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FARMLAND LEASING ARRANGEMENTS AND LAND · PDF file8/1/2016 1 FARMLAND LEASING ARRANGEMENTS AND LAND VALUES Melissa O’Rourke B.S., M.A., J.D. FARM & AGRIBUSINESS MANAGEMENT...

Apr 12, 2018

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  • 8/1/2016

    1

    FARMLAND LEASING ARRANGEMENTS AND LAND

    VALUES

    Melissa ORourke B.S., M.A., J.D. FARM & AGRIBUSINESS MANAGEMENT SPECIALIST

    Housed at ISU Extension

    Winneshiek County in Decorah

    www.extension.iastate.edu/agdm

    [email protected] 563-382-2949

    Read about Kevin & Lisa Martin (Farmers) and Susie Williams & Sam Williams (Landowners). Well discuss their viewpoints later today.

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    ISU Extension Farm Management

    Team

    Key Topics Today: Trends in . . .

    Farm land values

    Cash rental rates

    Costs of crop production -- resources

    Negotiating a fair cash lease rate

    2017 Farm Leasing Considerations:

    Communications

    Legal issues

    . . . And much more!

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    The Goal? You leave here today with

    increased knowledge and

    confidence to assist you to - -

    Review current leasing

    arrangements . . .

    Take steps to plan for the

    future . . . and

    Know where to go for

    resources and assistance.

    www.extension.iastate.edu/agdm

    Get familiar with Ag Decision Maker!!

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    Example: Calculating Cash

    Rent Tax Credit

    160 acres cash rented

    $300 per acre

    $48,000 gross lease

    income

    $48,000 x 7% = $3360

    Iowa income tax credit

    Can be used for flexible

    & crop-share leases too.

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    For More Information and to Apply:

    See 3-page application at:

    IowaFinanceAuthority.gov

    Beginning farmers

    financial statement

    Beginning farmers

    background letter

    Fees = start at $300 and

    depend on the length of

    the lease

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    You AnsweredWe Listened: Which

    of the following would you consider

    to be your PRIMARY occupation?

    Answer Response %

    Non-farming landowner 144 44%

    Active farmer 97 29%

    Ag lender 24 7%

    Attorney or Accountant 8 2%

    Professional farm manager 3 1%

    Other (please specify) 53 16%

    Total 329 100%

    N=382 excludes Not Lessors/Not Lessees

    Decrease rent 30%

    No changes will be made

    24%

    Change type of lease 9%

    Other 9%

    Move from an oral lease to a written lease agreement

    9%

    Apply for the Beginning

    Farmer Tax Credit or Custom

    Farming Tax Credit

    4%

    File and perfect a

    landlord's lien 3% Increase rent

    3%

    Intended Changes to Lease Arrangements:

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    You answered, we listened:

    Why do you participate in

    farmland leasing meetings?

    1. Gain knowledge on farmland

    leasing, rental market and

    trends

    2. Improve knowledge for

    communicating with other

    parties involved

    3. Gain knowledge on leasing

    practices

    You answered, we listened:

    What topics would you want covered at the 2016 Farmland Leasing Meeting?

    1. Setting rates and determining what is fair

    2. Costs of production, profitability

    3. Taking care of the land

    4. Types of leases

    5. Legal updates negotiations, terminations

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    Thinking About Farmland Leasing

    from Two Different Perspectives

    -Meet Kevin & Lisa Martin -and-

    Susie Williams & Sam Williams

    Take 5 minutes to read through the cases.

    Take another 5-10 minutes to visit about the

    cases with others.

    These folks will be with us for the rest of the

    program.

    Kevin & Lisa Martin

    Susie and Sam Williams

    Different Perspectives

    What additional questions do you have now as

    the Martins, or the Williams siblings?

    Consider how each party in the farmland leasing

    arrangement thinks differently about how the

    other party interprets and uses information.

    What if Sue & Sam decided they wanted to

    consider a new tenant for 2017 what questions

    should they ask of the potential tenant(s)?

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    What are some

    sources of Iowa

    Farmland Value Data?

    Why is it important for

    Kevin & Lisa Martin and

    Susie Williams and Sam

    Williams to think about

    farmland values?

