F ARMLAND L EASING AND ISU Extension Farm Management Team L AND V ALUES 2014 Melissa O’Rourke B.S., M.A., J.D. Farm & Agribusiness Management Specialist www.extension.iastate.edu/agdm morourke@iastate.edu 712-737-4230 The Goal? Workshop Purposes/Topics: ► Review updated land • You leave here today with value, cash rental rate increased knowledge and ► 2014 Farm Bill surveys + other resources confidence to assist you to - - basics, information ► Overview of CSR/CSR2 ► Methods to determine ► Iowa Nutrient – Review current leasing fair cash rent — fixed and Reduction Strategy arrangements . . . flexible resources – Take steps to plan for the ► Legal issues: Termination ► Bioenergy resources future . . . and procedures, landlord liens, ► Production cost other legal issues – Know where to go for resources ► Beginning Farmer Tax resources and assistance. Credits 1
Table of Contents: inside front cover – Use bold page #s at bottom of Let’s get the page. • 1-25: Resources familiar with • 26-29: Nutrient your Farmland Reduction Strategies • 30-61: Surveys Leasing • 62-69: Worksheets Arrangements • 70-91: Data book! • 92-95: Sample forms • 96: Glossary • 99: Contact info www.extension.iastate.edu/agdm Get familiar with Ag Decision Maker!! 2
What is the Iowa Nutrient Why? And why now? Reduction Strategy? • Iowa’s productive soils and cropping systems • Voluntary, science-based program to reduce also contribute to water quality concerns Nitrogen and Phosphorous impact on water • Society and EPA expect more from cities, • Includes cities, industry and agriculture industry and agriculture • A practice-based approach to show • Gulf Hypoxia Task Force requires plan to reduce meaningful and measureable progress N and P load to Gulf of Mexico by 45% • A framework for innovation and verification of • EPA requests strategy that emphasizes state new practices and technologies implementation of new and existing N and P practices for point and non-point sources 3
Iowa Nutrient Management Strategy: Cost Share Program See page 26 in your Farmland ► $20 M of new state appropriations over 2013-14. Leasing book ► Administered by Iowa Department Agriculture & Land for a Stewardship (IDALS) and Iowa Department of Natural Resources (IDNR); research by Iowa State University. publication on ► Contact: Soil & Water Conservation District Office the Iowa ► $1.4 M in cost-share funds available for Fall 2014 Nutrient (farmers must match): Reduction Cover Crops - $25/A Strategy. Adopt no-till or strip-till - $10/A Use of Nitrification Inhibitors on fall applied anhydrous ammonia - $3/A. Pg. 26-29, Farm Leasing Arrangements, July 2014 In 2012 at this time – things looked different! Crop Conditions Information Where to find it? — when you’re not there to look at the crop?!? 4
In 2013, we had moisture deficits in northwest Iowa: This year in Iowa (2014) . . . things look better. 5
Where to find that weekly USDA Report? Bioenergy www.nass.usda.gov/Statistics_by_State/Iowa/Publications/Crop_Progress_&_Condition/index.asp and Crop www.nass.usda.gov = the USDA’s National Agricultural Statistics Service Just Google - - - > USDA NASS Residue Leased Land: Who owns above-ground Questions to ask . . . . residue – Landowner or Tenant? • Do you want to get into the corn stover harvesting business? • Would you rather custom contract with someone else to do the • Above-Ground Residue: Iowa Code 562.5A harvest? – Tenant has right to take part of a harvested • Think about all the crop’s above ground plant, such as corn stover costs, benefits, risks and other crop residue – at harvest, after harvest, until termination of tenancy. – Written lease may have language to alter rule. 6
Ag Decision Maker File A1-70 - - - - - - - Contains 8 examples related to pricing stover This blank interactive spreadsheet is a free tool on Ag Decision Maker. 7
Read, review, question any written Example: Quality requirements contract presented to you: in the contracts? • What are you committing to provide/deliver? • When? — Delivery dates? • Price? — set, or determined by a formula? Under what circumstances can your • When will you be paid? — and delivery be docked or rejected? is there a penalty for late payment by the buyer? • What if you can’t deliver, e.g., due to wet fall weather? http://poet-dsm.com/biomass • Other provisions? Before you sign a legally binding Example: Financial penalties in contract . . . . the contracts • Have the contract reviewed by your attorney who is familiar with agricultural operations. • Be sure you understand what you are committing to . . . What are your obligations as seller . . . and what are the obligations of the buyer? http://poet-dsm.com/biomass 8
