Consider Legalities when Terminating, Renegotiating Farmland Leases

Jennifer Stewart, Purdue Agricultural Communications

 

As the end of grain harvest draws near, many landlords and tenants will be renegotiating or terminating farmland lease agreements - a process full of legal requirements, a Purdue Extension agricultural economist warns.

 

First and foremost, lease agreements and terminations should be in writing. While oral farmland lease agreements are as legal as written leases in Indiana, Gerry Harrison said some details of the oral agreement might be disputed.

 

"Oral leases should be avoided," he said. "There are many problems with oral leases, including what is or was the actual agreement."

 

Earlier this year, the Indiana Court of Appeals ruled that a lease termination is required to be in writing, which protects both landlord and tenant.

 

"It could be very risky to rely on an oral notice to terminate a lease," Harrison said. "Further, if a new leasing arrangement is needed with the existing tenant and a lease agreement does not come, the tenant, without a proper notice to quit, likely has the land for the coming year at the same rent or arrangement as the current year."

 

Indiana law also requires that a notice to quit, or terminate, a lease needs to be delivered by a landlord or tenant in a timely manner. For a lease of at least a year, law requires notice to be delivered three months before the end of the lease year.

 

If a lease doesn't specify the lease-year end, Harrison said it's customary in Indiana to consider the end of February of the coming crop year as the lease-year end.

 

"Farming is a continuous process. If there is to be a new tenant, the current tenant needs to plan for the transition, and the new tenant would likely want to start preparations for the coming crop year during the late summer or the fall of a current crop year," he said.

 

For landlords and tenants who are renegotiating lease agreements, Harrison said it's important for both parties to have an understanding of the farmland's rental value.

 

"Landlords must recognize the difference in the rental value of varying farmland parcels as to size in acres and quality of the land," he said. "While crop farming has been quite profitable in recent years, an oddly shaped 30 acres is not likely to be as desirable to a tenant as a very fertile 300-acre parcel."

Some lease renegotiations might require professional help to draft an appropriate rental agreement.

Harrison prepared an in-depth look at farmland lease renegotiations and terminations titled "Indiana Farmland Leases - Key Considerations and Laws." It's available by emailing him at harrisog@purdue.edu.

 

More information about farmland leases also is available in Harrison's free Purdue ExtensionPublication, "Legal Aspects of Indiana Farmland Leases and Federal Tax Considerations," which is available for download at http://www.extension.purdue.edu/extmedia/EC/EC-713.pdf

Weekly Outlook - Monitoring Corn Consumption

The price of corn, like the price of other commodities, is influenced by a wide array of factors that reflect a combination of current and expected supply and consumption. The market continually judges whether the price of corn is adequate to ration the available supply. While expectations about demand over the course of the marketing year influence that judgment, the on-going pace of consumption reveals the adjustments that are being made to accommodate the available supply. A pace of consumption that cannot be supported implies the need for higher prices, while a slower pace than required implies the need for lower prices.

In the current marketing year, the small U.S. crop requires a substantial reduction from the level of consumption in the 2011-12 marketing year. Based on the current forecast of the crop size, imports of 75 million bushels, and the assumption that year-ending stocks cannot be reduced below about five percent of consumption, corn consumption during the current marketing year will be limited to about 11.2 billion bushels. That is 1.326 billion bushels (10.6) percent less than consumed in the previous marketing year. The USDA has forecast a decline in consumption of 1.376 billion bushels and year-ending stocks slightly above five percent of consumption. By category, the USDA has forecast that exports will decline by 393 million bushels (25.5 percent), corn for ethanol and by-products will decline by 500 million bushels (10 percent), other processing uses will decline by 71 million bushels (5 percent), and feed and residual use will decline by 412 million bushels (9 percent).  <Read More>

Weekly Outlook - Cattle Prices Will Continue to Rise

The impacts of the 2012 drought continue to play out in a beef industry discouraged by high feed prices and large cattle feeding losses. In the latest Cattle On Feed report, the USDA confirmed that placements into feed lots dropped sharply in September following substantial declines in July and August. As a result, on-feed numbers are now down nearly three percent as the beef industry is doing its part to reduce corn and other feed usage.

Drought has been particularly cruel to the beef cattle industry. A multiple year drought in the Southern Plains has been followed by a devastating Midwestern drought in 2012 that is now forecast to continue into 2013. Brood cows remain the last major livestock industry that is land extensive. So, when dryness causes wide stretches of land to be unable to support cow grazing, producers have to buy feed or send the cows to town.  <Read More>

Upcoming Event - Indiana Certified Livestock Producer Program Instructional Session

Indianapolis - The Indiana State Department of Agriculture (ISDA) is hosting producer workshops as part of the Certified Livestock Producer Program (CLPP), a voluntary program that recognizes farmers for their commitment to innovative and top industry standards. The workshop will be held on Nov. 7 and Nov. 8 at the Southern Indiana Purdue Agricultural Center in Dubois.

Each workshop is free of charge and will include industry experts in the five areas of focus for the CLPP program: commitment to the environment, food safety & animal well-being, emergency planning, biosecurity and being a good neighbor in their community. 

"The Certified Livestock Producer Program gives an opportunity for livestock producers to publicly demonstrate their commitment to their farm, their family and the future," said CLPP Program Manager John Nagle. "The instructional sessions are the first step toward completing the program, and offer valuable insight from experts in the livestock industry that will benefit each producer’s operation and community."

Who:
Livestock producers of all sizes and species

What:
Free CLPP Instructional Sessions

When & Where:
November 7th & 8th

Southern Indiana Purdue Agricultural Center
11371 East Purdue Farm Rd, Dubois, IN 

5:00 pm to 8:30 pm EST both evenings

Cost:
No cost for producers to attend, and dinner will be provided

To register please visit the CLPP page on the ISDA website, http://www.in.gov/isda/2395.htm.

Contact John Nagle at jnagle@isda.in.gov or (317) 232-8770 for questions or more information.