Farm Leasing Arrangements. Tim Eggers. Field Agricultural Economist

Transcription

1 Farm Leasing Arrangements Tim Eggers Field Agricultural Economist

2 Farm Leasing Arrangements Charles Brown Field Specialist - Farm Management crbrown@iastate.edu

3 Farm Leasing Arrangements Melissa O Rourke Field Specialist - Farm Management morourke@iastate.edu

4 Farm Leasing Arrangements Shane Ellis Field Specialist - Farm Management shanee@iastate.edu

5 Farm Leasing Arrangements Steve Johnson Field Specialist - Farm Management sdjohns@iastate.edu

6 Farm Leasing Arrangements Kelvin Leibold Field Specialist - Farm Management kleibold@iastate.edu

7 Farm Leasing Arrangements Ryan Drollette Field Specialist - Farm Management drollett@iastate.edu

8 Farm Leasing Arrangements Gary Wright Field Specialist - Farm Management gdwright@iastate.edu

9 Agenda 2015 Farm Leasing Arrangements Follow -up Evaluation Summary Land Values Cash Rental Rates Landlord/Tenant Communication Legal Issues Farm Program Payment Update Costs of Crop Production Calculating a Fair Cash Rental Rate

10 Which of the following would you consider to be your PRIMARY occupation? Answer Response % Non-farming landowner % Active farmer 97 29% Ag lender 24 7% Attorney or Accountant 8 2% Professional farm manager 3 1% Other (please specify) 53 16% Total %

11 Intended changes to lease arrangements based on information presented Apply for the Beginning Farmer Tax Credit or Custom Farming Tax Credit 4% Move from an oral lease to a written lease agreement 9% File and perfect a landlord's lien 3% Increase rent 3% Decrease rent 30% Change type of lease 9% Other 9% Implement conservation strategies 9% No changes will be made 24% N=382 excludes Not Lessors/Not Lessees

12 You answered, we listened Why do you choose to participate in farmland leasing meetings? 1. Gain knowledge on farmland leasing, rental market and trends 2. Improve knowledge for communicating with other parties involved 3. Gain knowledge on leasing practices

13 5. Why did you choose to participate in the Farmland Leasing Arrangements Meeting? # Answer Response % 1 Update on rental market 36 28% 2 Non-farmer education/communication 27 21% 3 General gain of knowledge/information 20 16% 4 Update on lease arrangements/practices 20 16% 5 Update on current issues 13 10% 6 Learn what others are doing 8 6% 7 Speaker/location/topic 5 4% SEE Excel file tab 5_whyparticipate for raw data.

14 You answered, we listened What topics would you want covered at the 2016 Farmland Leasing Meeting? 1. Profitability and cost of production 2. Setting rates and determining what is fair 3. Taking care of the land 4. Types of leases 5. Legal updates negotiations, terminations

15 Have you attended a Farmland Leasing Arrangements Meeting prior to this year? # Answer Response % 1 Yes, multiple times % 2 Yes, once before % 3 No, 2015 was the first time I attended % 4 I don t know/i m not sure. 5 2% Total % ~1,845 participants at Leasing Programs in Survey results from 137 through Qualtrics (33% response rate) and 199 returned from mailed survey (29% response rate) totaled 336 evaluations (~18% of participants).

16 December 2017 Corn Futures Contract 2016 Leasing Meetings

17 November 2017 Soybean Futures Contract 2016 Leasing Meetings

18 2015 Cropland Value by State - Dollars per acre and percent change from

19 AgLetter Federal Reserve Bank of Chicago

20 Realtors Land Institute March 2016 Survey

21 Farmland Value per Acre Land value per acre ($/acre)

22 Farmland Values for Crop Reporting District 1 by Year $ per acre $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 High Medium Low $1,720 15%

23 $ per acre $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Farmland Values for Crop Reporting District 2 by Year High Medium Low $1,856 19%

24 $ per acre $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Farmland Values for Crop Reporting District 3 by Year High Medium Low $1,300 14%

25 $ per acre $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Farmland Values for Crop Reporting District 4 by Year High Medium Low $1,388 15%

26 $ per acre $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Farmland Values for Crop Reporting District 5 by Year High Medium Low $1,372 14%

27 $ per acre $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Farmland Values for Crop Reporting District 6 by Year High Medium Low $821 9%

28 Farmland Values for Crop Reporting District 7 by Year $ per acre $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 High Medium Low $1,159 15%

