Farm Leasing Arrangements

1. Farm Leasing Arrangements Tim Eggers Field Agricultural Economist teggers@iastate.edu 712-542-5171 www.extension.iastate.edu/feci

2. Agenda • Hot Topics in Ag Decision Maker • Legislative Update • Crop Conditions • CSR2 • Leasing Practices • Trends in • Farm land values • Cash rental rates • Costs of Production • 2014 Farm Leasing Arrangements Considerations

3. What goes up,….. • Is agriculture still cyclical and what could trigger a down turn? • What are the implications for livestock, agribusinessand land? • Will farm debt increase? • A new series of papers from ISU. • www.extension.iastate.edu/agdm/

4. 2013 Legislative Updates ► Past: Iowa statute did not require written termination notice on parcels of less than 40 acres. ►Now: Iowa Code 562.5 requires a written termination notice on all parcels regardless of size. ►If proper written notice is not provided by September 1, the lease automatically continues on the same terms and conditions as the original agreement.

5. Exception: Animal Feeding Operations • If primary use of a rented acreage of less than 40 acres is for an animal feeding operation, written notice requirement does not apply. • “Mere cropper” exception remains – essentially refers to someone hired (as an employee or custom operator) to plant/harvest the crop.

6. Land Holder Liability • 2013 Legislature added the phrase “Educational activities” to Iowa Code 416C -- included in the list of recreational purposes for which Iowa landholders have protection from liability. • So, if land holder desires to hold a school farm tour, the code provides some protection from liability.

7. Crop Conditions • Drought last year in 2012 • Cool wet spring and delayed planting 2013 • Crop impacts • Communications skills exercised?

9. http://www.nass.usda.gov/Statistics_by_State/Iowa/Publications/Crop_Progress_&_Condition/index.asphttp://www.nass.usda.gov/Statistics_by_State/Iowa/Publications/Crop_Progress_&_Condition/index.asp

11. Untimely Rains Induced Farm Lease Considerations • Communicate with your landowner • Send photos of the crops, pastures • Flexible leases: are crop insurance proceeds included in the rent formula?

12. CSR2 – Crop Suitability Rating • What is it? • Why did it need to change? • Where do I find my CSR2? • How much did it change? • When will CSR2 be used by assessors? • How does it change the CSR for my land? page 26

13. CSR2 = S‐M‐F‐W‐D±EJ Where: S is the taxonomic subgroup class of the soil series M is the family particle size class F refers to the field conditions of a particular SMU W is the water holding capacity D is a soil depth & erosion factor T EJ is an expert judgment correction factor

14. Why did CSR need to change? • The philosophical goal is to get values proportional to CSR but with greater transparency, consistency & ease. • The technical goal is to have CSR2 consistent with today’s soil mapping, classification, and government programs. • The ancillary goal is to be able to extend CSR2 across boundaries.

15. Where do I find my CSR2 rating? July ISPAID October WebSoilSurvey

16. Tama 120B CSR2 is 95 93 95 SMU 120 has a CSR2 of 100 95 95 95 95 95 95 95 284 245 226 268 232 292 267 233 95 95 95 95 95 95 Osceola Dickinson Emmet Winnebago Worth Lyon 241 229 Mitchell Howard 95 95 95 95 95 93 93 Winneshiek Allamakee 95 279 95 90 93 Kossuth 95 254 281 271 283 279 253 269 CSR ranged From 90 to 95 Palo Alto O'Brien Clay Hancock Cerro Gordo 278 Floyd Chickasaw Sioux 296 233 Fayette Clayton 289 321 275 261 298 291 311 275 261 Humboldt Bremer Buena Vista Pocahontas Wright Franklin Butler Cherokee Plymouth 273 265 282 285 274 Dubuque Black Hawk Buchanan Delaware 329 268 299 315 314 270 255 Webster Grundy Hardin Sac Hamilton Ida Calhoun Woodbury 250 Jackson 268 297 290 269 Jones 282 263 261 330 293 289 301 Benton Tama Linn Greene Marshall Boone Monona Carroll Story Crawford 278 Clinton 230 Cedar 219 268 253 222 230 237 275 274 262 219 Iowa 265 Poweshiek Jasper Guthrie Dallas Audubon Harrison Shelby Polk Johnson Scott 229 Muscatine 252 246 236 236 229 202 285 248 Washington Mahaska Keokuk Warren Marion Adair Pottawattamie Cass 226 Louisa 207 245 228 286 265 230 Wapello Adams Union Mills Montgomery 244 Henry Des Moines 234 232 215 213 Fremont Page Ringgold Taylor