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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. 10
The New 5-Year Farm Program (2014-2018) For More Information and to Apply: What do we know? • See 4-page application at: • IowaFinanceAuthority.gov • Beginning farmer’s financial statement • Beginning farmer’s background letter • Fees = • $200 application fee plus: • $50 service fee for each year of cash lease • $100 service fee for each year of crop share lease Marketing Loan National Rates: $1.95/bu Corn $5.00/bu Soybeans Source: The Agricultural Act of 2014, February 2014 Web Sites on the New Farm Program • ISU Polk County Ext. Farm Management (Government Farm Programs: FAQs, Fact Sheets, Regular Updates, Videos and Recorded Webcasts) www.extension.iastate.edu/polk/farm-management • Farm Doc – U. of Illinois Ext. Economics www.farmdoc.illinois.edu • Ag Manager – K-State Ext. Economics www.agmanager.info • Ag Decision Maker – ISU Ext. Economics (Farm Program Decision Tool, Newsletters, Publications, Voiced Media, Monthly e-Newsletter, New Farm Program) www.extension.iastate.edu/agdm/info/farmbill.html • USDA Farm Service Agency www.fsa.usda.gov/FSA/webapp?area=home&subject=arpl&topic=landing Source: Johnson, ISU Extension, July 2014 11
ARC PLC Decisions: The 3 Step Process WHEN will these updating, election and enrollment events happen? The farmland owner and the farm operator can “reallocate” base acres and/or “update” CC Yields by FSA farm number. Once Base Acres and Yields are determined for that farm, then the Election of the ARC or PLC program is established for the 5-year period 2014-2018. Once Election has been completed then Enrollment by the “party at risk” occurs annually. Sign-up for both the 2014 and 2015 crops will run concurrently in early 2015. Source: Johnson, ISU Extension, July 2014 12
Summary Acreage History Report • The first part of August, all owners and operators will receive the following: Letter that provides basic background of base acreage “Reallocation” and 1. “Update” of the CC Yield option. “Summary Acreage History Report” which shows the 2. acreage of covered commodities reported to FSA, 2008 through 2012 per farm. NOTE: This report also includes the “Base Acres” and “CC Yield” as of 9/30/2013. Source: McClure, Iowa FSA Office, July 2014 Base Acreage Reallocation Reallocating Base Acreage Example #1 Farm Historic: 100 Total Base Acres Corn Soybeans Total Corn Soybeans 50 Acres 50 Acres Corn Soybeans 35 Acres 65 Acres Source: Johnson, ISU Extension, July 2014 Source: Johnson, ISU Extension, July 2014 13
Base Acreage Reallocation Farm’s Yield Update Choices Example #2 Corn Soybeans Total 1. Retain the Farm’s Current CC Yield or 2. Update Yield (90% of Planted Yield history) Uses production and total acres planted of covered commodities, 2008 – 2012 , using a simple average. A plug yield of 75% of the county yield for any year with low or missing farm’s yield. Note: This option is available per Crop for landowners and operators regardless of program election: PLC, ARC-CO or ARC-IC. Corn Soybeans 75 Acres 25 Acres Source: Johnson, ISU Extension, July 2014 Source: McClure, Iowa FSA Office, July 2014 What’s Corn Suitability Rating? Learn more about CSRs: • • An index that rates a parcel of land – www.extension.iastate.edu/agdm • Understanding Iowa CSRs – File C2-86 the soil types in particular – based on • Computing CSR for Your Farm – File C2-87 productivity for row-crop production. • Original CSR explanation: • Values range from 100 to 5 pts/acre. http://www.extension.iastate.edu/Publications/PM1168.pdf • Website for the official NRCS published soil survey (The Web Soil • Assumes adequate management, Survey) is: http://websoilsurvey.nrcs.usda.gov/app/HomePage.htm natural weather, artificial drainage • The Iowa Soil Properties and Interpretations Database (ISPAID): http://www.extension.iastate.edu/soils/ispaid where needed, no frequent flooding, • 40-Slide Presentation on CSR2: no land leveling or terracing. www.ucs.iastate.edu/mnet/_repository/2013/soilmanagement/pdf/burr • High CSR = theoretically high land as.pdf • CSR2 Explanation document: productivity for row crop production. www.extension.iastate.edu/page/sites/www.extension.iastate.edu/file • Just one factor for setting rental rate. s/page/CSR2%20FAQ%20Final.pdf 14
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