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    County Assessors Offices Some county assessors maintain a public (pdf)

    document of ag land sales for example:

    http://siouxcounty.org/wp-content/uploads/2016/05/agsales.pdf

    Most county assessor offices in Iowa offer a search tool to find information about real estate ownership, values and sales within the county.

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    Realty & Auction Websites

    Federal Reserve BankChicago

    www.chicagofed.org Quarterly survey of ag

    lenders by state

    Annual Land Values Conference

    AgLetter: Quarterly Newsletter re: ag land values & credit

    Go to chicagofed.org and click on publications

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    Agricultural land values in the Seventh Federal Reserve District fell 4 percent from a

    year ago in the first quarter of 2016their largest year-over-year decline since the

    third quarter of 2009. There was a decrease of 1 percent in good farmland values

    in the first quarter of 2016 relative to the fourth quarter of 2015, based on the survey

    responses of 200 District agricultural bankers. Cash rental rates for District farmland

    experienced a significant drop of 10 percent for 2016 compared with 2015even

    larger than the decrease of last year relative to 2014. Demand to purchase

    agricultural land was markedly lower in the three- to six-month period ending with

    March 2016 compared with the same period ending with March 2015. Moreover,

    the amount of farmland for sale, the number of farms sold, and the amount of

    acreage sold were all down during the winter and early spring of 2016 compared

    with a year ago. Nearly two-thirds of the responding bankers expected farmland

    values to decrease during the second quarter of 2016, with the rest expecting

    farmland values to remain stable.

    AgLetter

    Federal Reserve Bank of Chicago

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    Realtors Land Institute See your book at page 35

    Semi-annual survey (March and September)

    Compares land classification by corn production

    Most recent survey always available on Ag Decision Maker

    www.extension.iastate.edu/agdm

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    http://usda.mannlib.cornell.edu/usda/current/AgriLandVa/AgriLandVa-08-05-2015.pdf

    - Dollars per acre and percent change from 2014

    The Iowa farmland market is showing weakness following

    significant increases in value over the past decade. Based on

    the Iowa State University Farmland Value Survey, 2015 Iowa

    land values have decreased two years in a row since 2000.

    However, despite these decreases, current Iowa farmland

    values are still more than double what they were 10 years

    ago, 75 percent higher than the 2009 values and 14 percent

    higher than the 2011 values.

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    Value in each year of $1,000 invested in 1950 in Iowa farmland or the S&P

    Iowa State University

    Farmland Value Survey Conducted annually since 1941

    Mailed to 1100 licensed real estate brokers; 500-600 responses

    Released annually in mid-December

    November 1 to November 1

    Latest and historical surveys found on Ag Decision Maker website

    www.extension.iastate.edu/agdm

    SEE YOUR BOOK page 27

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    Iowa Farmland Value Portal

    http://card.iastate.edu/farmland

    Farmland Value per Acre 1950-2015

    0

    2000

    4000

    6000

    8000

    Land v

    alu

    e p

    er

    acre

    ($/a

    cre

    )

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    $0

    $1,000

    $2,000

    $3,000

    $4,000

    $5,000

    $6,000

    $7,000

    $8,000

    $9,000

    $10,000

    $11,000

    $12,000

    2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

    $ p

    er

    acre

    High Medium Low

    Farmland Values for Crop

    Reporting District 3 by Year

    $1,300

    14%

    Iowa Farmland Purchases by Farmers and

    Investors and Land Values 2006-2015

    $0

    $1,000

    $2,000

    $3,000

    $4,000

    $5,000

    $6,000

    $7,000

    $8,000

    $9,000

    $10,000

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%A

    ve

    rag

    e L

    an

    d V

    alu

    e p

    er A

    cre

    Pe

    rce

    nt o

    f S

    ale

    s

    Farmers Investors Average Land Value

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    Northeast counties 2014 &

    2015 farmland values

    Percent Change 2014 to 2015

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    Crop

    Reporting

    District 3

    Crop Reporting

    District 2

    Farmland Values Predictions

    in Five Years

    District

    Increase

    5% or

    more

    Increase

    0-5%

    Stay the

    same

    Decrease

    0-5%

    Decrease

    5-10%

    Decrease

    10% or

    more

    PERCENT

    Northwest 16 18 20 16 16 14

    North Central 16 12 10 17 22 22

    Northeast 7 2

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