the Lease Allowed use of Land (i.e. Hunting? Purposes other than farming?) Allocation of Lime and Trace Elements over Life of Lease Tenant s Rights and Duties (i.e. Remove weeds and maintain fences?) Landlord s Rights and Duties (i.e. Pay property taxes) Indemnification Provisions 15

16 Right to Aboveground Plant The Iowa Legislature enacted Iowa Code 562.5A in 2010 in response to the growing commoditization of corn stalks. Under the statute, unless otherwise agreed to in writing by a landlowner and farm tenant, a farm tenant may take any part of the aboveground part of a plant associated with a crop, at the time of harvest or after the harvest, until the farm tenancy terminates. In other words, if a landlord does not want the tenant to have the right to harvest the corn stover, the written lease must state that the aboveground part of a plant associated with a crop belongs to the landlord. This rule applies to all farm leases, including those entered into before 2010 and continued effective through auto-renewal. v Oral v. Written Lease Although a written lease is preferable, oral leases are enforceable contracts. Generally, however, such contracts can only be proven for a one-year period. This is because the statute of frauds applies to a farm lease that is for a term greater than one year. vi The statute of frauds is an evidentiary rule that makes oral proof of contracts to which the statute applies incompetent. That means that the statute of frauds will typically bar the admission of evidence required to prove the existence of an oral farm lease beyond a one-year term. It does not, however, void such contracts or render them invalid. Recording a Farm Lease Agricultural leases for a term of greater than five years (with renewals vii ) MUST be recorded with the county recorder within 180 days of execution. viii Although the entire lease may be recorded, it is sufficient to record a memorandum of the lease containing: names and addresses of all parties named in the lease, a description of all real property length of the contract or initial term of the lease, and a statement as to whether any of the named parties have or are subject to renewal rights o if so, the event or condition upon which renewal occurs, the number of renewal terms and the length of each The failure to record a lease subject to the statute is punishable by a fine not to exceed $100/day for each day of violation. Leases for More than 20 Years Article I, 24 of the Iowa Constitution states that no lease of agricultural lands shall be valid for a longer period than 20 years. If a lease violates this constitutional provision, only that portion of the lease beyond 20 years will be unenforceable. ix The constitutional provision is not violated by a lease extending beyond the 20-year term only by virtue of Iowa s statutory auto-renewal provisions. Likewise, parties can agree to renew their farm leases beyond 20 years. The constitutional provision merely prevents a single lease from locking either party into that outcome. The Iowa Supreme Court recently ruled that Iowa Const. art. I, 24 was violated by a written lease providing for a five-year term with an option to renew for four additional five-year terms unless the tenant elected out. x The lease under review by the Court locked the landlord in for 25 years, but allowed the tenant the option to terminate at the end of each five-year period. The tenant argued that purpose of the constitutional provision was to protect tenants from oppressive landlords and that it would thus not be thwarted by upholding the renewal provision at issue. The Court rejected the argument, holding that art. I, 24 was designed to protect either party from being locked into an agricultural lease for a period of more than 20 years. As such, the Court ruled that the last five-year extension was unenforceable. 16

17 Auto-renewal of Iowa Farm Leases Iowa Code generally provides that Iowa leases for a farm tenancy automatically renew for another crop year under the same terms and conditions as the original lease unless either party provides written termination notice (in the specific manner directed by statute xi ) on or before September 1. This provision, which is unique to Iowa, can surprise an unwary landlord or tenant. The auto-renewal provision applies equally to oral leases or written leases. It also applies equally to one-year leases or multi-year leases. Regardless of the length of the term of the original lease, the auto-renewal provision extends the existing lease for just one additional year. However, a lease continues to yearly auto-renew under the statute, unless either party issues a notice of termination. In other words, without statutory notice, an automatically renewed lease will renew again. Note: It is important to realize that the auto-renewal provisions apply equally to landlords and tenants. For example, if a tenant does not wish the current lease to automatically renew for the following crop year under the same price and terms, the tenant must send statutory notice to the landlord by September 1. xii Although the auto-renewal statute sometimes impairs contractual terms agreed upon by the parties, the Iowa Supreme Court has ruled that it is constitutional. xiii Because this provision is strictly enforced, it is important that all farm landlords and tenants understand the contours of the law. Farm Tenancy The auto-renewal provision applies to a farm tenancy, defined as a leasehold interest in land held by a person who produces crops or provides for the care and feeding of livestock on the land, including by grazing or supplying feed to the livestock. xiv Interestingly, the Iowa Court of Appeals recently ruled that the definition of farm tenancy was broad enough to include a small residential acreage where a single, 38- year-old horse was grazing. xv The term livestock means an animal belonging to the bovine, caprine, equine, ovine, or porcine species, ostriches, rheas, emus; farm deer; or poultry. Consequently, under the reasoning of the recent Iowa Court of Appeals decision, a residential lease where the tenant raises backyard chickens or a pet ostrich could potentially be subject to auto-renewal, absent statutory termination notice. Exceptions to Auto-Renewal The auto-renewal statute does include several exceptions to its reach. Written Agreement to Terminate The statute begins, If a written agreement is made fixing the time of the termination of a tenancy, the tenancy shall terminate at the time agreed upon, without notice. The Legislature modified this exception to its current form in Effective July 1, 2016, the provision requires an agreement to terminate a farm tenancy to be in writing. xvi Before this change, the statute did not require an agreement to terminate to be in writing, although oral termination agreements were rarely enforced in court. It is important to note that a written agreement to terminate must be separate and subsequent to the actual xvii lease (not part of it). A lease providing for a specific termination date, even stating that the parties wish to terminate the lease on the stated date and waive the right to statutory notice, will still be subject to the auto-renewal provisions of Iowa Code Thus, parties wishing to execute an agreement to terminate the lease, must execute a separate written contract to accomplish this result. The statute provides that the written agreement will cause the lease to terminate on the agreed date. Conversely, a xviii party terminating a lease by issuing termination notice must set the termination date at March 1. 17

18 Less than 40-Acre Animal Feeding Operation The auto-renewal statute specifically states that it does not apply to a farm tenancy with an acreage of less than 40 acres where an animal feeding operation is the primary use. Before 2013, the exception included all farm tenancies that were less than 40 acres. Under the current law, all farm tenancies less than 40 acres are subject to auto-renewal unless they fall within the narrow animal feeding operation exception. An "animal feeding operation" means a lot, yard, corral, building, or other area in which animals are confined and fed and maintained for 45 days or more in any 12-month period, and all structures used for the storage of manure from animals in the operation. xix Under this definition, it would seem that only animal feeding operations such as feedlots and confinements fall under the statutory exception. Landlords or tenants should send statutory notice of termination for the lease of a small pasture if they want to avoid auto-renewal. Mere Cropper The auto-renewal statute also excludes from its reach arrangements involving mere croppers. As such, a cropper is not entitled to statutory termination notice. A cropper is "one who, having no interest in the land, works it in consideration of receiving a portion of the crop for his labor. xx By contrast, a tenant has an estate in the land for a term, and, consequently, has a right of property in the crop. The question of whether an operator is a tenant or a cropper is a jury question if the case goes to trial. xxi Default in Performance The statute specifically provides that the tenancy shall not continue because of an absence of notice if there is default in the performance of the existing rental agreement. This means that if a party breaches the terms of the lease and the other party wishes to terminate the lease due to the breach, the auto-renewal provision will not supersede the non-breaching party s right to terminate. xxii Termination Notice Procedures In order to serve proper statutory termination notice to avoid auto-renewal of a farm lease, the party wishing to terminate the lease must strictly follow the statutory requirements. xxiii Notice Method Iowa Code provides three alternative methods for serving statutory notice. Any of the following are acceptable: Delivery of the notice, on or before September 1, with acceptance of service to be signed by the party to the lease or a successor of the party. Serving the notice, on or before September 1, personally, or if personal service has been tried and cannot be achieved, by publication, on the same conditions, and in the same manner as is provided for the service of process in a lawsuit. Mailing notice before 9/1 by certified mail to the last known mailing address. The most common and usually the most efficient way to serve statutory notice is option three: mailing the notice by certified mail before September 1. Under this method, the service is completed when the notice is enclosed in a sealed envelope, with the proper postage on the envelope, addressed to the party or a successor of the party at the last known mailing address and deposited in a mail receptacle provided by the United States postal service. The courts construe the notice statute requirements very strictly. Notice will not be sufficient, for example, if it is sent via regular, instead of certified, mail. xxiv It does not matter if the intended recipient actually receives the notice and admits to having read it. xxv The notice will be 18

