Iowa's leasing practices surveyed
By Jean Caspers-Simmet
Date Modified: 09/23/2013 9:33 AM
WATERLOO —Iowa's farmland rental market has changed in recent years because of demand for biofuels, changes in technology and changes in the demographics of land owners, said Kristen Schulte, Iowa State University Extension farm business management field specialist.
Schulte presented the results from the 2012 Iowa Land Ownership and Tenure survey at a recent farmland leasing meeting at Hawkeye Community College.
The survey by ISU economists Mike Duffy and William Edwards was a random telephone sample of landowners. Survey selection was based on 40-acre parcels. This was the tenth landownership survey since 1958. The response rate was 69 percent.
The survey found that 37 percent of farmland is owner-operated, 12 percent is crop share, 42 percent is cash rent, 5 percent is Conservation Reserve Program acres and 3 percent is custom farmed, Schulte said.
That compares to 1982, when 55 percent of land was owner operated, 21 percent cash rented and 21 percent crop share.
Cash leases are the most prevalent type in Iowa and account for 42 percent of all farmland and 77 percent of leased land, Schulte said.
Of all leased acres, 61 percent have a written lease with 65 percent of cash rental arrangements and 46 percent of crop share rental arrangements have written leases.
"While that has slowly increased over the years, which has been good, there is still a good percentage of leases based on a handshake or verbal agreement," Schulte said. "While it's great there is that much trust and communication, it is very important to get the terms of those contracts down in writing so both parties are aware of the agreements in that contract."
While no one likes to think of worst-case scenarios, owners must prepare by having a written contract, Schulte said.
"If I had 80 acres rented to a tenant, and I got hit by the bread truck on the way home would the people who will inherit that land know who the tenant is, what the terms of the contract are, what the payments are?" Schulte said.
For crop share leases, 35 percent of tenants have rented the land for more than 20 years and 28 percent for 11 to 20 years. With cash leases, 17 percent of tenants have rented the land for more than 20 years, 27 percent for 11 to 20 years and 30 percent for 6 to 10 years.
"Many landlords and tenants have very long relationships with rental agreements," Schulte said.
Flexible cash rent was used for 19 percent of cash rented acres, a 50 percent increase from 2007, with 14 percent flexing on yield, 13 percent on price and 73 percent on price and yield.
Having a tenant who is a good steward of the land is important to 93 percent of landowners compared to 26 percent who said it is important that the tenant is a family member. Fifty-two percent said it's important that the tenant is someone they know and 24 percent said it's important to help a young farmer get started.
In 2012, 11 percent of the leased acres involved a professional farm manager, more than double from 2007.
Schulte said that the distribution of land based on the age of the owner shows a small glimmer of hope. Farmland owners under 35 accounted for 4 percent of land in 2012, up from the two previous survey periods. Fifty-six percent of land is owned by people 65 years or older.
"How are we setting up that land to be transferred to the next generations so we can continue a farming legacy in Iowa?" Schulte said.
In 2012, 40 percent of farmland was owned by couples, 24 percent was owned by multiple individuals through tenancy in common, a trust or corporation, 20 percent was owned by single males and 16 percent was owned by single females.
The majority of land, 78 percent, is leased for an indefinite period.
Fifty-seven percent of leases have two payments per year, primarily in the first and fourth quarters, and 34 percent have one payment annually generally in the first quarter, 46 percent, or fourth quarter, 39 percent.
More information on the 2012 Iowa Land Ownership and Tenure survey can be found on the Ag Decision Maker website at extension.iastate.edu/agdm.