29 Farmland Values for Crop Reporting District 8 by Year $7,000 $6,000 High Medium Low $ per acre $5,000 $4,000 $3,000 $2,000 $1,000 $0 $394 8%

30 Farmland Values for Crop Reporting District 9 by Year $ per acre $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 High Medium Low $322 4%

31 Percent of Sales 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Iowa Farmland Purchases by Farmers and Investors and Land Values Farmers Investors Average Land Value $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Average Land Value per Acre

32 Iowa Landlords by Ownership Arrangements - % Rented Acres Corporation, 5.3 Other, 3.1 Operator Landlord, 23.2 Trust, 23.9 Total acres rented out in Iowa, 2014: million acres more than 50% of Iowa farmland. Partnership, 14.4 Individual, 37.0 Source: USDA NASS TOTAL

33 District Farmland Values Predictions Increase 5% or more in Five Years Increase 0-5% Stay the same Decrease 0-5% PERCENT Decrease 5-10% Decrease 10% or more Northwest North Central Northeast West Central Central East Central Southwest South Central Southeast STATE

34 % Change in Land Values by District 2014 and 2015 District Average Value 2015 % Change % Change Northwest $9, % -12.3% North Central $7, % -13.1% Northeast $7, % -11.0% West Central $8, % -10.8% Central $8, % -8.0% East Central $8, % -3.4% Southwest $6, % -13.5% South Central $4, % -6.6% Southeast $6, % 3.2% State Avg. $7, % -8.9%

35 Iowa Farmland Value Portal

36 Percent of Farmland Leased or Rented, 2012 Source: USDA NASS 2012 Census of Ag

37 Rent to Owner - Corn $400 $350 $300 $ per Acre $250 $200 $150 $100 $50 Crop Share Cash Rent 30% Flex Rent $0

38 Crop Share vs Cash Rent vs Flex Rent Rent is paid in cash Rent returns change with price and/or yield Owner contributes to costs of crop production Crop Share X X Cash Rent Flex Rent X X X

39 Crop Share Lease Advantages 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.

40 Crop Share Lease Advantages The owner receives more information about yields and inputs used each year. A second USDA payment limit is created.

41 Crop Share Lease Disadvantages The landlord and tenant must agree on how production expenses will be shared. 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.

42 Crop Share Lease Disadvantages 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.

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44 ISU Cash Rent Survey Goal To provide current, accurate, and unbiased information on cash rents in Iowa Started in 1994 by Dr. William Edwards

45 ISU Cash Rent Survey Procedure People who are knowledgeable about rental rates are asked about typical land rental rates in their county Farm operators Landowners Agricultural Lenders Professional farm managers Realtors/Appraisers

46 ISU Cash Rent Survey 1,585 responses in 2016 (1,437 in 2015)

47 Average 2016 Typical Cash Rents for Corn & Soybean Acres

48 State and Crop Reporting District 1 $300 $250 Average Rent by Year $283 $267 $270 $259 $248 $224 $200 $150 $149 $174 $187 $188 State District 1 $

49 State and Crop Reporting District 2 Average Rent by Year $300 $294 $277 $270 $250 $200 $150 $155 $183 $196 $191 $220 State District 2 $254 $243 $

50 State and Crop Reporting District 3 $300 Average Rent by Year $266 $281 $277 $273 $250 $250 $223 $200 $150 $157 $190 $186 $192 State District 3 $

51 State and Crop Reporting District 4 $300 $250 Average Rent by Year $227 $279 $294 $288 $265 $245 $200 $179 $196 $195 State $150 $151 District 4 $

52 State and Crop Reporting District 5 $300 $250 Average Rent by Year $284 $275 $297 $261 $239 $226 $200 $191 $197 $195 $150 $157 State District 5 $

53 State and Crop Reporting District 6 Average Rent by Year $300 $284 $273 $255 $250 $219 $252 $242 $200 $166 $186 $193 $196 State $150 District 6 $

54 State and Crop Reporting District 7 $300 Average Rent by Year $250 $246 $257 $249 $242 $200 $150 $161 $170 $176 $213 State District 7 $220 $100 $

55 State and Crop Reporting District 8 $300 Average Rent by Year $250 $200 $150 $100 $126 $155 $146 $151 $177 $193 $210 $202 State District 8 $187 $

56 State and Crop Reporting District 9 $300 Average Rent by Year $250 $200 $198 $217 $229 $229 $217 $203 $150 $100 $134 $161 $173 $169 State District