19 deemed invalid and the lease will auto-renew unless all statutory requirements are followed. The courts have reasoned that, without such an interpretation, the purpose of Legislature would be thwarted, returning us to jousts between landlords and tenants as to whether notice was in fact given when informal notification was used. Note: It is important that the sender of the notice retain the certified mailing receipt. Without such receipt, he or she will be unable to prove proper service if a dispute arises. Termination Date The law provides that termination notice must fix the termination of the farm tenancy to take place on xxvi the first day of March. Where one landlord sent termination notice purporting to terminate the lease xxvii on December 31, the court ruled that the notice was still valid. The court, however, ruled that the tenancy terminated on March 1, as required by Iowa Code 562.5, not on December 31 as stated in the notice. Death of a Party to the Lease Tenant At common law, the death of a crop share tenant resulted in the automatic termination of the lease. That is still the law in some jurisdictions. Because of the auto-renewal statute, however, that common law rule has been changed in Iowa. In Iowa, the death of a tenant even a crop-share tenant does not automatically terminate the lease. If a tenant dies on October 1, for example, and termination notice was not given by September 1, the legal representative of the estate of the tenant is entitled to continue to farm the ground the following crop year pursuant to the auto-renewal statute. xxviii Landlord Similarly, the death of a landlord does not cause the lease to terminate at the landlord s death. This is true even where the landlord was only a life tenant. The statute provides that a farm tenancy granted by a life tenant shall continue until the following March 1 if the landlord dies during the term of the lease. This is true, even though the landlord s interest in the property legally dies with her. Furthermore, if a landlord who is a life tenant dies between September 1 and the following March 1 and statutory notice was not given to the tenant, the tenant will have the right to farm the ground for an additional crop year pursuant to the auto-renewal statute. The successor in interest to the life tenant must then serve statutory termination notice on the tenant the following crop year or the lease will again auto-renew. These autorenewal provisions do not alter the doctrine of emblements, which provides that a life tenant s estate is entitled to the life tenant s share of a crop (under a crop-share lease) if the death occurs after the seed was planted. xxix Tenants in Common Often a parent will die, leaving farmland to his or her children as tenants in common. This presents some unique management challenges. Ordinarily a lease of the entire estate by one tenant in common is not binding on other tenants in common who have not authorized or ratified it. xxx Thus, unless all tenants in common agree to rent the property, the lease will generally not be enforceable against the tenants in common who make their objections know. However, where a lease is made by one tenant in common and the lessee takes possession and continues to pay rent, it will be presumed that the lease was made with the knowledge and consent of the other tenants in common, absent evidence to the contrary. xxxi Because of 19

20 this rule, it is important for all tenants in common to monitor their property and immediately object if they observe a non-owner possessing the ground without their permission. One tenant in common may send termination notice to a lessee and it will generally be enforceable. This result is less certain, however, where the tenants in common disagree as to whether to terminate the lease. Most likely, however, under current Iowa law, one tenant in common even a minority tenant in common can send enforceable termination notice to the lessee, even if the other tenants in common disagree. xxxii Ouster and Breach Holdover Tenant If a landlord properly terminated the lease by serving statutory notice before September 1, but the tenant refuses to vacate the property as of March 1, the landlord may evict the holdover tenant. Because of the risks of failing to properly follow the statutory procedure, the landlord should engage legal counsel to complete the eviction. Typically, the landlord must serve a three-day notice to quit upon the holdover tenant xxxiii and then file a forcible entry and detainer action. xxxiv Once the action is initiated, the court will schedule a hearing to allow both parties an opportunity to be heard. Nonpayment of Rent The Iowa Supreme Court has stated that failing to pay rent when it is due is a default in performance that xxxv entitles the landlord to initiate termination proceedings, no matter when that default occurs. Although many leases provide that nonpayment of rent terminates the lease, termination in such cases is not xxxvi automatic, but an option the landlord can exercise. Any specific written lease terms will govern the landlord s procedure for terminating a lease for nonpayment. Generally, however, nonpayment of rent xxxvii will entitle the landlord to terminate the lease and initiate a forcible entry and detainer action. Because equity abhors a forfeiture, this right is generally subject to a substantial compliance xxxviii exception. For example, a landlord will not generally be allowed to terminate a lease if a tenant who is able to pay merely misses the deadline by a few days. As such, the landlord should first provide a nonpaying tenant with a notice of default and intent to terminate, offering within the notice a reasonable opportunity to cure. If the tenant is unable to pay and refuses to vacate the premises, the landlord may xxxix initiate forcible entry and detainer procedures (preceded by a three-day notice to quite). If the landlord is unable to find a tenant willing to pay the amount of rent the non-paying tenant was obligated to pay, the landlord may seek breach of contract damages against the evicted tenant for the difference. Again, it is important for landlords to seek the assistance of an experienced attorney to ensure that ouster and breach procedures are properly followed. Breach of Other Provisions Typically, nonpayment of rent is the clearest breach for which a landlord has the right to immediately terminate the lease. The remedies for other breaches may not be so clear. Even where a material breach exists, a party must ordinarily be given a reasonable opportunity to cure the failure. xl If the violation is cured, the lease cannot be terminated. Termination is usually possible, however, where no cure is forthcoming for a material breach. In such a case, the court will consider the magnitude of the harm caused by the breach and the hardships incurred to the tenant by a potential ouster. A breach that may be sufficient to terminate a multi-year lease at the end of a crop year may not be sufficient to terminate a lease in the middle of a crop year. In a 1963 case, the Iowa Supreme Court allowed a landlord to terminate a three-year lease at the end of the first 20

21 year because the tenant had breached (and did not cure) the good husbandry provisions of the lease. xli The Court suggested, however, that the same conduct likely would not have been sufficient to terminate the lease in the middle of the crop year. To oust the tenant with the hardships and difficulties resulting from such action would have presented a different case. As it was, the Court ruled that tenant's operations were such that the landlord should not be required to put up with them for two more crop years. Financial Protections for the Landlord The easiest way a landlord can protect his or her right to receive the rent is to require full payment up front. If the tenant doesn t pay, the landlord then has time to terminate the lease and negotiate a lease with a new tenant for the same crop year. When this arrangement is not possible, landlords have several other options to reduce their financial risk. Landlord s Lien Iowa Code provides that a landlord shall have a lien for the rent upon all crops grown upon the leased premises, and upon any other personal property of the tenant which has been used or kept thereon during the term and which is not exempt from execution. This means that a lien automatically attaches to the farm products grown on the property by virtue of the landlord leasing the property to a farm tenant. The landlord has a statutory lien by operation of law. This does not mean, however, that the lien is perfected. Only a perfected landlord's lien is prioritized ahead of other secured or lien creditors. To perfect the landlord s lien, the landlord must file a UCC-1 financing statement with the Iowa Secretary xlii xliii of State. If that perfection occurs when the tenant takes possession of the property or within 20 days after the tenant takes possession, the Code gives the landlord s lien a special priority position ahead of previously perfected security interests and ahead of many other previously perfected statutory liens. Specifically, the Code provides that, subject to a few exceptions: A perfected lien in the farm products has priority over a conflicting security interest or lien, including a security interest or lien that was perfected prior to the creation of the lien under this section. In other words, if landlord files a UCC-1 within 20 days of possession, the landlord s lien will have priority over a conflicting security interest held by a bank or an agricultural supply dealer s lien perfected before March 1. Under the statute, only a properly perfected harvester s lien xliv or a perfected commodity production contract lien xlv would have priority over a properly perfected landlord s lien on crops. xlvi But remember, this special priority is only available if the UCC-1 is filed by the time the tenant takes possession of the property or within 20 days thereafter. Although a perfected lien does not guarantee that a landlord will recover his payment due (bankruptcy, for example, can throw a wrench into the recovery), it does provide the maximum legal protection available to a landlord. To perfect a landlord s lien, a landlord takes the following steps: File a standard financing statement (UCC-1) with the Iowa Secretary of State. Instructions for filing this form online can be found on the Secretary of State s website. xlvii The statement must say that it s "for the purpose of perfecting a landlord s lien." 21

22 It costs just $10 to file the UCC-1 to perfect the lien. According to Iowa Code 570.1, this financing statement is effective "until the termination statement is filed." o Because Iowa Code requires a continuation statement after five years for security interests, however, it may be best practice to file a continuation statement after five years if the landlord's lien remains in place. This may help avoid confusion or disputes. No signatures are required to file the landlord's lien. A landlord s lien continues for one year after rent is due or six months after the end of lease, whichever is first. xlviii Within 20 days after a landlord who has filed a financing statement receives a written demand from a tenant, the landlord must file a termination statement if the lien has expired or the tenant is no longer in possession of the property and the tenant has performed all obligations under the lease. xlix Landlords wishing to ensure the protection of the landlord s lien should file the UCC-1 each new crop year, unless the lease is a written, multi-year lease. Even though such filing may not be required to perfect the lien for an auto-renewed lease or a new lease between the same parties, prudence likely dictates yearly filing until Iowa law on this subject becomes clearer. Article 9 Security Interest Although the Iowa Code gives special priority to a landlord s lien, a landlord is not precluded from also seeking a standard consensual security interest in the crops grown on his or her rented ground. This may provide additional protection for the landlord, particularly in the event of a tenant bankruptcy l or where the farm products subject to the lien end up in another jurisdiction. li It is important to note, however, that a consensual security interest in farm products is not granted the priority of a landlord s lien. Therefore, it is governed by the general rule of rank according to priority in time of filing or perfection. lii In other words, first to perfect generally wins. To acquire a consensual security interest in the farm products grown or raised on the rented ground, the landlord must have the tenant sign a security agreement, which can be part of the lease. A UCC-1 is then filed to perfect the security interest. To ensure that the security interest is effective against buyers in the ordinary course, a landlord acquiring a security interest must comply with the Farm Products Rule, liii which, in Iowa, requires direct notice to all purchasers of farm products. Without this notice, an elevator, for example, purchases the grain free and clear of the security interest. The holder of a perfected landlord s lien is not required to comply with the requirements of the Farm Products Rule. Other Protections In addition to seeking payment up front and perfecting the landlord s lien and the Article 9 security interest, landlords may also wish to include a few additional protective terms in their leases: Require that the tenant won t sell any crops subject to a lien or security interest without the landlord s permission Require the tenant to provide a list of potential buyers of the crops Require the tenant to include the landlord as a payee on checks if the crops are sold (Note: It is theft for a tenant, with an intent to defraud, to sell grain subject to a landlord s lien for unpaid rent, without the written consent of the landlord. liv ) 22