17. Ackmore 430 CSR2 is 77 70 83 79 79 284 245 226 268 232 267 233 83 83 Osceola Dickinson Emmet Winnebago Worth 88 81 83 241 229 Mitchell Howard 83 83 83 86 83 83 83 Winneshiek Allamakee 83 279 83 83 83 83 83 83 71 Kossuth 83 254 281 271 283 279 83 83 80 83 83 253 269 83 CSR ranged From 70 to 83 Palo Alto O'Brien Clay Hancock Cerro Gordo 83 83 83 278 Floyd Chickasaw Sioux 296 233 Fayette Clayton 289 321 275 261 298 291 311 275 261 Humboldt Bremer Buena Vista Pocahontas Wright Franklin Butler Cherokee Plymouth 273 265 282 285 274 Dubuque Black Hawk Buchanan Delaware 329 268 299 315 314 270 255 Webster Grundy Hardin Sac Hamilton Ida Calhoun Woodbury 250 Jackson 268 297 290 269 Jones 282 263 261 330 293 289 301 Benton Tama Linn Greene Marshall Boone Monona Carroll Story Crawford 278 Clinton 230 Cedar 219 268 253 222 230 237 275 274 262 219 Iowa 265 Poweshiek Jasper Guthrie Dallas Audubon Harrison Shelby Polk Johnson Scott 229 Muscatine 252 246 236 236 229 202 285 248 Washington Mahaska Keokuk Warren Marion Adair Pottawattamie Cass 226 Louisa 207 245 228 286 265 230 Wapello Adams Union Mills Montgomery 244 Henry Des Moines 234 232 215 213 Fremont Page Ringgold Taylor

18. When will CSR2 be used by assessors? Visit with your assessor(s). 2015is the earliest expected use. page 26

19. How does it change the CSR for my land?

20. How does it change the CSR for my land?

21. Soils Aren’t Equally Distributed CSR2 71.1 CSR 59.3

22. Leasing Practices • 10th land ownership survey since 1958 • Phone survey conducted by the Center for Survey Statistics and Methodology and the ISU Statistical Department • Survey selection is based on 40 acre parcel; all owners are surveyed. • This year allows some discussion of owners not just acres • 69% response rate

23. Distribution of Iowa Farmland Acres by Operation Type, 2012

24. Crop Share Lease Tenure Cash Lease Tenure

25. Distribution of Iowa Farmland by Type of Operator Tenure

26. Percent of Farmland Acres Managed by a Professional Farm Manager by Type of Ownership, 2012

27. Distribution of Iowa Farmland Based on the Age of the Owner

28. Distribution of Iowa Farmland by Type of Owner, 2012

29. Distribution of Crop Share Acres Based on the 50%of Costs Paid by the Owner

31. AgLetterFederal Reserve Bank of Chicago

32. Realtors Land InstituteMarch 2013 Survey

33. Average Valuesall grades 1950−2012

34. Southwest $7,015 high $8,818 med $6,732 low $4,484 up 18.8% up $1,110

35. Positive Factorsaffecting land values

36. Negative Factors affecting land values

37. Who Purchased Farmland

38. Who Has Purchased Farmland

39. Change insales activity from previous year More – 64% Less – 5% Same – 31% More – 64% Less – 8% Same – 28% More – 52% Less – 23% Same –25% More – 51% Less – 18% Same –31% More – 59% Less – 12% Same – 29% More – 65% Less – 14% Same –21% More – 63% Less – 13% Same – 24% More – 41% Less – 11% Same – 48% More – 30% Less – 38% Same – 32%

40. Land Value & Cash Rental Rate Trends Averages 2012 Land Value:$8,296/A 2013 Cash Rent: $270/A Source: ISU Extension Economics, Dec. 2011 and May 2012

41. 2013 Iowa Cash Rental Rate Survey William Edwards, Extension Economist

42. Response • Sent out 6,000 surveys • 1,703 county observations received

43. Timing and Purpose • Questionnaires sent out in March • Summary ready in May Purpose: provide information to tenants and landlords to use as a starting point for estimating a fair cash rent.

44. Questions • “What do you think typical cash rental rates are in your county?” • Half paid in advance, half after harvest • For corn and soybean land • High 1/3, medium 1/3, low 1/3 productivity • Based on farm yields reported to NASS • Oats, hay, pasture, cornstalks, hunting

45. Average Corn/Soybean Rent

46. State Average Values, $/acre

47. $283 $294 $281 $294 $297 $284 $257 $210 $229 Average corn/soybean rent/acre

48. State Average Values, $/acre

49. Oats, Hay, Hunting Rights

50. State Average Values, $/acre