I have four parcels of family farmland ranging from 80 acres to 320 acres located iin Benton, Poweshiek and Tama counties. I have been fearful for some time that the tenants renting this dirt would give me notice they are terminating here in August before the September 1st deadline. All of this ground is leased at about the 85th percentile range or so for cash rents for the CSR rating of the dirt. So I'm not sqeezing them that hard. I structure all of these leases to pay half of the rent on March 1 and the second half on September 1. In 2023 the worst piece, the 80, produced a 201 bpa of corn. The best piece , a 160, turned out 239 bpa for corn....so these are not bad parcels
Today the first Termination Notice arrived together with a tearful and angst filled letter describing just how tough it is to be a corn/bean grower in this modern era....he wants me to lower his rent, but he still wants to farm it.
Granted, I can see the storm cloulds gathering for agriculture. But ,why do these guys always expect someone else to shoulder their load?
Did he try to negotiate the lease before sending a termination letter? Seems odd if not, because if you would have entertained a small drop in rent, there is no reason to terminate the lease. If not, I can understand getting out in front of it ahead of the 9/1 deadline. I'd say if you are in the top 85th percentile, as you noted, that is a pretty good squeeze on them with the markets where they are, and inputs certainly not following suit.
I guess we take a different approach, which has kept our rents below market average. We do a flex lease of sorts, though nothing is written on paper that way. We end up writing rather large per acre bonus checks on the good years, which in turn, has allowed our landlords to trust that when we make extra money, so will they, instead of chasing the land market all to hell (which never plays out well for the farmer).
You mentioned share crop not being something you'd be interested in, but I think you'd be surprised by the amount of crop that is still share cropped. We've got 400 acres of a 50/50 share crop yet, which has been mutually beneficial to ourselves and our landlord. Also, in my line of business, I've seen share crops of 25/75 (essentially custom farming, farmer doesn't pay for any of the inputs, but gets 25% of the crop for their work), and 60/40 in favor of the landlord. Also worked through a lot of flex leases based on crop insurance prices, which is a way to lower the base rent, but still allow for some upside for the land owner.
If they are a good tenant, why not be open to the conversation and get their side? You also made note of expecting someone to shoulder their load, but what option do they have? Would you stay in business long knowing you are going to lose "x" per acre? Or would you do the prudent thing, and try to lower your inputs, and land rent being the top one. I'm certain it wouldn't take you long to find someone willing to pay what they were paying, or more than they were paying though. It's the Ag world we live in, where instead of looking at the bottom line, they want to farm the world and hope they hit a homerun, until the bank says their run is done.
Good luck though, it's hard to find good tenants that care about the land, fertilize well, and try to grow the best crop they can on land that isn't theirs. We actually turned down several hundred new rented acres a few years ago because we knew the prior farmer didn't fertilize worth a shit, and we didn't want to pay the higher rent cost, and have yield deficiencies due to the previous tenant. Bottom line has to come into play at some point, and it looks like it's going to again for the next couple of years.