23 Reducing Nutrient Loss: Science Shows What Works Iowa has been working for decades to protect and improve water quality. However, progress measured toward reduction targets at the watershed scale has been challenging, and many complex nutrient-related impacts in Iowa s lakes, reservoirs, and streams remain to be addressed. reductions, and estimating implementation costs. The assessment shows that broad implementation of a combination of practices will be needed to reach desired load reductions. The Iowa Nutrient Reduction Strategy is a science and technology-based framework to assess and reduce nutrients to Iowa waters and the Gulf of Mexico. It directs efforts to reduce nutrients in surface water from both point and nonpoint sources in a scientific, reasonable, and costeffective manner. A Closer Look The need to increase voluntary efforts to reduce nutrient loss is one of the key points related to agriculture in Iowa s Nutrient Reduction Strategy. It was prompted by the 2008 Gulf Hypoxia Action Plan that calls for Iowa and other states along the Mississippi River to develop strategies to reduce nutrient loadings to the Gulf of Mexico. The plan established a goal of at least a 45 percent reduction in total nitrogen and total phosphorus loads. The science assessment identified effective nutrient reduction practices in three categories nitrogen and phosphorus management, land use, and edge-of-field. (See charts on pages 3-4.) The Iowa strategy is a coordinated approach for reducing nutrient loads discharged from the state s largest wastewater treatment plants, in combination with targeted practices designed to reduce loads from nonpoint sources such as agriculture. Management practices involve application rate, timing, and method, plus the use of cover crops and reduced tillage. Success can be achieved using the tools known to work, such as targeted, voluntary conservation measures, in conjunction with research, development, and demonstration of new approaches. The goal is application of proven practices in fields and cities across Iowa. Science Provides Guidance Land use practices include perennial energy crops, extended rotations, grazed pastures, and land retirement. Edge-of-field practices involve drainage water management, wetlands, bioreactors, buffers, terraces, and sediment control. Some practices that have the greatest potential are highlighted here. Management Practices Nitrogen The strategy related to farmland is built on a scientific assessment of practices and associated costs to reduce loading of nitrogen (N) and phosphorus (P) to Iowa surface waters. Rate Reduction: Matching N application rates with the Corn Nitrogen Rate Calculator, a university developed online tool, has potential to reduce nitrate-n loss. This tool estimates optimal N rates based on fertilizer and corn prices. (Find the calculator here: The College of Agriculture and Life Sciences at Iowa State University and the Iowa Department of Agriculture and Land Stewardship partnered to conduct the scientific assessment. The science team consisted of 23 individuals representing five agencies or organizations. Nitrification Inhibitor: Research shows a corn yield increase plus a nitrate-n loss decrease when using a nitrification inhibitor (Nitrapyrin) with fall applied anhydrous ammonia. The only cost associated with this practice is the material. There is a corn yield increase of approximately 6 percent. The objective of the science assessment was to identify and model the effectiveness of specific practices at reducing N and P reaching the Gulf of Mexico. Sidedress: Sidedressing N can be done in different ways and with different sources of N, yet the concept of applying fertilizer after corn emergence is consistent. This strategy includes applying N during plant uptake, as well as timing to reduce the risk of loss from leaching events. Sidedressing also allows the N rate to be optimized by either soil sampling or crop canopy sensing. The assessment involved establishing baseline conditions, reviewing scientific literature, estimating potential load 23

24 Management Practices Phosphorus Consider Soil-Test P: This practice involves not applying P on fields where the Soil-Test P (STP) values exceed the upper boundary of the optimum level for corn and soybean in Iowa. The practice would continue until the STP level reaches the optimum level. Cover Crops: Planting a late summer or early fall seeded cover crop can reduce P loss. For example, winter rye offers benefits of easy establishment, seeding aerially or by drilling, growth in cool conditions, initial growth when planted in the fall, and continued growth in the spring. Cover crops also are effective at reducing N loss. Edge-of-Field Practices Nitrogen and Phosphorus Wetlands: Wetlands targeted for water quality benefits show great potential for nitrate-n reduction. Wetland costs include design, construction, buffer seeding, maintenance, and land acquisition. In addition to water quality benefits, these wetlands provide other benefits such as improved aesthetics and habitat. Bioreactors: Subsurface drainage bioreactors also show good potential for nitrate-n reduction. Bioreactor costs include control structures, woodchips, design, construction, seeding, additional tile, management, and maintenance. Reduced Tillage: Conservation tillage, where 30% or more of the soil surface is covered with crop residue after planting, or no-till, where 70% or more of the soil surface is covered with crop residue after planting, reduces soil erosion and surface runoff. Reduced erosion and runoff also reduces P transport. Land Use Practices Nitrogen and Phosphorus E xtended Rotations: Extended rotations reduce the application and the loss of both P and nitrate-n. If a shift to extended rotations is significant, the amount of corn and soybean produced in Iowa would be reduced, along with an increase in alfalfa production that could support increased livestock production for alfalfa feeding. Another benefit would be improved soil quality. Buffers: Edge-of-field technologies such as buffers are designed to settle sediment and sediment-bound N and P, along with retaining nitrate-n and dissolved P. Buffers also provide wildlife habitat, sequester carbon, reduce greenhouse gas emissions, stabilize stream banks, and potentially reduce flood impacts. Costs of buffers can vary greatly depending on width, type of vegetation, and the amount of earthwork required. Saturated Buffers: Field tile drainage is intercepted in a riparian buffer and a fraction of the flow is diverted as shallow groundwater within the buffer. The nitrate-n contained in the tile drainage water is partially removed by plant uptake, microbial immobilization, or denitrification. What s Next? Iowa s Nutrient Reduction Strategy is a key step toward improving Iowa s water quality while ensuring the state s continued economic growth and prosperity. The Practices List will evolve over time as new information, data, and science are discovered and adopted. Energy Crops Replacing Row Crops: Although there is not a current large market for perennial biomass crops as a source for energy or transportation fuel production, there are local and regional markets. Replacing row crops with energy crops or integrating energy crops within the rowcrop landscape decreases erosion, surface runoff, and leaching losses in the area implemented; therefore, the loss of both P and nitrate-n is reduced. An added benefit is an increase in wildlife habitat. The path forward to reducing nutrient impacts will not be easy, as it will require a high adoption rate of multiple practices to achieve the goal of cleaner water and a profitable agriculture. To learn more about the practices that may be right for your farm, attend a field day, contact the Iowa Department of Agriculture and Land Stewardship, Iowa State University Extension and Outreach, or a certified crop adviser. More information on Iowa s Nutrient Reduction Strategy is available at 24

25 Iowa Strategy to Reduce Nutrient Loss: Nitrogen Practices This table lists practices with the largest potential impact on nitrate-n concentration reduction (except where noted). Corn yield impacts associated with each practice also are shown as some practices may be detrimental to corn production. If using a combination of practices, the reductions are not additive. Reductions are field level results that may be expected where practice is applicable and implemented. Nitrogen Management Practice Comments % Nitrate-N Reduction + % Corn Yield Change ++ Average (SD*) Average (SD*) Moving from fall to spring pre-plant application 6 (25) 4 (16) Spring pre-plant/sidedress split Timing Compared to fall-applied 5 (28) 10 (7) Sidedress Compared to pre-plant application 7 (37) 0 (3) Sidedress Soil test based compared to pre-plant 4 (20) 13 (22) ** Source Liquid swine manure compared to spring-applied fertilizer 4 (11) 0 (13) Poultry manure compared to spring-applied fertilizer -3 (20) -2 (14) Nitrogen rate at the MRTN (0.10 N:corn price ratio) compared to current estimated application rate. Nitrogen (ISU Corn Nitrogen Rate Calculator Application Rate can be used to estimate MRTN but this would change 10-1 Nitrate-N concentration reduction) Nitrification Nitrapyrin in fall Compared to fall-applied Inhibitor without Nitrapyrin 9 (19) 6 (22) Cover Crops Rye 31 (29) -6 (7) Oat 28 (2) -5 (1) Living Mulches e.g. Kura clover Nitrate-N reduction from one site 41 (16) -9 (32) Land Use Perennial Energy Crops Compared to spring-applied fertilizer 72 (23) Land Retirement (CRP) Compared to spring-applied fertilizer 85 (9) Extended Rotations At least 2 years of alfalfa in a 4 or 5 year rotation 42 (12) 7 (7) Grazed Pastures No pertinent information from Iowa assume similar to CRP 85 Edge-of-Field Drainage Water Mgmt. No impact on concentration 33 (32) Shallow Drainage No impact on concentration 32 (15) Wetlands Targeted water quality 52 Bioreactors 43 (21) Buffers Only for water that interacts with the active zone below the buffer. This would only be a fraction of all 91 (20) water that makes it to a stream. Saturated Buffers Divert fraction of tile drainage into riparian buffer to remove Nitrate-N by denitrification. 50 (13) + A positive number is nitrate concentration or load reduction and a negative number is an increase. ++ A positive corn yield change is increased yield and a negative number is decreased yield. Practices are not expected to affect soybean yield. * SD = standard deviation. Large SD relative to the average indicates highly variable results. ** This increase in crop yield should be viewed with caution as the sidedress treatment from one of the main studies had 95 lb-n/acre for the pre-plant treatment but 110 lb-n/acre to 200 lb-n/acre for the sidedress with soil test treatment so the corn yield impact may be due to nitrogen application rate differences. 25

