Practical Farmers of Iowa put on a great annual conference last week. Here are three insights we wanted to share:
Fair Leasing with Flex Leasing: The session entitled Rethinking Farmland Leasing (led by Michael Downey of Next Gen Ag Advocates) caused us to, well, rethink how fair different types of farmland leases are for both the farmer and the farmland owner. While Downey’s talk was focused on conventional row crop farming, there are implications for sustainable farming as well.
The key question Downey would have you ask about any lease is whether the landowners and the farmer are fairly sharing in the inherent risks of farming in the rent pricing system.
The cash rent system (in which the farmer pays a set price for the use of the land) essentially places all of the risk on the farmer. What’s more, the setting of the cash rent price level is often based on comparisons with what other farmers are paying in the area and on real estate values which are set by market forces unrelated to the realities of farming.
Crop sharing used to be a very prevalent form of lease pricing that did share risk. In crop sharing, the farmer and landowner both share in paying for expenses and also share (sometimes 50-50; sometimes in some other ratio) in whatever income is produced. In fact, the landowner is often the one selling his/her own share of the crops.
But crop share leasing has declined significantly.
What increasing numbers of farmers and farmland owners are turning to is the flex lease. This sets a guaranteed base rent rate lower than the market lease rate, which the landowner will receive no matter what happens to yield or market prices. The “flex” portion is an additional pricing element that is added on and fluctuates based on the yield and market prices at the time of harvest. So during a very good year, the landowner would receive more rent. During a very bad year, the landowner might not receive any income from the “flex” element. But in this way both the farmer and landowner are sharing the pain.
This approach takes the stress out of annual negotiations that typically happen long before harvest and are often seen as a zero sum game by both sides. Instead, the flex lease encourages a spirit of partnership and also makes its less stressful for the farmer to take on conservation practices, like cover cropping.
While used almost exclusively for row crop farming, the flex lease approach could be creatively applied for some other types of farming. The “business” of farmland rental doesn’t have to be just a business. It can be more of a partnership.
Here are the two helpful articles we’ve seen on flex leases – one from Iowa State Extension https://www.extension.iastate.edu/agdm/wholefarm/html/c2-21.html and the other from Farm Progress https://www.farmprogress.com/land-management/its-time-get-serious-about-flexible-land-lease
Deep Ties Between Farmers and Farmland Owners: During a session facilitated by Sustainable Iowa Land Trust (SILT), we heard from a farm couple who have a 20-year lease from SILT. The backstory is that the original farmland owner donated the land to SILT because of SILT’s commitment to only leasing (or selling) farmland to sustainable farmers. The long-term lease at a reasonable rate has given Adrian and Will the confidence to add perennials to their lineup of sustainably grown gourmet mushroom, herbs, and vegetables.
What we especially appreciated hearing was how the original owner had lived on the property for a few more years even after Adrian and Will began leasing and how he had helped them set up their farm. Now that he is in a nursing home, they visit him and give him updates on the land and their farming, which he loves to hear.
Organic Transition Led by Landowner: In a roundtable that focused on how landowners have moved their farmland towards better stewardship, Carol, an inspiring landowner who inherited seven farms, shared some insights from her efforts around her farm near Mason City, Iowa. There she is having the 200-acres transitioned to organic row crops. She shared three key ingredients to the success she and the farmer have had so far:
1. Have a farmer-partner who is really into the idea and not just going through the motions. Organic/regenerative farming is a whole new mindset. Your farmer-partner might not be enthused at the beginning so give him/her some time to understand the benefits. (And offer #3 as well!)
2. Have an advisor-consultant to help the farmland owner understand all that is involved. Carol recognized that she had a lot of gaps in her knowledge and sought out experienced advisors.
3. Make the advisor-consultant available to the farmer to provide advice and coaching on practical farming questions. This support, which Carol paid for, helped reassure the farmer, who had never farmed organically before, that he would have some place safe to turn for things he ran into that he didn’t know how to handle the organic way.