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Cash Rent Advice Around Iowa

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September 1st is the deadline for ending a farm lease that becomes effective for March 1st of 2018. Anyone who does not end their lease in writing by then will have the same lease agreement they had this year.

Iowa State University Extension is conducting about 70 meetings statewide in July and August to talk about cash renting. In Iowa there are 23.5 million tillable acres, of those, 55 percent is rented.

Steve Johnson with Iowa State University Extension and Outreach says, "The primary information that will be shared will be around farmland values, cash rental rates, calculating a fair cash rent as well as tight profit margins and the importance of communications between both the land owner and the tenant operator."

Cash rents change every year, fluctuating with land prices, crop prices, or just what a land owner wants.

On a Dallas County farm, Cole Moody, a student at Iowa State University is working a case study trying to determine how best to value land. He estimates the ISU case study farmland is worth, in cash rent, about $186 an acre. But says that's definitely on the low end of the scale, it's an education facility and comes with extra costs that drive the price down.

Moody says, "We're taking actual production history. Real cost of production information. As well as local cash prices and using all of those factors along with the decision tools on the ag decision maker website to calculate that fair cash rental rate."

The average cash rent this year is $219 per tillable acre, about 19 percent below the 2013 high and around five percent below last year, mainly because of low crop prices.

Even verbal cash rent agreements are legal contracts, Johnson says getting a lease in writing is important now that there are tight profit margins. He says 70 percent of farm leases in Iowa are in writing.

ISU extension has a short form and long form lease information that can be completed and sent to owner or operator to help with leases.

Johnson explains the trend in Iowa has been land prices going down for the last four years, "Cash rents are highly correlated with land values. Cash rents for 2018 will likely follow the land values not necessarily crop prices or crop yields."

Johnson says farmers should contact their local extension office for more information or to find a nearby meeting.