26 Iowa Strategy to Reduce Nutrient Loss: Phosphorus Practices Practices below have the largest potential impact on phosphorus load reduction. Corn yield impacts associated with each practice also are shown, since some practices may increase or decrease corn production. If using a combination of practices, the reductions are not additive. Reductions are field level results that may be expected where practice is applicable and implemented. Phosphorus Management Practices Practice Phosphorus Application Source of Phosphorus Placement of Phosphorus Comments % P Load Reduction a % Corn Yield Change b Average (SD c ) Average (SD c ) Applying P based on crop removal Assuming optimal STP level and P incorporation 0.6 d 0 Soil-Test P No P applied until STP drops to optimum or, when manure is applied, to levels indicated by the P Index f 17 e 0 Liquid swine, dairy, and poultry manure compared to commercial fertilizer Runoff shortly after application 46 (45) -1 (13) Beef manure compared to commercial fertilizer Runoff shortly after application 46 (96) Broadcast incorporated within 1 week compared to no incorporation, same tillage 36 (27) 0 With seed or knifed bands compared to surface application, no incorporation 24 (46) 0 Cover Crops Winter rye 29 (37) -6 (7) Conservation till chisel plowing compared Tillage to moldboard plowing 33 (49) 0 (6) No till compared to chisel plowing 90 (17) -6 (8) Land Use Change Perennial Vegetation Energy Crops 34 (34) Land Retirement (CRP) 75 Grazed pastures 59 (42) Erosion Control and Edge-of-Field Practices Terraces 77 (19) Buffers 58 (32) Control Sedimentation basins or ponds 85 a b c d e f A positive number is P load reduction and a negative number is increased P load. A positive corn yield change is increased yield and a negative number is decreased yield. Practices are not expected to affect soybean yield. SD = standard deviation. Large SD relative to the average indicates highly variable results. Maximum and average estimated by comparing application of 200 and 125 kg P 2 O 5 /ha, respectively, to 58 kg P 2 O 5 /ha (corn-soybean rotation requirements) (Mallarino et al., 2002). Maximum and average estimates based on reducing the average STP (Bray-1) of the two highest counties in Iowa and the statewide average STP (Mallarino et al., 2011a), respectively, to an optimum level of 20 ppm (Mallarino et al., 2002). Minimum value assumes soil is at the optimum level. ISU Extension and Outreach publication (PM 1688). SP 435 September 2014 Iowa State University Extension and Outreach programs are available to all without regard to race, color, age, religion, national origin, sexual orientation, gender identity, genetic information, sex, marital status, disability, or status as a U.S. veteran. Inquiries can be directed to the Director of Equal Opportunity and Compliance, 3280 Beardshear Hall, (515)

27 File C2-70 December Farmland Value Survey The Iowa Land Value Survey was initiated in 1941 and is sponsored annually by Iowa State University. Only the state average and the district averages are based directly on the ISU survey data. The county estimates are derived using a procedure that combines the ISU survey results with data from the U.S. Census of Agriculture. Beginning in 2014, the survey is being conducted by the Center for Agriculture and Rural Development in the Economics Department at Iowa State University and Iowa State University Extension and Outreach. The survey is intended to provide information on general land value trends, geographical land price relationships, and factors influencing the Iowa land market. The survey is not intended to provide an estimate for any particular piece of property. The survey is based on reports by licensed real estate brokers, farm managers, appraisers, agricultural lenders, and selected individuals considered to be knowledgeable of land market conditions. Respondents were asked to report for more than one county if they were knowledgeable about the land markets. The 2015 survey is based on 514 usable responses providing 708 county land values estimates. Starting in 2015, respondents could complete the survey online or use the traditional mail copy. Online responses allowed the participant to provide estimates for up to 15 counties. Of the 514 respondents, 287 (55 percent) completed the survey online. Participants in the survey are asked to estimate the value of high, medium, and low grade land in their county. Comparative sales and other factors are taken into account by the respondents in making these value estimates. A new web portal has been developed this year to facilitate the visualization and analysis of Iowa farmland values by pooling data from Iowa State University, USDA, Federal Reserve Bank of Chicago, and Realtors Land Institute. The portal can be accessed at farmland/. The website offers interactive charts and county maps to enhance visualization of land values over time. Major Factors Influencing the Farmland Market Most of the survey respondents listed positive and/ or negative factors influencing the land market. Of these respondents 89 percent listed at least one Figure 1. Average value per acre of Iowa farmland. $9, $8,500 $8,000 $7, $7,000 $6,500 $6,000 $5,500 $5, $4,500 $4,000 $3,500 $3,000 $2, $2,000 $1, $1,000 $ $ Source: Iowa State University Land Value Survey 27 Wendong Zhang Assistant Professor of Economics and Extension Economist wdzhang@iastate.edu

28 Page 2 File C2-70 positive factor and 93 percent listed at least one negative factor. The respondents listed multiple factors in most cases. There were four positive factors listed by over 10 percent of the respondents who provided at least one positive factor. The most frequently mentioned factor was low interest rates, mentioned by 24 percent of the respondents. Strong yields was the second-most frequently mentioned positive factor, being mentioned by 15 percent of the respondents. Other frequently mentioned positive factors included, land availability (14 percent), cash/credit availability (11 percent), investor demand (5 percent). There were only two negative factors listed by more than 10 percent of the respondents who identified at least one negative factor. The most frequently mentioned negative factor affecting land values was lower commodity prices, mentioned by 42 percent of the respondents. High input prices were the second-most frequently mentioned negative factor (12 percent). Cash/credit availability and an uncertain agricultural future was mentioned by 8 and 6 percent of the respondents, respectively. Number of Sales Compared to Previous Year Over half, (60 percent) of the respondents reported lower sales in 2015 relative to On the other end of the spectrum, just 10 percent reported more sales and 30 percent reported the same level of sales in 2015 relative to Land Sales by Buyer Category Respondents were asked what percent of the land was sold to the following five categories of buyers. Existing farmers represented 76 percent of the sales. Investors represented 20 percent, of which individual investors were 15 percent. New farmers represented 3 percent. Other purchasers represented 1 percent. Table 1. Recent changes in Iowa farmland values Year Value per acre Dollar change Percentage change 1981 $ 2147 $ Sales to existing farmers by Crop Reporting Districts ranged from 82 percent in Northwest and West Central to 55 percent in South Central. Sales to investors were highest in South Central (30 percent). Northeast, Northwest, and Southeast reported the lowest investor activity (11 percent). Central and East Central reported slightly higher percentage of land sales to entity investors. Respondents by Occupation The 2015 Iowa land value survey asked a new question regarding the main occupation of the respondent. Additionally, this was the first year the 28

29 File C2-70 Page 3 land value survey was made available online in addition to using the traditional mail copy. In total, 514 agricultural professional completed the survey, providing 708 county land value estimates. Of these respondents, agricultural lenders represented the largest group, accounting for 38 percent of all respondents. Farm managers (16 percent), appraisers (14 percent), and those in agricultural sales (14 percent) were the next three largest groups. Land Quality and Corn Suitability Ratings To gauge how each respondent defined high-, medium-, and low-quality land for their county, we asked them to provide opinions on estimated average CSR (Corn Suitability Rating) and CSR2 points for high-, medium-, and low-quality land. Results show that agricultural professionals have adapted to CSR2. Approximately 60 percent of participants provided at least one CSR2 estimate for the corresponding land quality classes. The estimated average CSR2 statewide for high-, medium-, and low-quality land is 83, 71, and 59 points respectively, while the statewide average CSR for these three land quality classes are 79, 67, and 55, respectively. In addition, respondents ranked high-, medium-, and low-quality land based on relative conditions in their region. For example, the average CSR2 for high quality land in the South Central district is 71, comparable to the CSR2 for low-quality land in Northwest district at 67. Reported changes from CSR to CSR2 are consistent with actual statistics from Iowa State University agronomists. This year s survey provided estimates for distribution of quality of land purchased by buyer types. Results show that the land quality distribution by farmers and investors were not significantly different: roughly half of the land they purchased was high-quality land, followed by roughly a third of medium-quality land. Although South Central reported a higher percentage of investor demand, the quality they bought is slightly lower than what farmers bought. Interpretation of the Survey Results The Iowa State University Land Value Survey reported a 3.9 percent decrease to $7,633 in Iowa farmland values from November 2014 to November This represents a modest decline in Iowa farmland values and the first time that land values have decreased two years in a row since However, despite continued downward pressures on farm income and farmland prices, current Iowa farmland values are still more than double what they were 10 years ago, 75 percent higher than the 2009 values and 14 percent higher than the 2011 values. The 2015 survey revealed different conditions within the state. Only one crop reporting district, Northwest, reported a modest increase in land values, (0.7 percent), while North Central showed a 6.7 percent decrease. Additionally, seven counties reported higher land values in 2015 relative to This year s survey also revealed different patterns in land values across different land quality classes: while state-average values for high-quality land decreased 5 percent, there was only a mild 0.9 percent decline for low-quality farmland values. In addition, the Southwest (5.4 percent) and Northwest (2.6 percent) districts also reported an increase in low-quality land values. This is likely a combined result of robust livestock returns, strong recreational demand, and higher government payments from conservation programs such as the Conservation Reserve Program (CRP). In general, the results from the 2015 Iowa State University Land Value Survey match results from other surveys. The Federal Reserve Bank of Chicago reported Iowa land values down 1 percent from October 2014 to October The same survey reported Iowa land values decreased by 1 percent from July to October, The USDA reported Iowa farmland values down by 5.9 percent from June 2014 to June The Realtors Land Institute reported land values down 7.6 percent from September 2014 to March 2015 but only down 3.7 percent from March 2015 to September

