Transcript Cash Rent Suggestions for 2009

Cash Rent Suggestions for 2009
• The following information has been
gleaned from several sources, including:
– Gary Schnitkey, and others from the U of I
– Mark Rhea and Adam Kestner, FBFM
– Personal communications
’09 Farm Rent Suggestions*
• Use a variable rent or share rent- these
are now considered a cash lease by FSA
• If fixed cash rent must be used, delay until
March ’09, when revenue insurance
policies have been set
• Consider re negotiating cash rents
*U of I Farm Management Specialists
Flexible Rents
• Sets base price but can vary dependent
upon yield, price or both
• FBFM- Bob Rhea/ Adam Kestner
• Gross income + FSA payments
• Subtract seed, chemical, fertilizer and
insurance
• Remainder is split 50-50
Flexible Rents
• Example 1- FBFM
• 175 bushel corn x $3.75+ $18 FSA= $674
• Seed, chemical, fert., Ins.= $389
• Difference is $285/2= $142
• 175 bushel corn x $4.50 + $18 FSA= $805
• Seed, chem, fert, ins= $389
• Difference is $417/2= $208
Flexible Rents
• Determine base cash rent, base yield and base price
• After harvest complete, then remaining rent is computed
by
Base rent X Current Price X Current Yield = Current Rent
Base Price
Base Yield
150 x 3.75
x
200
= $160.31
4.00
150 x 5.50
4.00
175
x
200
175
• Can vary price or yield or both
= $235.13
Flexible Cash Rent Lease Examples
File C2-22
September 2008
www.extension.iastate.edu/agdm
William Edwards
extension economist
641-294-6161
[email protected]
Many tenants and land owners agree to set
their cash rental rates based on actual
prices, yields and/or production costs each
year instead of fi xing a rate in advance. More information
on fl exible cash leases can be found in Information
File C2-21 Flexible Farm Lease Agreements.
Respondents to a recent survey conducted
by Iowa State University Extension were asked to
report on fl exible cash rental agreements that they
were using or with which they were familiar. The
following list is a sample of the nearly 100 different
types of agreements that were reported. Although no
two agreements are exactly alike, most of them fall
into a few general categories.
Flexible rent based on gross revenue
The most common type of fl exible lease bases the
fi nal cash rent on an estimate of the actual gross
Flexible Rents
• Base rent plus bonus payment, bonus
payment based upon yield, price or both
• Cash rent is based upon $ per bushel
harvest
• Fixed % of gross revenue
– 35% on good/excellent soils
– 40% on average soils
Cash Rent % - Central Illinois
Cash Rent as a Percent of Crop Returns - Central Illinois Grain Farms
Year
2000
2001
2002
2003
2004
2005
2006
2007
Average
Cash Rent
$132
$137
$137
$140
$143
$147
$150
$166
2000-2007 avg.
$144
Cash Rent as %
35% of
Crop Returns of Crop Returns Crop Returns
$391
33.8
$137
$364
37.6
$127
$360
38.1
$126
$407
34.4
$142
$443
32.3
$155
$434
33.9
$152
$494
30.4
$173
$703
23.6
$246
$450
33.0
$157
40% of
Crop Returns
$156
$146
$144
$163
$177
$174
$198
$281
$180
Source: Illinois FBFM Association and University of Illinois.
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Cash Rent - FBFM
Average Cash Rent Paid by Illinois Farms Enrolled
in Illinois Farm Business Farm Management, 2001 - 2007
Region
2001
2002
2003
Year
2004
Northern
$126
$129
$130
$135
$137
$139
$149
2.86
Central (High SPR)
$137
$137
$140
$143
$147
$150
$166
3.31
Central (Low SPR)
$119
$122
$123
$131
$131
$135
$150
4.00
$87
$89
$82
$98
$99
$98
$101
2.84
Southern
2005
2006
2007
Average Annual
% Change
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