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Flex Rent
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obie_iaffa
Posted 1/17/2016 05:50 (#5041561 - in reply to #5041456)
Subject: RE: Flex Rent


NE Iowa
Probably needs to be around $150-$175 if you really want a flex rent to work. Problem I've seen with most flex rents is the landowner wants a base that's top dollar for the area and then the potential for a cherry on top if prices and/or yields rise. Might as well call that a bonus rent. In full disclosure, I've been trying to sell our farms landowners on flex rents the last 4 years and have only had 2 takers and one since went back to a fixed rent. The base for the one that switched back was set when corn was $4.80/bushel. When we wrote the initial flex contract, I wanted to start the base rent that would be workable with $3.50 corn and the landowner wanted nothing to hear of it. When we renegotiated this past August, he said he would do a flex lease, but he would only lower his base rent $5 below what he wanted if we did a fixed price rent. (Example with fictitious numbers: the base rent in the flex contract would have been $225 and he wanted $230 for a fixed rent). I took the fixed rent as I knew the most I would pay was going to be $230. With the flex at $225 base, my rent could have been upwards of $300 if prices rose. I was willing to take a $5 increase in base rent to keep any gravy if it would exist. Anyway, that's the end of my morning rant
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