30 Page 4 File C2-70 There were several new features added to this year s survey. A few of the highlights are: an online version, in addition to the traditional mail copy, was made available. Of the 514 respondents, 287 (55 percent) completed the survey online. Second, respondents were asked to predict how the land values in their territory would change next year and five years from now. Seventy-seven percent of the participants predicted the land values in their territory would continue to fall over the next year, while the remaining 23 percent thought land values would increase or stay the same in their territory over the next year. When asked to predict land values five years from now, 48 percent predicted land values would increase or remain the same. Third, this year s survey asked about the main occupation of respondents, with agricultural lenders, appraisers, farm managers, and those in ag sales making up the bulk of the respondents. Finally, to gauge how each respondent defined high-, medium-, and low-quality land for their county, we asked for estimated average CSR (Corn Suitability Rating) and CSR2 points for all land quality classes. Results show that agricultural professionals have adapted to CSR2. About 60 percent of participants provided at least one CSR2 estimate for the corresponding land quality class. The Iowa State University survey reports on sales in the Iowa farmland market. The percent of respondents who reported fewer sales is the second highest recorded to date at 60 percent, which is the same percentage as in Additionally, 76 percent of all farmland purchases were to existing farmers. It is important to remember that the Iowa State University survey is an opinion survey covering the period from November 2014 to November When comparing surveys be sure to consider the period covered. This can be especially relevant in times when the land values are not exhibiting a uniform change. An opinion survey is just that. It represents the collective opinion of the survey respondents. Most of the respondents will use actual sales to formulate their opinions but each person can choose to weigh or discount particular sales as they deem necessary. A study led by Dr. Mike Duffy comparing the Iowa State University opinion survey and actual sales data in Iowa from 2000 to 2011 showed that differences were not statistically significant. Some years the opinion was higher and vice versa. For some counties the differences were greater in one year and less in another. So, even though the opinion survey averaged higher than the sales, the difference was not statistically significant. Outlook for Land Values The results of the 2015 Iowa State University Farmland Value Survey are not surprising. With the decline in corn and soybean prices, in addition to the 8.9 percent decline in farmland values in 2014, landowners and agricultural professionals familiar with farmland markets have already expected farmland values to decline this year. The 3.9 percent decline may seem less than what many people speculated, especially given the most recent prediction from USDA that U.S. net farm income would be down 38 percent from last year. However, I would argue that the 3.9 percent decline is not out of line due to a mix of factors. First, despite the sharp decline in corn and soybean prices, many farmers still have a lot of cash in hand accumulated from the golden 2000s. Second, it was widely accepted among farmers and landowners at the start of 2015 that commodity prices, farm income, and profit margins probably wouldn t improve much over the year, and arguably the farmland market has already capitalized these expectations. Therefore, the downward pressures did not cause a panic market reaction. Finally, despite the weakening agricultural exports, especially from China, the U.S. economy is still more robust than many other countries across the globe. Of particular interest to farmland markets, the livestock sector still saw strong growth, recreational demand is on the rise, and high CRP payments are boosting the values of pastureland, timberland, and low-quality cropland. 30

31 File C2-70 Page 5 The primary reason for the drop or slowdown in land values is the drop in net farm income. Land values are determined by the income and the interest (discount) rate used. Net farm income has been at record high levels the past few years and interest rates have been at record low levels. This combination produced record high farmland values over the past decade. In August, the USDA forecast net farm income to be down 26 percent for and down another 38 percent for , which is a direct result of the sharp decline in corn and soybean prices. The forecast net farm income for 2015 would be the lowest since A simple regression analysis with farmland values as a function of net farm income shows a one percent decrease in income will produce approximately a one-half percent decrease in farmland values. This relationship is not exact or immediate but there is an extremely strong relationship, which indicates what will happen to land values with a change in income. Interest rates are also an important determinant of farmland values. The Federal Reserve Board had long discussed the end of the low-interest era, but the global economic slowdown has postponed these efforts for now, and perhaps into the foreseeable future. The current 10-year Treasury bond rates averaged 2.12 percent during the first three quarters of 2015 lower than the 2.54 percent average rate during Some people feel that interest rates are more important than net income in determining farmland values; putting these arguments aside, the Federal Reserve Board will likely raise interest at a slow rate as opposed to an immediate increase. With the decline in farm income and a possible increase in interest rates, we might see farmland values continue to recede if the forecasts for low commodity prices and the global stock recovery for grains and oilseeds are realized next year and beyond. The Iowa farmland market appears to have peaked for the foreseeable future, and we may expect to see the Iowa farmland market drifting sideways. In the 2015 Iowa Land Value Survey, over 75 percent of all respondents said farmland values in their territory would continue to decline next year, but only six percent of all respondents said values would decrease 10 percent or more. The majority of agricultural professionals tend to think land values in their territory will either experience a modest decline of less than 5 percent or decline 5 to 10 percent next year. The predictions of land values five years from now yield a more mixed picture: 32 percent and 17 percent of respondents predicted land values would go up or stay the same, respectively, while 19 and 18 percent of respondents projected land values would decrease 5 to 10 percent or decrease more than 10 percent five years from now, respectively. Based on estimates from Iowa State University Soil Management and Land Valuation conferences, the margin of error in the forecasts of agricultural professionals is larger when projecting values for a distant future as opposed to the months ahead. Commodity prices appear to have moved to a new plateau, and the high-profit-margin era for row crop production has ended. It appears prices will stabilize somewhere in the mid- to upper-$3 range for corn and the upper-$8 to lower-$9 range for soybeans. Obviously the prices will move with supply and demand changes, however, based on current futures prices, these appear to be the likely long-term ranges. Unfortunately, the current projections show a loss at these prices. Preliminary Iowa State University cost of production estimates for 2016 indicate a loss of about $2 per bushel for soybeans and more than $.50 per bushel for corn with average costs and yields. Costs of production, especially rents, have increased considerably over the past several years. Higher commodity prices led to higher incomes, which led to increases in rents. Under low to negative profit margins, farmers are trying to lower costs in a variety of ways. Rents will change with income, but they will decline slower as incomes drop. In other words, the rent tends to be sticky when facing downward pressure. How long it will take for the rents to adjust to the lower 31

32 Page 6 File C2-70 commodity prices remains to be seen. However, until they adjust, profitable production is unlikely and land values will continue to be under downward pressure. Iowa farmers made record income over the past several years, and a major question is what they did with that income. Some farmers appear to have saved it or paid down existing debt, but other farmers appear to have parlayed the income into more debt with additional land and new machinery and buildings, etc. There is a concern for some producers over possible financial difficulties due continually declining income and accumulation of debt from banks and other sources. It appears most farmers will be able to weather the storm as the market prices find a new equilibrium, but farmers and land owners who bet on the high commodity prices lasting and aggressively expanded or borrowed heavily will face significant problems in the months ahead. Some of the survey respondents reported strong auction sales where existing farmers were aggressively bidding for neighboring properties or some other particularly desirable parcel. These buyers appeared to have the money and to that extent they will provide support for the land market. As the survey indicated, existing farmers still account for the majority of the land purchased in Iowa, and robust livestock returns, strong recreational demand, and high CRP payments drove the increases in land values in the Northwest and South Central districts. Many people are concerned about a potential farmland bubble burst, or a replay of the 1920s economic depression or 1980s farm crisis. There are legitimate reasons to be cautious, especially with the slowing Chinese economy and potential rise in interest rates. However, Iowa farmland values do not appear to be in a speculative bubble that caused dramatic declines in the 1980s farmland values or the urban real estate market in the mid-2000s. In the 1970s, there wasn t steady growth in farm income before the sudden collapse of farmland values. Farmers now have accumulated substantial income during the last decade thanks to high commodity prices, and the current farmland values don t seem to diverge too much from the economic fundamentals. There wasn t irrational buying and selling in a panic and the demand for U.S. crop and livestock products is still very strong. The downward pressures on farmland values likely will continue to play out next year and beyond, but it will more likely be a rational and modest correction as opposed to a sudden change. It is not possible to say where the farmland values will stabilize, however, the odds of commodity prices collapsing, a sudden stoppage of the Chinese economy, interest rates rapidly increasing, and/or land values collapsing are not high. The odds are not zero, but it doesn t appear these events will occur in the foreseeable future. A more likely scenario is that farmland values will return to more normal changes experienced over the past century. Since 1910 Iowa farmland values have averaged a 4.9 percent increase per year. Farmland values have increased 73 percent of the years, decreased 25 percent of the years and remained unchanged for 3 years between 1910 and Farmland has historically been a fairly robust investment that generates relatively stable returns, and the Iowa farmland market seems to continue drifting sideways to slightly lower. There have been three golden eras for Iowa land values over the past 100 years. The first one ended in a long, drawn-out decline in land values from 1921 to 1933, the second golden era ended with a sudden collapse from 1981 to The third golden era appears to have ended with an orderly adjustment as opposed to a sudden collapse. More details of the survey can be accessed at 32

