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Monday, September 12, 2011

Cash Rent Leases:  Are You Ready For 2012?



 

As we push toward the middle of September, how long will it take to harvest your crop, and how does that coincide or conflict with the schedule for renewing farm leasing agreements, including cash rent situations?  If harvest is going to be delayed because of late planting or protracted because of downed corn, resolving those cash rent agreements for 2012 might be a priority before climbing into the combine cab.

Interestingly, USDA last Friday reported 2011 cash rent averages for counties, which may be one of the earliest times for that to happen.  It can provide some guidance for 2012, but both operators and owners should realize that it is an average.  Rents will be both higher and lower, and not every farm was surveyed by USDA so the averages will not be as accurate as some would like them to be.

When looking for your county average cash rent, keep in mind that your farm may be demand a much higher rent than the average, or for a myriad of reasons the rent should be well below the average.  What are those reasons that may push and pull on cash rents?  Purdue economist Craig Dobbins offers a list of 16 different dynamics, including soil quality, farm location, field shape and size, and the cropping history, along with such issues as the “going rate” in the region and additional services that the operator provides to the land owner.  The latter should be rewarded either by additional fees paid to the operator or a reduction in the cash rent.  Those might include grain hauling, drainage repair, and facility maintenance.

Many local attorneys across the Cornbelt may have agricultural clients and use a form lease for cash rent or crop share agreements.  However, other attorneys may try to tailor a real estate rental agreement into a farm cash rent lease and with resulting pain and anguish for all involved should something happen that the apartment lease form did not anticipate.  If you would like a legal form to fill out with the details of your agreement, such a form is available.  Other lease agreements, such as crop share, and livestock are also available

If you prefer to prepare your own agreement, a written lease is better than an oral lease on any day of the week, and many lawsuits have been avoided with a written lease where an oral lease would not provide that luxury.  When creating your own agreement, Ohio State University farm management specialist Don Breece suggests the use of his checklist for items to be included.  Those include general terms, termination procedure, farm operation and maintenance, landowner rights and government payments, crop sharing provisions and lengths of the agreement.  Such an agreement does not have to be in legal terms and only has to detail the terms that both the operator and the landowner can agree on.

Summary:
Many agreements for farm leases will soon be expiring and will require focused attention by both land owners and farm operators.  Average cash rents have been published by USDA on a county level, and can be used as a general guide.  A specific cash rent for a farm should be derived from the farm’s ability to produce specific levels of crops.  Leases should address all appropriate issues that might affect a farming operation on a given property.

Posted by Stu Ellis on 09/12 at 12:35 AM | Permalink

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