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

• Can vary price or yield or both

Base rent X Current Price X Current Yield = Current RentBase Price Base Yield

150 x 3.75 x 200 = $160.31

4.00 175

150 x 5.50 x 200 = $235.13

4.00 175

Flexible Cash Rent Lease ExamplesFile C2-22September 2008www.extension.iastate.edu/agdmWilliam Edwardsextension economist641-294-6161wedwards@iastate.eduMany tenants and land owners agree to settheir cash rental rates based on actualprices, yields and/or production costs eachyear instead of fi xing a rate in advance. More informationon fl exible cash leases can be found in InformationFile C2-21 Flexible Farm Lease Agreements.Respondents to a recent survey conductedby Iowa State University Extension were asked toreport on fl exible cash rental agreements that theywere using or with which they were familiar. Thefollowing list is a sample of the nearly 100 differenttypes of agreements that were reported. Although notwo agreements are exactly alike, most of them fallinto a few general categories.Flexible rent based on gross revenueThe most common type of fl exible lease bases thefi 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

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Cash Rent % - Central Illinois

Average Cash Rent as % 35% of 40% ofYear Cash Rent Crop Returns of Crop Returns Crop Returns Crop Returns2000 $132 $391 33.8 $137 $1562001 $137 $364 37.6 $127 $1462002 $137 $360 38.1 $126 $1442003 $140 $407 34.4 $142 $1632004 $143 $443 32.3 $155 $1772005 $147 $434 33.9 $152 $1742006 $150 $494 30.4 $173 $1982007 $166 $703 23.6 $246 $281

2000-2007 avg. $144 $450 33.0 $157 $180

Source: Illinois FBFM Association and University of Illinois.

Cash Rent as a Percent of Crop Returns - Central Illinois Grain Farms

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Cash Rent - FBFM

Region 2001 2002 2003 2004 2005 2006 2007

Northern $126 $129 $130 $135 $137 $139 $149

Central (High SPR) $137 $137 $140 $143 $147 $150 $166

Central (Low SPR) $119 $122 $123 $131 $131 $135 $150

Southern $87 $89 $82 $98 $99 $98 $101 2.84

Average Cash Rent Paid by Illinois Farms Enrolledin Illinois Farm Business Farm Management, 2001 - 2007

% Change

2.86

3.31

4.00

Year Average Annual