33 File C2-70 Page 7 Table 2. Average value per acre of Iowa farmland listed by crop reporting districts and grades of land Year State North- North North- West East South- South South- Avg west Central east Central Central Central west Central east All grades High grade Medium grade Low grade

34 Page 8 File C2-70 Figure and 2014 Iowa land values by county 17 Figure Iowa land values by crop reporting district 11,229 8,834 6,252 $9,685 Up 0.7% 8,976 7,352 5,372 $7,962 Down 6.7% 9,684 7,581 5,082 10,087 7,758 5,292 $8,061 $8,505 Down 4.3% $7,861 Down 3.6% 10,289 7,934 5,366 $8,506 Down 6.4% 8,031 6,038 4,070 6,445 4,282 2,750 $6,372 $4,397 Down 2.2% 9,575 7,460 5,242 Down 1.7% Down 5.6% 9,536 6,525 3,797 $6,892 Down 4.5% Estimates of average dollar value per acre for high-, medium-, and low-grade farmland (top row) on Nov. 1, 2015, by Iowa Crop Reporting District; (middle row) the Crop Reporting District average; and (bottom row) the average percentage change from Nov. 1, The estimates are based on a survey conducted by Iowa State University, Center for Agricultural and Rural Development, and Iowa State University Extension and Outreach.... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and July 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. 34

35 File C2-75 April 2016 R Farmland Value Survey T Realtors Land Institute he Iowa Farm & Ranch Chapter #2 Realtors Land Institute has released the results of its March 2016 Iowa Land Trends and Values Survey. The REALTORS Land Institute is an affiliate of the National Association of REALTORS and is organized for realtors who engage in land specialties such as agribusiness, appraisal, consulting, land auctions, and land management. All participants in the survey deal almost exclusively in farmland. Participants were asked to estimate average values of farmland as of March The estimates are for bare, unimproved land with the sale price on a cash basis. Pasture and timber land values were also requested as supplemental information. Kyle J. Hansen, ALC Hertz Real Estate Service

36 Page 2 File C2-75 Table 1. Survey of farmland values (dollars per acre). Iowa Farm and Land Chapter #2, REALTORS Land Institute, March 2016 Area in Iowa Land classification by potential corn production High quality crop land Medium quality crop land Low quality crop land Non-tillable pasture Timber Sept. March Sept. March Sept. March Sept. March Sept. March Change in tillable cropland values past 6 months Central $9,886 $9,507 $7,259 $6,837 $4,802 $4,317 $2,881 $2,783 $2,402 $2, % East Central 10,072 9,992 7,406 7,157 4,668 4,468 2,796 2,734 2,119 2, % North Central 9,417 9,074 7,314 6,905 4,978 4,714 2,400 2,262 1,829 1, % Northeast 9,415 9,089 7,102 6,691 4,623 4,453 2,675 2,629 2,638 2, % Northwest 11,350 10,939 8,392 8,078 5,771 4,918 3,002 2,934 2,551 2, % South Central 7,205 6,905 5,148 4,686 3,225 3,020 2,873 2,780 2,500 2, % Southeast 9,821 9,318 6,530 6,242 4,002 3,697 2,419 2,404 2,017 1, % Southwest 8,835 8,125 6,594 6,238 4,767 4,638 3,289 3,413 2,257 2, % West Central 9,646 9,368 7,646 7,355 5,393 5,025 2,830 2,750 2,392 2, % State Average 9,516 9,146 7,043 6,688 4,692 4,361 2,796 2,743 2,301 2, %... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and July 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. 36

37 Cash Rental Rates for Iowa Ag Decision Maker 2016 Survey File C2-10 The cash rental rate information presented in this publication is from a survey of farmers, landowners, agricultural lenders, and professional farm managers. They supplied information based on their best judgments about typical cash rental rates for high, medium, and low quality cropland in their counties, as well as for land devoted to production of hay, oats, and pasture. Information about rents for individual farms was not collected. The rental rates summarized in this bulletin do not include the value of any buildings or storage structures, manure application contracts, or seed production contracts. The cooperation and assistance of the landowners, farmers, and agribusiness people who responded to this survey are greatly appreciated. Figure 1 shows the distribution of the 1,585 responses was 47 percent from farm operators, 25 percent from landowners, 14 percent from agricultural lenders, 12 percent from professional farm managers and realtors, and 2 percent from other professions. Respondents indicated being familiar with a total of 2.5 million cash rented acres across the state. Determining Cash Rents This summary can be used as a reference point for determining an appropriate cash rental rate for a particular farm. The following may justify a higher or lower than average rent in specific cases: Small size or unusual shape of fields Terraces or creeks that affect the time it takes to plant and harvest crops Difficult or restricted access to fields High or low fertility levels or ph index Existence of contracts for growing seed or specialty grains, or manure application Above-average local grain prices due to proximity to biofuel plants or feed mills USDA program variables, such as crop bases and assigned yields Longevity of the lease Other services performed by the tenant Additional survey information about cash rental rates by county is available from USDA National Agricultural Statistics Service (NASS) at the following website: Publications/County_Estimates/index.php. Figure 1. Distribution of 1,585 responses to the 2016 survey. Professional farm managers and realtors, 12% Agricultural lenders, 14% Landowners, 25% Other, 2% Farm operators, 47% Details about setting a fair cash rent can be found in the following Ag Decision Maker information files, located under Whole Farm, Leasing, at: Computing a Cropland Cash Rental Rate (File C2-20) Computing a Pasture Rental Rate (File C2-23) Flexible Farm Lease Agreements (File C2-21) Definitions Number of responses number of individuals who reported typical rental rates for each county average yields based on farm level data collected by National Agricultural Statistics Service (NASS) for each county. Average row crop CSR2 index average corn suitability rating 2 (CSR2) for the highest rated acres in each county, up to 110 percent of the number of acres planted to corn and soybeans in that county. Note: starting in 2014, values were converted to the CSR2 system, based on ISPAID 8.1. High, medium, and low quality third land quality of land planted to corn and soybeans, using typical corn yields as a reference for land quality within the county. FM 1851 Revised May

38 Page 2 Typical corn yields average yields for the high third, medium third, and low third productivity farms in each county as reported to NASS. Average rents per unit overall average rent for corn/soybean land in each county, divided by the 5-year average corn yield, the 5-year average soybean yield, and the average row crop CSR2 index value for each county. Improved permanent pasture pasture that contains both grasses and legumes and is regularly fertilized. Unimproved pasture pasture with mainly bluegrass that receives little fertilizer or renovation. Pasture, $/AUM rent charged per animal unit month. One AUM is equal to a beef cow and calf or equivalent grazing for one month. Cash Rental Rates for Iowa Survey Overall Average of Typical Cash Rents Corn and Soybean Acres ($/acre) District 1 District 2 District 3 District 4 District 5 District 6 District 7 District 8 District 9 $ $ $ $ $ State $252 $270 $260 $246 $230 Cornstalk grazing includes grazing of cornstalks in fall or winter, but not mechanical harvesting. Hunting rights rent charged to allow hunting on land, per year.... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Prepared by Alejandro Plastina, extension economist Ann Johanns, extension program specialist Craig Welter, research assistant Farm Management Field Specialists store.extension.iastate.edu Issued in furtherance of Cooperative Extension work, Acts of May 8 and July 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. 38

39 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 1 County District Average Buena Vista Cherokee Clay Dickinson Emmet Lyon O Brien Osceola Palo Alto Plymouth Pocahontas Sioux Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $248 $251 $281 $230 $216 $216 $272 $245 $263 $234 $265 $228 $279 Irrigated land average $326 High quality third Average response $284 $283 $309 $270 $250 $245 $318 $277 $310 $267 $298 $265 $312 Range of responses Medium quality third Average response $250 $258 $284 $233 $220 $216 $268 $247 $265 $236 $267 $229 $275 Range of responses Low quality third Average response $212 $213 $250 $188 $179 $189 $231 $209 $214 $200 $230 $191 $249 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.40 $1.45 $1.54 $1.29 $1.28 $1.24 $1.50 $1.32 $1.44 $1.34 $1.55 $1.28 $1.54 Rent per bu. of bean yield $4.77 $5.12 $5.11 $4.51 $4.50 $4.50 $4.86 $4.38 $4.96 $4.78 $5.10 $4.65 $4.81 Rent per CSR2 index point $2.86 $2.82 $3.12 $2.61 $2.43 $2.54 $3.40 $2.58 $2.99 $2.75 $3.27 $2.65 $3.13 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $194 $183 Grass hay, established $147 Oats $170 Improved perm. pasture $82 $104 $116 $85 $60 Unimproved perm. pasture $59 $66 $75 Pasture, $/AUM NA Cornstalk grazing $14 Hunting rights $20 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 39

