Ease Rent Risk

FSA RULE CHANGE SPURS INTEREST IN FLEXIBLE LEASES

Flexible cash rent leases are still uncommon, but a USDA rule change is likely to encourage wider use.

In Iowa, flexible leases make up only about 12% of all cash farm leases, says Ann Johanns, Iowa State University Extension program specialist. But interest in flex leases is up sharply, she says, and farm management experts are fielding more questions about them. That's partly because of a recent change in FSA rules, says Kent Thiesse, vice-president of MinnStar Bank in Lake Crystal, MN. Rental agreements that provide for a guaranteed base plus a bonus are now considered cash rent leases, rather than crop-share leases.

This means USDA farm program payments no longer have to be shared between the farmer and the landlord — a provision that had stifled innovation, Thiesse says. The rule change “has opened the door to creative flexible lease agreements.”