Cash Rent Suggestions for 2009 The following information has been gleaned from several sources, including: –Gary Schnitkey, and others from the U of I –Mark Rhea and Adam Kestner, FBFM –Personal communications

’09 Farm Rent Suggestions* Use a variable rent or share rent- these are now considered a cash lease by FSA If fixed cash rent must be used, delay until March ’09, when revenue insurance policies have been set Consider re negotiating cash rents *U of I Farm Management Specialists

Flexible Rents Sets base price but can vary dependent upon yield, price or both FBFM- Bob Rhea/ Adam Kestner Gross income + FSA payments Subtract seed, chemical, fertilizer and insurance Remainder is split 50-50

Flexible Rents Example 1- FBFM 175 bushel corn x $3.75+ $18 FSA= $674 Seed, chemical, fert., Ins.= $389 Difference is $285/2= $ bushel corn x $ $18 FSA= $805 Seed, chem, fert, ins= $389 Difference is $417/2= $208

Flexible Rents Determine base cash rent, base yield and base price After harvest complete, then remaining rent is computed by Can vary price or yield or both Base rent X Current Price X Current Yield = Current Rent Base Price Base Yield 150 x 3.75x200 = $ x 5.50x200 = $

Flexible Cash Rent Lease Examples File C2-22 September William Edwards extension economist Many tenants and land owners agree to set their cash rental rates based on actual prices, yields and/or production costs each year instead of fi xing a rate in advance. More information on fl exible cash leases can be found in Information File C2-21 Flexible Farm Lease Agreements. Respondents to a recent survey conducted by Iowa State University Extension were asked to report on fl exible cash rental agreements that they were using or with which they were familiar. The following list is a sample of the nearly 100 different types of agreements that were reported. Although no two agreements are exactly alike, most of them fall into a few general categories. Flexible rent based on gross revenue The most common type of fl exible lease bases the fi nal cash rent on an estimate of the actual gross

Flexible Rents Base rent plus bonus payment, bonus payment based upon yield, price or both Cash rent is based upon $ per bushel harvest Fixed % of gross revenue –35% on good/excellent soils –40% on average soils

8 Cash Rent % - Central Illinois

9 Cash Rent - FBFM