40 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 2 County District Average Butler Cerro Gordo Floyd Franklin Hancock Humboldt Kossuth Mitchell Winnebago Worth Wright Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $243 $275 $251 $249 $262 $234 $238 $239 $235 $222 $233 $233 Irrigated land average $278 High quality third Average response $278 $317 $289 $284 $298 $264 $271 $272 $277 $249 $270 $272 Range of responses Medium quality third Average response $242 $275 $248 $247 $261 $234 $238 $241 $238 $223 $230 $227 Range of responses Low quality third Average response $208 $232 $215 $217 $228 $205 $206 $204 $191 $192 $200 $201 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.41 $1.62 $1.53 $1.49 $1.48 $1.34 $1.38 $1.34 $1.37 $1.28 $1.37 $1.32 Rent per bu. of bean yield $4.96 $5.50 $5.23 $5.08 $5.24 $4.78 $4.96 $4.88 $4.80 $4.63 $4.76 $4.76 Rent per CSR2 index point $2.91 $3.40 $3.06 $2.93 $3.12 $2.85 $2.77 $2.85 $2.70 $2.78 $2.84 $2.74 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $167 $148 $171 Grass hay, established $125 $128 $137 Oats $183 Improved perm. pasture $68 $80 $55 $60 Unimproved perm. pasture $48 $52 $42 $44 Pasture, $/AUM $13 Cornstalk grazing NA Hunting rights NA 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 40

41 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 3 County District Average Black Hawk Bremer Buchanan Allamakee Chickasaw Clayton Delaware Dubuque Fayette Howard Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Winneshiek Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $250 $223 $241 $274 $254 $222 $258 $267 $294 $263 $217 $243 High quality third Average response $297 $262 $290 $324 $303 $254 $305 $315 $374 $305 $246 $286 Range of responses Medium quality third Average response $250 $223 $251 $269 $245 $233 $253 $271 $285 $265 $213 $245 Range of responses Low quality third Average response $205 $186 $182 $230 $214 $178 $215 $214 $224 $219 $192 $197 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.45 $1.33 $1.44 $1.58 $1.49 $1.31 $1.45 $1.53 $1.62 $1.49 $1.28 $1.40 Rent per bu. of bean yield $4.80 $4.29 $4.73 $5.27 $4.88 $4.53 $4.69 $5.04 $5.16 $4.96 $4.34 $4.86 Rent per CSR2 index point $3.18 $2.93 $2.84 $3.15 $3.10 $2.64 $3.63 $3.42 $4.26 $3.25 $2.61 $3.12 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $249 $208 $251 Grass hay, established $192 Oats $206 Improved perm. pasture $90 Unimproved perm. pasture $53 Pasture, $/AUM $15 $18 Cornstalk grazing $13 Hunting rights NA 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 41

42 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 4 County District Average Audubon Calhoun Carroll Crawford Greene Guthrie Harrison Ida Monona Sac Shelby Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $245 $236 $233 $265 $266 $229 $195 $250 $272 $240 $267 $240 $241 Irrigated land average $243 $245 High quality third Average response $282 $269 $268 $295 $301 $259 $230 $297 $311 $280 $304 $278 $290 Range of responses Medium quality third Average response $245 $234 $232 $267 $266 $229 $199 $244 $271 $244 $272 $236 $247 Range of responses Low quality third Average response $207 $204 $199 $233 $230 $200 $158 $208 $236 $197 $225 $206 $187 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.47 $1.43 $1.40 $1.65 $1.56 $1.40 $1.27 $1.51 $1.50 $1.55 $1.59 $1.37 $1.42 Rent per bu. of bean yield $4.96 $4.72 $4.96 $5.30 $5.12 $4.98 $4.24 $5.32 $5.04 $5.11 $5.24 $4.62 $4.92 Rent per CSR2 index point $3.15 $3.11 $2.65 $3.23 $3.59 $2.69 $2.41 $3.42 $3.36 $3.48 $3.03 $3.33 $3.44 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $206 Grass hay, established $181 Oats NA Improved perm. pasture $86 $63 $85 $103 Unimproved perm. pasture $60 $52 $72 $79 Pasture, $/AUM NA Cornstalk grazing $10 $9 Hunting rights NA Woodbury 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 42

43 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 5 County District Average Boone Dallas Grundy Hamilton Hardin Jasper Marshall Polk Poweshiek Story Tama Webster Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $239 $229 $221 $271 $225 $250 $231 $240 $249 $241 $244 $239 $231 High quality third Average response $274 $256 $250 $310 $260 $281 $269 $278 $287 $274 $282 $285 $258 Range of responses Medium quality third Average response $243 $235 $230 $269 $222 $246 $237 $249 $241 $253 $249 $249 $233 Range of responses Low quality third Average response $201 $197 $184 $235 $193 $224 $188 $194 $218 $197 $201 $184 $201 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.40 $1.34 $1.34 $1.51 $1.36 $1.43 $1.33 $1.37 $1.52 $1.38 $1.50 $1.40 $1.33 Rent per bu. of bean yield $4.71 $4.67 $4.60 $4.84 $4.79 $4.90 $4.44 $4.36 $5.08 $4.63 $5.08 $4.43 $4.71 Rent per CSR2 index point $2.82 $2.63 $2.48 $3.08 $2.62 $2.94 $2.89 $2.93 $2.77 $3.05 $2.80 $2.85 $2.75 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $165 Grass hay, established $138 Oats $181 Improved perm. pasture $76 $61 $81 Unimproved perm. pasture $53 $43 $46 $56 Pasture, $/AUM NA Cornstalk grazing $19 Hunting rights $13 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 43

44 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 6 County District Average Benton Cedar Clinton Iowa Jackson Johnson Jones Linn Muscatine Scott Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $242 $246 $237 $241 $229 $246 $219 $248 $261 $223 $265 High quality third Average response $289 $280 $274 $289 $275 $293 $252 $300 $310 $289 $324 Range of responses Medium quality third Average response $242 $254 $237 $234 $223 $249 $226 $253 $266 $220 $254 Range of responses Low quality third Average response $195 $206 $201 $201 $188 $197 $180 $191 $208 $160 $216 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.41 $1.49 $1.34 $1.35 $1.32 $1.46 $1.28 $1.47 $1.56 $1.33 $1.53 Rent per bu. of bean yield $4.49 $4.73 $4.23 $4.30 $4.40 $4.64 $4.29 $4.51 $5.12 $4.13 $4.57 Rent per CSR2 index point $3.01 $2.89 $2.76 $3.26 $2.90 $3.62 $2.64 $3.22 $3.03 $2.72 $3.05 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $185 $178 $196 Grass hay, established $144 $158 Oats $151 $155 Improved perm. pasture $88 $90 Unimproved perm. pasture $55 $46 $49 $54 $72 Pasture, $/AUM $22 $20 Cornstalk grazing $11 Hunting rights $16 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 44

45 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 7 County District Average Adair Adams Cass Fremont Mills 3/ Montgomery Page Pottawattamie Taylor 3/ Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $220 $195 $214 $218 $219 $233 $228 $209 $253 $214 High quality third Average response $261 $235 $260 $262 $264 $273 $268 $250 $285 $249 Range of responses Medium quality third Average response $217 $192 $206 $213 $215 $233 $227 $206 $253 $211 Range of responses Low quality third Average response $183 $159 $174 $179 $177 $194 $189 $169 $222 $182 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.41 $1.32 $1.43 $1.32 $1.34 $1.46 $1.44 $1.38 $1.48 $1.56 Rent per bu. of bean yield $4.72 $4.24 $4.65 $4.45 $4.56 $4.96 $4.85 $4.45 $5.06 $5.22 Rent per CSR2 index point $2.83 $2.53 $3.06 $2.76 $2.67 $2.88 $2.92 $2.55 $3.29 $2.85 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $111 $108 $100 $140 $97 $108 $92 Grass hay, established $89 $81 $75 $89 $92 $102 Oats $101 $80 Improved perm. pasture $87 $82 $92 $90 $76 $94 $73 $106 $87 Unimproved perm. pasture $58 $58 $53 $46 $64 $72 $61 Pasture, $/AUM $26 Cornstalk grazing $8 $6 Hunting rights $5 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 3/ Corn and soybean yield data not available for 2015, average based on

46 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 8 County District Average Appanoose & Monroe 3/ Clarke Decatur Lucas Madison Marion Ringgold Union 3/ Warren Wayne Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $183 $178 $165 $158 $163 $206 $210 $189 $223 $184 $150 High quality third Average response $219 $209 $202 $189 $194 $243 $267 $226 $261 $219 $183 Range of responses Medium quality third Average response $182 $177 $161 $163 $163 $207 $203 $188 $224 $184 $148 Range of responses Low quality third Average response $147 $147 $131 $124 $132 $169 $159 $154 $184 $149 $119 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.38 $1.50 $1.32 $1.22 $1.30 $1.41 $1.35 $1.51 $1.68 $1.28 $1.18 Rent per bu. of bean yield $4.31 $4.45 $4.13 $4.05 $3.98 $4.58 $4.38 $4.61 $5.07 $4.00 $3.85 Rent per CSR2 index point $2.40 $2.41 $2.26 $2.16 $2.14 $2.42 $2.66 $2.78 $2.69 $2.19 $2.24 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $100 $97 $98 $93 $124 $90 Grass hay, established $75 $76 $68 $68 $66 Oats $102 Improved perm. pasture $75 $81 $68 $78 $76 $92 Unimproved perm. pasture $52 $50 $56 $50 $53 Pasture, $/AUM $24 Cornstalk grazing $9 $8 Hunting rights $15 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 3/ Corn yield data not available for 2015, average based on