57 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 1 Average Yield) Cash Rent as a % of Gross Revenue $1,000 $900 $800 $825 $880 46% 50% 45% 40% $700 $600 $500 $400 $300 33% $415 $642 27% 23% 30% $582 35% 30% 25% 20% 15% Average 32% $200 10% $100 5% $ %

58 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 2 Average Yield) Cash Rent as a % of Gross Revenue $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 31% $442 $592 31% $789 $820 34% 24% 49% $552 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Average 34% $ %

59 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 3 Average Yield) Cash Rent as a % of Gross Revenue $1,000 $900 $800 $700 $600 $500 $400 $300 $200 32% $446 $577 33% $807 $827 32% 24% 49% $563 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% Average 34% $100 5% $ %

60 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 4 Average Yield) Cash Rent as a % of Gross Revenue $900 $800 $700 $600 $500 $400 $300 $200 $100 36% $386 $618 29% $784 25% $739 38% 48% $595 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Average 35% $ %

61 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 5 Average Yield) Cash Rent as a % of Gross Revenue $900 $800 $700 $600 $500 $400 $300 32% $449 23% $600 32% $767 25% $887 31% 48% $590 50% 45% 40% 35% 30% 25% 20% 15% Average 34% $200 10% $100 5% $ %

62 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 6 Average Yield) Cash Rent as a % of Gross Revenue $900 $800 $700 $600 $500 $400 $300 $200 35% $441 31% $606 $765 26% $832 30% 44% $614 45% 40% 35% 30% 25% 20% 15% 10% Average 33% $100 5% $ %

63 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 7 Average Yield) $800 $700 $600 $500 $400 $300 $200 $100 30% $413 $541 30% $717 $703 25% Cash Rent as a % of Gross Revenue 35% 43% $582 45% 40% 35% 30% 25% 20% 15% 10% 5% Average 32% $ %

64 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 8 Average Yield) Cash Rent as a % of Gross Revenue $700 $600 $500 $400 $300 30% $385 34% $457 $539 28% 35% $557 37% $543 40% 35% 30% 25% 20% 15% Average 31% $200 10% $100 5% $ %

65 Gross Revenue to a 50/50 Rotation (Marketing Year Average Price times Crop Reporting District 9 Average Yield) Cash Rent as a % of Gross Revenue $800 $700 $600 $500 $400 $300 $200 30% $412 $765 $585 $593 28% 29% 28% 37% $617 45% 40% 35% 30% 25% 20% 15% 10% Average 31% $100 5% $ %

66 Interactive Decision Tool

67 Interactive Decision Tool

68 Landlord-Tenant Communication: It s a 2-way street Farmland owners need to be open to learning about current farming challenges, conditions, costs of productions Producers need to listen to the interests and goals of farmland owners; and be willing to share information about inputs, yields, and crop plans

69 Communication Methods: Newsletter Facebook, Twitter, blog Phone calls Stop by for a cup of coffee Annual or periodic meetings KEY: Don t limit communication to annual rent payment and rent negotiations.

70 More farmland owners require written annual report as a lease condition. Owner agrees: Information provided by the Tenant (such as yields, management practices) is kept confidential. Proprietary business information needs to be shared to negotiate lease terms but it is not to be shared in the coffee shop.

71 Winning Communication Strategies: Communicate regularly, not just once a year Producers: Take time to share and education Owners about current trends in agriculture, farm costs Provide regular crop reports during growing season Maintain farm appearance Treat landowners like family with respect and kindness.

72 Communication Process Start early Use data Know your own break evens and overheads Know your own ability to handle burn rate. Separate business from family/friends Understand challenges landowners face with declining revenues Sell your benefits -

73 Communication Based on Facts Yields Prices Government payments Crop insurance Soil maps Fertilizer application records Satellite pictures drainage, other issues

74 When Communication Fails Ask for more time Be aware of your non-verbal communication Focus on what the other person is saying and what they really mean Ask for more information to clarify points. Ask if there are issues that the other party is willing to compromise on or can be negotiated further. Stick to building trust, using tact, and logic Try to understand the other party s perspective new truck May need to bring in a third party - mediator

75 Farm Lease Basics: A Few Pointers Strong preference for written leases Legal issues, including lease termination Communication fundamentals

76 Why should a farm lease be written? Provides more assurance that the parties understand one another. Lease of more than 1 year must be in writing to be enforceable. Lease of 5 years or more must be in writing and recorded at the county recorder s office.

