Sharing Income and Risk through Modern Farm Lease Agreements

Agriculture and Natural Resources Extension
Iowa State University

Title of Success Story

Sharing Income and Risk through Modern Farm Lease Agreements

Public Value (now or future)
(Impact:  Who benefits beyond participants and how?  What conditions changed?)

Efficient asset markets require that both buyers (renters) and sellers (landlords) have full information.  ISUEO, as an informed and impartial resource, plays an important role in making that happen.  The result is that farmland rents are more closely aligned with the productive value of each farm, and each owner and tenant manages financial risk according to his or her own circumstances, and the supply of rented farmland is allocated more efficiently among producers.  The increased use of flexible cash leases causes rents to adjust automatically to changing economic conditions, and creates a more consistent cash flow for tenants, which indirectly benefits farm lenders and input suppliers, as well.  Benefits to the public also arise from more environmental considerations being incorporated into lease terms.

RELEVANCE
(Why is it important to address this issue with education?  What are the desired changes?)

Over 60% of the farmland in Iowa is leased from an owner to a tenant.  Changing economic conditions cause farm lease terms and rates to quickly become outdated.  Few public sources of current information about rental rates exist.  New variations on farm leases have been developed, and both owners and tenants need to be informed about them so that an equitable sharing of risk and rewards can be negotiated.

RESPONSE
(Outputs: activities, numbers reached, publications, products)

Forty-two farm leasing workshops with 106 total hours of instruction were held across Iowa, with 1,749 persons attending.  A statewide survey of cash rental rates was conducted and distributed, with 60,869 copies distributed through website downloads and an estimated 1,000 copies distributed through county Extension offices.  Six fact sheets and decision aids were posted and downloaded 89,000 times, 15 newsletter articles were published, and information was provided to over 50 voice and print media outlets.  A 13-state regional website with 3 updated bulletins and 3 updated lease forms was developed, and two webinars for Extension educations in the region were delivered.  Finally, over 3,000 individual questions from owners and tenants on farm leasing terms were answered.

RESULTS (Outcomes:  specific changes that occurred in Learning, Actions, Conditions; how outcomes were measured)

A follow-up survey of people who attended ISUEO farm leasing workshops revealed that 79% adjusted their cash rental rate, 51% used the ISUEO fair rent calculator program to arrive at a rental rate, and 42% changed from an oral to a written lease, as a result.  Their reported change in net income averaged +$36.36 per acre, or $16,755 per respondent.    Extrapolating this result to all workshop attendees would indicate a net income gain of over $29 million for 2012.

Desired Changes
Learning
Actions
Conditions

Farm owners and tenants learned about current market conditions for rented land and innovative lease provisions for sharing risks and profits.  They adjusted rental rates to fit current conditions, and introduced variable rate formulas to protect against unanticipated changes in the farm economy.

Extension Lead(s)
(name, position, counties served, contact information)

Farm and Agribusiness Management Team (William Edwards, Extension Economist, team leader, wedwards@iastate.edu, 515-294-6161).  All counties in Iowa are served, as well as many out-of-state clientele.

Your Position

­­­­­_____Field                                        ___X__Campus                         _____Both

POW # and Team

 ­­­­­_____100 Corn and Soybean Production and Protection
­­­­­_____ 110 Dairy
­­­­­__X__ 120 Farm and Business Management
­­­­­_____ 130 Horticulture: Commercial and Consumer
­­­­­_____ 140 Iowa Beef Center
­­­­­_____ 150 Iowa Pork Industry Center
­­­­­_____ 160 Natural Resources and Stewardship

ANR Priority (select all that apply)

­­­­­__X__Global Food Security and Hunger
­­­­­_____Regional Food Systems
­­­­­_____Natural Resources & Environmental Stewardship
­­­­­_____Food Safety
­­­­­_____Sustainable Energy – Biofuels & Biobased Products
­­­­­_____Climate Change
­­­­­_____Other

Knowledge Areas: (USDA categories)

Economics of agricultural production and farm management (601)

Continuing Story

__X__ No                _____  Yes (If continuing, what story?)

Major Partners or Collaborators

Iowa Farm Bureau Federation, Wallace’s Farmer magazine, various Iowa community colleges, Iowa Chapter of the American Society of Farm Managers and Rural Appraisers

Where story took place
(Region, campus, multi-regional)

Statewide and beyond

Fiscal Year

2011

Multi-state or Integrated (Ext + Research)

Both integrated and multi-state.

Funding Source

Iowa Agricultural and Home Economics Experiment Station, Iowa Farm Bureau Federation

Keywords

Leasing, tenancy, rent

 

Page last updated: February 9, 2012
Page maintained by Julie Honeick, jhoneick@iastate.edu