Financial Conversations with Fitz #78 - Rents, Crop Break Even, Terminations and Rental meetings - 08/24/2010
Crops are looking good, but a little inconsistent in spots. Degree days are at 2203 in Kanawha. We are behind 101 average at this point. Grain prices still crazy!!!! Grains look to open mixed to higher this morning. Crop reports are coming in mixed. For each bushel /acre of production is 81 million bushels increase in supply. Traders are bullish on demand……Looks like the DOW will open up just a little. Japan’s was lower tho overnight. Tough week last week trading. Just a week left to attend any leasing meetings if you are interested. One in Nashua on Tuesday at 1:00 and one in Garner at 9:00 on Wednesday. Remember to notify your landlord or tenant before the end of August on your plans to continue under current arrangement for next crop year.
What do they cover at a farm rental meeting. Usually have about 2/3 of crowd is landlords and 1/3 tenants. Kevin Leibold from ISU will be the presenter. He will review the 7 different factors that go into making up a fair rental price. Of course the increase in farmland value was discussed to start out with. WE know it has jumped by more than 9% in 2009. Doesn’t seem to be softened a bit at this point in 2010. 40% of land in Iowa is controlled by owner/operator. The other 60% in rented from a landlord. Interesting point on this is that last year most of the farm ground purchased was by active farmers. 70% compared to 24% by investors. Do you realize that 55% of the land is owned by people over 65. With 28% owned by people over 75. There will be quite a change in the next 15 years in the face of land ownership. Pretty good discussion on the factors involved in Flex leases if you want to ride the grain market jumps, if that happens. If you go this route be sure to get some professional help in setting the conditions. I have worked with these and they can work out OK. The main point stressed is how important for any landlord to keep a good tenant at a reasonable rate. With the high cost of inputs and the importance of a good fertility and pests program some ‘ above market rent rates tenants’ can greatly affect the these factors in just one year. So you see there are so many variables in just these two factors that landlord and tenant need to meet with solid figures to work together to get “fair rental” rates. Be sure to use a spread sheet to do different situations. AGDM is a great one as far as I am concerned.
Remember notice before Sept 1st. A good tenant is still your best asset. Work together to keep them.
Be sure to talk with your financial person after you have been to one of these meetings.
For more information, please contact any of our Ag Bankers at any of our three offices in Forest City, Thompson and Titonka.
Remember that you should deal with people in community banks and organizations. When you work with them, you know that you will also see them sitting with you at ball games, church or community events. So, if in doubt give us a call.