77 Shouldn t a handshake be good enough? Don t rely on selective memory. Be sure that you cover all the provisions that you intend to cover. Define meaning of terms. Put things in writing because you value the relationship... and because you don t want there to be later misunderstandings!

78 A Few Examples.... Fencing Hunting rights Crop residue (stover)

79 Assuring the Rent is Paid How can parties assure one another that the rent will be paid?

80 First Step? -- Use a written lease. And, be sure that: (1) The legal description and parcel number in the lease is accurate. (2) The parties to the lease are properly identified. (3) The lease terms are clear.

81 Additional tools to assure rent payment may include: Require all rent paid on March 1. (Reduction for interest paid by the borrower may be a consideration.) Require irrevocable letter of credit from the Producer/Tenant s lender. Require Landlord s name be included as Payee on checks for crops. File and perfect a Landlord Lien this includes recording the lease seek professional legal assistance for this.

82 Farm Lease Termination: Does lease termination mean the end of the Owner Tenant relationship? Not necessarily but it means either the Owner (or the Tenant) want to make some changes for the next year. Without written notice of termination, lease automatically renews under the same terms and conditions for the following crop year.

83 Farm Lease Termination: Iowa Code 562.6: Amended in 2016 to clarify that whether the lease is oral or written, the termination notice must be in writing! Notice cannot be contained within the lease it must be a separate written notice. Serve written notice on or before September 1 (this terminates the current least on the following March 1). Serve in person (have them sign the notice and keep a copy); or by Certified US Mail (keep copy of receipt, return receipt optional); or by publication if neither in-person or mail can be accomplished.

84 Projected 2016 ARC-CO Payments Corn Lyon Sioux Plymouth $72 $64 $72 Woodbury $12 Monona $ Corn ARC-CO Payment $50 - $76 $25 - $50 $1 - $25 $0 - $1 No Data Harrison Osceola O'Brien Cherokee $42 Mills $60 $76 $46 Ida Fremont $72 Crawford Pottawattamie $0 Shelby Clay Buena Vista Sac $55 Dickinson $73 Montgomery Page Carroll Audubon Cass Emmet $25 $21 $61 $41 $25 $30 Palo Alto Pocahontas Calhoun $35 $52 $29 Adams Taylor $64 $34 $30 Guthrie Adair $49 Greene $14 Kossuth Humboldt Webster $42 $26 Union $62 $27 $37 Ringgold Dallas $25 $57 $0 Boone $37 Madison Winnebago Hancock Wright Hamilton $48 $16 Clarke Decatur $35 $52 $27 $13 Polk $0 $0 Story $20 Warren $0 Worth Cerro Gordo Franklin Hardin $48 Lucas Wayne $36 $36 $46 $57 Jasper $0 $0 Marion Marshall Mitchell Floyd Butler Grundy $70 $11 Monroe $35 $54 $73 $75 Appanoose Tama Mahaska $60 Davis Chickasaw Bremer Poweshiek Howard Black Hawk $23 Wapello Benton Iowa Keokuk $67 $1 $13 $0 $6 $0 $15 $39 $37 $34 $49 Winneshiek Fayette Buchanan $32 Jefferson $72 $71 $0 Van Buren $0 $60 Linn $72 Johnson $70 Washington $0 Henry Lee Allamakee $67 Clayton $72 Delaware $0 $32 $72 Louisa Jones Cedar $71 $73 Muscatine $48 Des Moines $45 Dubuque $63 $71 Jackson Clinton Scott $53 $74 $40 *Payments based on yield and price projections as of 7/13/2016

