Time to consider farmland lease options for 2021
This time of the year farmers who are renting farmland, and owners, are negotiating leases for the 2021 crop year. I receive inquires on a regular basis from landowners about farmland values and cash rents, particularly if they plan to re-negotiate the price, terms or conditions with an existing tenant farmer, or are because they are making a change.
Past farm leasing surveys have consistently shown that there are many variables, most tangible, and some intangible, which usually result in the final negotiated cash rent to be higher or lower than the USDA Census county average rate. The USDA average cash rent for non-irrigated farmland Monroe County for 2019 is $131 per tillable acre, down $9 per acre from 2017. The average price per acre in Lenawee County is $138, up from $129 in 2017 while Washtenaw County is $83.50 per tillable acre, down $1.50 from 2017. Irrigated farmland in Monroe County has an average cash rent of $219 per acre. USDA did not have a survey amount for 2020 or 2018.
All farm leases, whether fixed cash, variable cash, crop-share, building or pasture leases should be in writing. This should not be viewed by either party as a lack of trust, but to ensure that both parties, or their heirs, know what all the terms of the lease are. There have been disputes over even simple matters, as the landowner expecting the farmer to walk soybean fields and pull weed escapes. It seems every year there is one or more tenant farmer has not paid the rent or had the check bounce. One aggrieved local landowner surprised the other party by putting a lien on property or equipment for the past due amount.
There are several sample generic lease forms that landowners and farmers can modify and use and of course an attorney can draw up a lease as well. The Midwest Plan Service based at Iowa State University has various sample lease forms that have been written, reviewed and edited by members of the North Central Farm Management Extension committee. These include cash, crop share, pasture, farm building or livestock facility and machinery lease forms. All sample forms are available free of charge at; www.mwps.sws.iastate.edu/free-lease-forms. Extension attorneys at the University of Illinois also have sample cash farm lease forms as well.
Some of the many variables that can affect crop land rent, higher or lower, include;
• Size and location of the tract of land and the distance to the “home” farm.
• Soil type, soil fertility level, weed history, presence of rocks, ditches or other nuisances or hindrances.
• Surface and subsurface drainage, a tile map, soil erosion characteristics or restrictions of tillage used.
• Past crop and yield history and the presence of soil pathogens, such as Soybean cyst nematodes, Sclerotinia white mold, Sudden Death Syndrome, Phytophthora root rot, etc.
• Proximity of non-farm neighbors, schools, home gardens, organic farms or other factors that can affect pesticide, anhydrous ammonia use, night-time farm work, or where the farm has the potential for trespassing or crop damage.
• Width of roads, bridges, amount of traffic, bordering trees or other hindrances.
• Payment schedule and the length of the lease.
• Neighboring weedy fields or the requirement to keep non-farm ditches or other non-tillable areas mowed and clean, or restrictions of crops grown, such as no corn or only low height crops.
• Hunting privileges.
• Availability of buildings or electricity and gravel driveways suitable for modern farm equipment.
An intangible but nevertheless real factor affecting land rental price is the integrity of the tenant farmer. There is a real dollar value to the landowner of having a trustworthy tenant farmer, especially for an absentee landowner. Though this factor is hard to quantify in terms of actual dollars per acre, this should result in a lower cash payment than if the landowner is constantly worried about getting paid on time, has trouble communicating with the farmer, or is concerned about the land and its use or abuse. A good tenant will keep weeds under control, make payments on time, control soil erosion, soil test on a regular basis, and do other things that will not run down or erode the topsoil on the farm. They will also keep the landowner informed and provide them with a copy of soil tests, yields and other farm information.
Landowners simply interested in securing the highest possible cash rent have no idea of all the little things that a “good” farmer does to look after the soil and farm. A tenant farmer paying very high cash rent may cut corners to keep their overall costs down, such as running down the soil fertility level, and could be negligent of important details that the landowner assumed would be done.