Farm Leases

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Farm Leases

By: Roger Custer, Gerry Stein

Leasing, or renting land, is important in Iowa agriculture. Retired farmers, or their heirs, may wish to continue to own farms but do not want to operate them. Farmers with limited capital find that they can more easily reach an efficient scale of operation by renting land instead of owning. Leasing involves a business agreement between the land owner and the farm operator (tenant). The lease provides a framework for combining the resources of land, labor, capital, and management to produce farm commodities.

In Iowa, the four most common types of leases are the fixed cash lease, the flexible cash lease, the crop-share lease, and a custom farming agreement between land owner and operator.

Under a fixed cash lease the operator pays a given amount of cash rent per acre per year for the landowner to use their farmland. The owner may establish some restrictions as to what crops should be grown, tillage practices used, and methods of pest control. Other than this the tenant determines the crop production program to be used and receives all the crop and any associated USDA commodity program payments.

The flexible cash lease is a variation to the fixed cash lease. This lease may include a payment above an established base rent. The rent to be paid depends on actual yields and/or the selling prices available during the lease period. The landowner shares some of the risk of low yields or low commodity prices but will also share in extra profits when prices and/or yields exceed expectations.

In a crop-share lease arrangement both owner and operator are responsible for crop production and receive a predetermined percent (50-50, 60-40) of yield or revenue based on contributions made. For example, in a 50-50 crop share agreement the owner normally furnishes land and buildings and pays one half of the input costs. The tenant usually furnishes all labor, fuel, and equipment, and the other half of the shared expenses. Many variations on sharing of expenses exist and need to be considered when constructing a crop-share lease.

With a custom farming contract the owners hires out production operations. The farm operator supplies all labor and equipment to perform tillage, planting, pest control, harvesting, and transportation of crops. The farm operator receives a fixed payment per acre from the owner or a fixed payment for each operation performed. The land owner receives all of the crop and any USDA payments.

All types of leases have advantages and disadvantages to both the land owner and the farm operator. These should be considered when deciding on the type of lease to be used.

Iowa State University Extension and Outreach conducts an annual cash rental survey each year for all Iowa counties. Included here are cash rent averages of Greene and surrounding counties for 2017.

  • Boone County:            $227 per acre
  • Calhoun County:         $207 per acre
  • Carroll County:            $236 per acre
  • Dallas County:            $199 per acre
  • Greene County:          $224 per acre
  • Guthrie County:          $199 per acre
  • Webster County:         $220 per acre