85 Projected 2017 ARC-CO Payments Corn Lyon Sioux Plymouth $8 $31 $51 Woodbury $52 Monona $ Corn ARC-CO Payment $50 - $76 $25 - $50 $1 - $25 $0 - $1 No Data Harrison Osceola O'Brien Cherokee $63 Mills $46 $68 $55 Ida Fremont $54 Crawford Pottawattamie $42 Shelby Clay Buena Vista Sac $65 Dickinson $68 Montgomery Page Carroll Audubon Cass Emmet $48 $60 $66 $61 $62 $59 Palo Alto Pocahontas Calhoun $62 $65 $63 Adams Taylor $65 $66 $63 Guthrie Adair $58 Greene $58 Kossuth Humboldt Webster $63 $57 Union $66 $65 $67 Ringgold Dallas $60 $53 $47 Boone $63 Madison Winnebago Hancock Wright Hamilton $65 $57 Clarke Decatur $65 $66 $67 $62 Polk $47 $51 Story $61 Warren $55 Worth Cerro Gordo Franklin Hardin $62 Lucas Wayne $64 $63 $68 $65 Jasper $47 $51 Marion Marshall Mitchell Floyd Butler Grundy $54 $66 Monroe $49 $64 $67 $68 Appanoose Tama Mahaska $63 Davis Chickasaw Bremer Poweshiek Howard Black Hawk $66 Wapello Benton Iowa Keokuk $63 Winneshiek Fayette Buchanan $66 $60 $65 $61 $54 $47 $48 $59 $63 $66 $65 Jefferson $44 $66 $53 Van Buren $51 $66 Linn $66 Johnson $68 Washington $63 Henry Lee Allamakee $28 Clayton $67 Delaware $58 $43 $66 Louisa Jones Cedar $65 $68 Muscatine $63 Des Moines $61 Dubuque $63 $47 Jackson Clinton Scott $65 $69 $67 *Payments based on yield and price projections as of 7/13/2016

86 Projected 2016 ARC-CO Payments Soybeans *Payments based on yield and price projections as of 7/11/2016

87 Projected 2017 ARC-CO Payments Soybeans *Payments based on yield and price projections as of 7/11/2016

88 Projected 2016 ARC-CO Payments Crop Reporting District 1 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

89 Projected 2016 ARC-CO Payments Crop Reporting District 2 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

90 Projected 2016 ARC-CO Payments Crop Reporting District 3 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

91 Projected 2016 ARC-CO Payments Crop Reporting District 4 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

92 Projected 2016 ARC-CO Payments Crop Reporting District 5 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

93 Projected 2016 ARC-CO Payments Crop Reporting District 6 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/11/2016

94 Projected 2016 ARC-CO Payments Crop Reporting District 7 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/ Yield data not available for Mills or Taylor Counties

95 Projected 2016 ARC-CO Payments Crop Reporting District 8 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/ Corn yield data not available for Union or Monroe Counties

96 Projected 2016 ARC-CO Payments Crop Reporting District 9 $/Base Acre Corn Payment Soybeans Payment *Payments based on yield and price projections as of 7/13/2016

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99 What is the Iowa Nutrient Reduction Strategy? Voluntary, science-based program to reduce Nitrogen and Phosphorous impact on water Includes cities, industry and agriculture A practice-based approach to show meaningful and measureable progress A framework for innovation and verification of new practices and technologies

100 Partial Budgeting Changes that Increase Revenue + Changes that Reduce Cost Increased Profits Changes that Decrease Revenue + Changes that Increase Costs Decreased Profits

101 Decision Making Decisions always involve both facts & values Human-agriculture-environmental relationships are systems with multidirectional feedback loops Farmer s have feedback loops that influence social learning with beneficial or inadequate outcomes

102 Financial Impact If cover crops result in a decreased level of profitability, will you decrease the cash rental rate to provide an incentive to your tenant to adopt the strategy? $-50 $-40 $-30 $20 $-10 $0 $10 $20

103 Questions to ask your tenant(s) Are you raising cover crops? Yes How many acres? Why? Does it work financially? What s happening with your production (yields, weed pressure, burn down, differences from year to year)? Are there social pressures?

104 Farm Profitability Economic profits don t last long in a competitive market Economic profits destroyed by: Falling output prices due to increases in production Increased costs Production costs Land prices/rents Number of producers

105 What is cost of production? - Preharvest machinery - Seed, chemicals, etc. - Harvest machinery - Labor - Land

106 Corn following Soybeans Land, $ Preharvest machinery, $36.90 Labor, $33.80 Harvest machinery, $89.85 Seed, chemicals, etc., $292.46

107 Cost per Acre Preharvest machinery Fixed Variable Total Tandem disk $3.80 $2.60 $6.40 Apply nitrogen $5.10 $5.00 $10.10 Field cultivate $2.70 $2.40 $5.10 Plant $6.20 $4.90 $11.10 Spray $2.30 $1.90 $4.20 Custom hire $0.00 $0.00 $0.00 Other $0.00 $0.00 $0.00 Other $0.00 $0.00 $0.00 Total per acre $20.10 $16.80 $36.90

