A growing number of Iowa landowners are working closely with their farmer-tenants to improve water quality, reduce soil loss and build soil health on their land, according to Steve Johnson, Iowa State University (ISU) Ex­­tension Farm Management specialist.

"Instead of just chasing dollars, I think a lot of landlords are taking a harder look these days at what’s going on their land," Johnson said last week at an ISU Extension Farm Leasing workshop in Altoona. "More and more landowners want to make sure that tenants are practicing good stewardship."

It’s important to get more landlords involved in conservation and water quality efforts through the Iowa Nutrient Reduction Strategy because more than half of the land in the state is leased to farmer-tenants, Johnson said.

"We’ve been focusing on farmers, but landlords are a big part of this and they have a big stake in land and water stewardship," he said. "I think landlords are starting to open up a dialogue on stewardship. And we are moving that direction faster than anybody imagined a few years ago because there is such a strong focus on water quality in soil conservation now in Iowa."

Financial crunch

Along with a growing emphasis on stewardship, Johnson predicted Iowa landowners and tenants will face another difficult winter determining the cash rental rates for the 2017 crop year. "The financial situation that many farmers are facing is making it very tough to set rates," he said.

Most Iowa farmers still have fairly solid balance sheets thanks to robust income in the years prior to 2014. But they have had to work very hard to squeeze out costs because their cash flow has been slashed by sharply lower commodity prices since then, Johnson said. In many cases, that cost-cutting effort is being pushed by lenders, who are concerned about farmers’ ability to service operating and term loans, he said.

As they search for ways to reduce costs, farmers often focus on rental rates, Johnson said. "It’s almost sure to get much of the attention because it’s the biggest single cost item on a per-acre basis."

In this stressful climate, it’s important for landlords and tenants to keep the lines of communication open and to understand each other’s positions, Johnson said. "You need to listen to what the person on the other side of the table is saying," he said. "Don’t limit communication to annual rental payments and negotiations about next year’s cash rent."

As they negotiate leases, landlords need to understand that farmers are facing one of the toughest cash-flow crunches in decades, Johnson said. Tenants, on the other hand, should be willing to provide landlords more information, such as yield histories on their farm, and be more willing to participate in conservation and water quality improvements, he said.

Flexible leases

The economic stress may also spur more interest in "flexible cash leases" that tie the rental rate to yields and commodity prices, but likely have a base rent established. "Landlords may have to take on slightly more risk than they have been used to in the past," Johnson said.

The ISU Farmland Leasing workshop was one of 70 that ISU Extension is holding around the state this month to discuss land leasing issues. The workshops are designed to coincide with Iowa’s Sept. 1 deadline for either the landowner or tenant to terminate a farmland lease for the upcoming growing season.

Johnson noted that under a new law, passed by the Iowa Legislature earlier this year, termination of a farmland lease, whether it is oral or written, must be done in writing on or before Sept. 1. In addition, the termination notice cannot be part of the lease document, but must be a separate document.

For more information from ISU Extension on issues in Iowa farmland leases, go to http://www.extension.iastate.edu/agdm/wdleasing.