Switch To Flexible Cash Lease For Cropland?

Volatility in grain prices, changes in input costs and now the increased variability in Iowa crop yields due to this summer's abnormally dry weather could make setting 2013 cash rental rates even more challenging. Steve Johnson, Iowa State University Extension farm management specialist in central Iowa, says flexible cash rent leases are something to consider as a way for both landlords and tenants to cope with the increased risk involved in renting cropland.

In this article, Johnson explains flexible cash rent leases and takes a look at the performance of a flex cash lease for the past five years using a central Iowa farm lease as an example. 

So, will cash rental rates continue to rise in 2013? The rate of cash rental rate increases will likely slow, says Johnson. That's because drought conditions have cut into the 2012 yields of most Iowa farms. Despite the higher crop prices, most operators will have fewer bushels to sell. That means lower gross revenue per acre in order to pay cash rent. Some operators might have to use crop insurance loss proceeds to make final 2012 cash rent payments.