108 Seed, chemicals, etc. Fixed Variable Total Seed ---- $ $ cost per 1000 kernels $3.71 kernels per acre 30,000 Nitrogen ---- $52.40 $52.40 price per pound $0.40 pounds per acre 131 Phosphate ---- $30.60 $30.60 price per pound $0.45 pounds per acre 68 Potash ---- $18.90 $18.90 price per pound $0.35 pounds per acre 54 Lime (annual cost) ---- $8.80 $8.80 Herbicide ---- $38.10 $38.10 Crop insurance ---- $12.20 $12.20 Miscellaneous ---- $10.00 $10.00 Interest on preharvest variable costs ---- $10.27 $10.27 length of period (months) 8 interest rate 5.2% Total ---- $ $292.46

109 Harvest machinery Fixed Variable Total Combine $19.90 $9.10 $29.00 Grain Cart $6.20 $2.70 $8.90 Haul $7.74 $5.35 $13.09 Fixed- price per bushel $0.04 Variable- price per bushel $0.03 Drying $9.00 $23.76 $32.76 Fixed- price per bushel $0.05 Variable- price per bushel $0.13 Handling $3.11 $2.99 $6.10 Fixed- price per bushel $0.02 Variable- price per bushel $0.02 Custom hire $0.00 $0.00 $0.00 Total per acre $45.95 $43.89 $89.85

110 Labor Fixed Variable Total Operator $ $33.80 Hours 2.6 Rate per hour $13.00 Hired ---- $0.00 $0.00 Hours 0 Rate per hour $0.00 Total $33.80 $0.00 $33.80

111 Total fixed, variable and all costs Fixed Variable Total Per acre $ $ $ Per bushel $2.03 $1.96 $3.99 Return per Acre Over Variable Costs All Costs Gross returns Expected selling price $ $ Government payments ---- $0.00 Effective LDP rate $ $0.00 Total returns ---- $ Net returns $ $11.61

112 Soybeans following Corn Land, $ Preharvest machinery, $38.50 Seed, chemicals, etc., $ Labor, $29.25 Harvest machinery, $36.95

113 Direct Corn Expenses $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Seed Insecticide & Fungicide Herbicide Fertilizer & Lime Drying & Storage

114 Direct Bean Expenses $60 $50 $40 Seed Insecticide & Fungicide Herbicide Fertilizer & Lime $30 $20 $10 $

115 Soybean Costs of Production $300 $250 $200 Land Seed, Chemicals, Fertilizer, etc. Machinery for Growing and Harvesting Labor $ $150 $100 $ $ $ $50 $0 $46.76 $75.43 $26.95 $

116 Corn Costs of Production $350 $300 $250 $200 $150 $100 $50 Land Seed, Chemicals, Fertilizer, etc. Machinery for Growing and Harvesting Labor $195 $155 $101 $292 $266 $127 $0 $29 $

117 $800 $700 $600 $500 $400 $300 $200 $100 $0 -$ Cost Estimates: Corn following Soybeans, 180 bu/acre $719 $266 $292 $127 $34 $630 at $3.50/bushel Costs Predicted Revenue Margin Land Crop Inputs Machinery Labor (-$89) or ($0.49)/bushel Source: Plastina, ISU Ext. Economics, FM-1712, Jan 2016

118 $600 $ Cost Estimates: Soybeans following Corn, 50 bu/acre $533 $445 at $9.50/bushel $400 $300 $200 $100 $0 $266 $163 $75 $29 Land Crop Inputs Machinery Labor (-$58) or ($1.16)/bushel -$100 Costs Predicted Revenue Margin Source: Plastina, ISU Ext. Economics, FM-1712, Jan 2016

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121 Estimating a Cash Rental Rate Ag Decision Maker information file C2-20 Decision Aid file C2-20 (spreadsheet) Flexible Cash Leases Ag Decision Maker information file C2-21 Decision Aid file C2-21 (spreadsheet)

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126 Influences on 2017 Rental Market Grain prices Number of acres, weather Price of crude oil (ethanol demand and price) Export demand exchange rate Livestock feeding cattle, pigs, birds Reduced profits in 2016 Farm Bill payments Financing Supply and demand will ultimately set the rents.

127 Beginning Farmer Tax Credit - Program Purpose Encourage agricultural asset owners to lease to qualifying beginning farmers Provides owner a credit on Iowa income taxes owed 7% on cash rent 17% on crop share 1% additional first year if BF is a military veteran

128 Thank You! Tim Eggers Field Ag Economist (712)

129 Our Mission ISU Extension builds partnerships and provides research-based learning opportunities to improve quality of life in Iowa We believe in... Quality Access Diversity Accountability