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Cash Rent Suggestions for 2009. The following information has been gleaned from several sources, including: Gary Schnitkey, and others from the U of I Mark Rhea and Adam Kestner, FBFM Personal communications. ’09 Farm Rent Suggestions*.
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Cash Rent Suggestions for 2009 • The following information has been gleaned from several sources, including: • Gary Schnitkey, and others from the U of I • Mark Rhea and Adam Kestner, FBFM • Personal communications
’09 Farm Rent Suggestions* • Use a variable rent or share rent- these are now considered a cash lease by FSA • If fixed cash rent must be used, delay until March ’09, when revenue insurance policies have been set • Consider re negotiating cash rents *U of I Farm Management Specialists
Flexible Rents • Sets base price but can vary dependent upon yield, price or both • FBFM- Bob Rhea/ Adam Kestner • Gross income + FSA payments • Subtract seed, chemical, fertilizer and insurance • Remainder is split 50-50
Flexible Rents • Example 1- FBFM • 175 bushel corn x $3.75+ $18 FSA= $674 • Seed, chemical, fert., Ins.= $389 • Difference is $285/2= $142 • 175 bushel corn x $4.50 + $18 FSA= $805 • Seed, chem, fert, ins= $389 • Difference is $417/2= $208
Flexible Rents • Determine base cash rent, base yield and base price • After harvest complete, then remaining rent is computed by • Can vary price or yield or both • Base rent X Current Price X Current Yield = Current Rent • Base Price Base Yield 150 x 3.75 x 200 = $160.31 4.00 175 150 x 5.50 x 200 = $235.13 4.00 175
Flexible Cash Rent Lease Examples File C2-22 September 2008 www.extension.iastate.edu/agdm William Edwards extension economist 641-294-6161 wedwards@iastate.edu Many tenants and land owners agree to set their cash rental rates based on actual prices, yields and/or production costs each year instead of fi xing a rate in advance. More information on fl exible cash leases can be found in Information File C2-21 Flexible Farm Lease Agreements. Respondents to a recent survey conducted by Iowa State University Extension were asked to report on fl exible cash rental agreements that they were using or with which they were familiar. The following list is a sample of the nearly 100 different types of agreements that were reported. Although no two agreements are exactly alike, most of them fall into a few general categories. Flexible rent based on gross revenue The most common type of fl exible lease bases the fi nal cash rent on an estimate of the actual gross
Flexible Rents • Base rent plus bonus payment, bonus payment based upon yield, price or both • Cash rent is based upon $ per bushel harvest • Fixed % of gross revenue • 35% on good/excellent soils • 40% on average soils
