Excessive Heat Warnings

Flexible Cash Rent Leases More Popular

 

Around half of Iowa's land is cash rented. In 2016 the average price was about $230 an acre according to Iowa State University. But the land price is on track to go down.

Rabo AgriFinance Vice President Stephen Nicholson says the cash rent price for the past couple years is unsustainable with near three dollar corn. Prices have been going down since a peak of $270 an acre in 2013, but at a much slower rate than commodity prices. Part of that is due to the landowner, but Nicholson says the farmer plays a role too.

Nicholson says, "Farmers have got to think about what cash flows and what doesn't. And if it doesn't cash flow, then you just need to walk away from it and let someone else pay for that, because probably if they're going to pay too much you probably may get that land back in a couple years."

There are different cash rent agreements; for many years deals were negotiated in September and then paid in March. Nicholson says he's seen a move to more flexible leases, which can take many different forms. One example has the landlord taking a percentage of the earnings of the land instead of a flat rent rate.

Nicholson says, "But if you go to a flex lease, it's going to be a little more negotiation a little more detail involved in that lease, a little more skin in the game for both the farmer and the land lord."