47 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY FOR CROP REPORTING DISTRICT 9 County District Average Davis Des Moines Henry Jefferson & Van Buren Keokuk Lee Louisa Mahaska Wapello Number of responses 1/ avg. corn yield avg. bean yield Avg. row crop CSR2 index Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $203 $159 $223 $213 $169 $221 $176 $193 $225 $215 $239 High quality third Average response $249 $187 $277 $258 $209 $267 $213 $217 $289 $283 $287 Range of responses Medium quality third Average response $202 $155 $216 $212 $168 $222 $170 $201 $221 $213 $241 Range of responses Low quality third Average response $160 $135 $175 $169 $132 $175 $144 $162 $165 $150 $188 Range of responses Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.32 $1.27 $1.34 $1.35 $1.17 $1.39 $1.24 $1.15 $1.33 $1.48 $1.43 Rent per bu. of bean yield $4.25 $4.08 $4.37 $4.26 $3.84 $4.51 $3.91 $3.78 $4.41 $4.78 $4.51 Rent per CSR2 index point $2.56 $2.24 $2.62 $2.63 $2.17 $2.76 $2.29 $2.41 $2.85 $2.69 $2.91 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $109 Grass hay, established $102 Oats $179 Improved perm. pasture $66 $88 $55 Unimproved perm. pasture $48 Pasture, $/AUM NA Cornstalk grazing NA Hunting rights $16 Washington 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 47

48 Cash Rental Rates for Iowa Survey Page CASH RENTAL SURVEY SUMMARY BY CROP REPORTING DISTRICT County State Average Northwest District 1 Average North Central District 2 Average Northeast District 3 Average West Central District 4 Average Central District 5 Average East Central District 6 Average Southwest District 7 Average South Central District 8 Average Number of responses 1/ 1, avg. corn yield avg. bean yield Avg. row crop CSR2 index Southeast District 9 Average Typical Cash Rent for Corn and Soybeans, $ per tillable acre Overall average $230 $248 $243 $250 $245 $239 $242 $220 $183 $203 Irrigated land average $326 $278 $243 High quality third Average response $270 $284 $278 $297 $282 $274 $289 $261 $219 $249 Medium quality third Average response $230 $250 $242 $250 $245 $243 $242 $217 $182 $202 Low quality third Average response $191 $212 $208 $205 $207 $201 $195 $183 $147 $160 Typical Corn Yield, bu. per acre High third Middle third Low third Average Rents per 5-year Average Yield or CSR2 Rent per bu. of corn yield $1.41 $1.40 $1.41 $1.45 $1.47 $1.40 $1.41 $1.41 $1.38 $1.32 Rent per bu. of bean yield $4.66 $4.77 $4.96 $4.80 $4.96 $4.71 $4.49 $4.72 $4.31 $4.25 Rent per CSR2 index point $2.86 $2.86 $2.91 $3.18 $3.15 $2.82 $3.01 $2.83 $2.40 $2.56 Typical Cash Rent for Oats, Hay, and Pasture, $ per acre 2/ Alfalfa hay, established $165 $194 $167 $249 $206 $165 $185 $111 $100 $109 Grass hay, established $133 $147 $125 $192 $181 $138 $144 $89 $75 $102 Oats $159 $170 $183 $206 NA $181 $151 $101 $102 $179 Improved perm. pasture $80 $82 $68 $90 $86 $76 $88 $87 $75 $66 Unimproved perm. pasture $54 $59 $48 $53 $60 $53 $55 $58 $52 $48 Pasture, $/AUM $20 NA $13 $15 NA NA $22 $26 $24 NA Cornstalk grazing $12 $14 NA $13 $10 $19 $11 $8 $9 NA Hunting rights $14 $20 NA NA NA $13 $16 $5 $15 $16 1/ Number of responses is the number of individuals who provided information about typical rental rates in the county. Rental data was not collected by individual farm. 2/ No values are reported if fewer than five responses were received. 48

49 Iowa Farmland Rental Rates Ag Decision Maker (USDA) File C2-09 Cropland rental rates averaged $235 per acre in 2016, down $15 per acre from This was the second decrease in value since Cash rent for pastures averaged $52 per acre in 2016, showing a $2 increase from the previous year. Rent as a percentage of land value was 2.9% for cropland and 1.5% for pasture. For more localized information about cash rental rates, ask for the Cash Rental Rates for Iowa 2016 Survey (AgDM File C2-10) at the ISU Extension and Outreach office in your county or find it online at wholefarm/pdf/c2-10.pdf. Estimated Farmland Rental Rates Iowa 1 Cropland Pasture Land Land Cash Rent, Change, Value, Rent as % Cash Rent, Change, Value, Rent as % Year $/acre Percent $/acre of value $/acre Percent $/acre of value , % % % 1, % % % % 1, % % % % 1, % % % % 1, % % % % 1, % % % % 1, % % % % 1, % % % % 2, % % % % 2, % % % % 2, % % % % 2, % % 1, % % 3, % % 1, % % 3, % % 1, % % 4, % % 2, % % 3, % % 1, % % 4, % % 2, % % 5, % % 2, % % 6, % % 2, % % 8, % % 3, % % 8, % % 3, % % 8, % % 3, % % 8, % % 3, % 1 Prepared from data collected by the USDA, National Agricultural Statistics Service. Prepared by Ann Johanns extension program specialist... and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and July 30, 1914, in cooperation with the U.S. Department of Agriculture. Cathann A. Kress, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa. FM 1728 Revised August 2016

50 North Central Farm Management Extension Committee Farm Building Rental Rate Survey Farm buildings and livestock facilities often outlast their owner s need for them, but can still provide usable service. Farm operators and livestock producers may be able to make use of certain types of farm buildings but are not in a position to invest in new facilities. Both parties can benefit from a leasing arrangement. However, information about common rental rates for farm buildings is not easily obtainable. The information in this publication was summarized from the results of a survey of farm operators, farm owners, professional farm managers and rural appraisers in the north central region of the U.S. The North Central Farm Management Extension Committee sincerely thanks all the agricultural professionals who contributed. The survey assumed that building tenants would provide labor and management and pay the cost of utilities and minor upkeep. Owners would generally be responsible for major repairs and insurance coverage. Individual rental rates will vary according to the age, condition, size, location and efficiency of the particular building being rented. For more information about determining rental rates and terms see publication NCFMEC-04, Rental Agreements for Farm Buildings and Livestock Facilities. For a sample lease form, see publication NCFMEC-04A, Farm Building or Livestock Facility Lease. Both publications are available for no charge at the following website: Type of Building Number of Responses Unit on Which Rent is Paid Average Rent Paid Range of Rents Paid Average Capacity of Building Beef Finishing, open lot & shed 9 $/head/day $.12 $ head Dairy Milking parlor and cow housing 9 $/cow/mo. $12.16 $ stalls Heifer housing no labor, no feed 3 $/head/day $.31 $ with labor, no feed 3 $/head/day $.67 $ with labor and feed 3 $/head/day $2.28 $ Swine Farrowing 5 $/crate/year $360 $ crates Nursery 7 $/pig through $4.09 $ ,350 spaces Finishing 16 $/ pig finished $12.93 $ ,334 spaces Machinery Storage Machine shed, all 75 $/sq. foot/year $.45 $ ,845 sq. ft. with concrete floor 26 $/sq. foot/year $.53 $ ,927 sq. ft. without concrete floor 36 $/sq. foot/year $.40 $ ,445 sq. ft. with high doors 35 $/sq. foot/year $.52 $ ,474 sq. ft. without high doors 27 $/sq. foot/year $.40 $ ,513 sq. ft. over 10 years old 60 $/sq. foot/year $.43 $ ,928 sq. ft. 1 to 10 years old 6 $/sq. foot/year $.75 $ ,773 sq. ft. NCFMEC-07 May

51 North Central Farm Management Extension Committee Type of Building Number of Responses Unit on Which Rent is Paid Average Rent Paid Range of Rents Paid Average Capacity of Building Grain Storage Grain bin, all 11 $/bushel/month $.027 $ ,635 bu. Grain bin, all 78 $/bushel/year $.14 $ ,919 bu. Up to 10,000 bu. 43 $/bushel/year $.13 $ ,005 bu. Over 10,000 bu. 34 $/bushel/year $.16 $ ,000 bu. Hay Storage Small square bales 4 $/bale $.12 $ ,825 bales Large square bales 5 $/bale $2.81 $ bales Large round bales 3 $/bale $5.24 $ bales Rural Housing House on farm, all 110 $/month $568 $100 1,300 1 to 50 years old 24 $/month $598 $300 1,000 more than 50 years old 56 $/month $509 $100 1,200 2 bedrooms 12 $/month $435 $ bedrooms 40 $/month $499 $ or more bedrooms 22 $/month $626 $200 1,200 Acknowledgements This publication is a product of the North Central Regional (NCR) Cooperative Extension Services of: Illinois Indiana Iowa Kansas Kentucky Michigan Minnesota Missouri Nebraska North Dakota Ohio Oklahoma South Dakota Wisconsin and The USDA National Institute of Food and Agriculture (NIFA) Funding Funding for this project was provided by the North Central Risk Management Education Center ( and the USDA National Institute of Food and Agriculture ( usda.gov). This material is based upon work supported by USDA/NIFA under Award Number NCFMEC-07 May by the North Central Farm Management Extension Committee For more information about this and other leases, visit