These are volatile financial and regulatory times for agriculture. You can’t control the world, but you can assess the financial health and future of your own farm to inform operational decisions with more confidence.
It will be harvest time soon, not to mention you’re reviewing any 2026 Iowa farm leases for renegotiation or termination notices before September 1. We understand there’s already quite a lot on your plate, and here we are advocating for adding “just one more.” But it’s an important one!
Know your cash flow
Common wisdom is that a farmer should keep his or her balance sheet updated throughout the year so they know what standing assets and liabilities they have at any given time. It’s equally a good idea to keep your cash flow numbers updated.
The cash flow isn’t just a flat look at revenue and expenses. It’s like a mini-movie of how healthy your farm business is, and if all parts are in balance. Ideally you can check your cash flow upon demand to answer questions like: “How much does it cost me to produce an acre of corn on this property?” or “What am I paying to feed each sow for a year in that barn?”
Right now you may be deciding whether to continue with a farm lease, but you face other big decisions throughout the year where it would be valuable to consult your active cash flow at a glance. For now, let’s focus on the lease. Last month’s blog post noted Iowa cash rent rates are down for the first time in several years. It’s only 2.9%, but that margin could mean the difference between severing a lease that’s just a little too pricey or keeping it another year if the landlord agrees to a reduction—depending on your expenses.
Deciding for the lease
If you haven’t already looked ahead to your operations plan for 2026—even if you have no lease—it is a good idea to start penciling in a draft cash flow. How many acres will you plant? What kind of yield could you conservatively count on next fall? What kind of prices do you think you can get, and what are late 2026 futures? What inputs and labor will you need? Are you planning to buy or lease equipment, or stick with repairs? And what will those cost?
If you raise livestock, you have some different questions to answer.
How could these considerations impact a lease termination decision? Will you make money next year if you keep it, taking into account all those other factors—or would it be more profitable to terminate, eliminating that ground’s production but also its rent and input costs?
This would dovetail well with an overall examination of your cash flow and operations for 2026: Is one part of your farm doing well and “carrying” shortfalls for any part of the rest of it? If so, do you have a good reason for maintaining the loss operation? (For example, you might raise crops and cattle, and now you’re getting great returns on the cattle but not so much for your grain. However, if some of the crop goes into feed, maybe it’s cheaper overall to keep planting than to buy that input off the farm.)
As an aside about your lease decision: If you send a termination notice this month, it does not necessarily mean you cannot rent that ground again, depending on your (good) relationship with the landlord. If you need to terminate the lease as it’s currently set to renew next March, go ahead and send the notice even if your landlord has agreed to renegotiate terms. You can draw up a new lease before March.
In this scenario, you do run the risk the landlord will rent to another farmer while negotiating with you. But if you have decided to terminate in absence of a renegotiated lease, sending the notice before September 1 is not truly a risk, since it legally protects you from being on the hook for another year’s rate of rent you did not want.
Deciding for other reasons
If you are on top of your cash flow and know how your farm is operating on any given day, great! If you’re out of practice or need to review everything to get to that point, though, Ag & Business Legal Strategies can help with an enterprise analysis at any time. This is auditing the individual parts of your farm that are supposed to make money, then isolating the factors contributing to its profit or loss.
The point of this is to return to you the informed power to make choices about your operations—especially now. Bankers we’ve talked with lately have explained they’re seeing farmers draining the savings they’ve built up over years into just keeping their farms afloat, especially growers who are struggling with lower prices, yet still-high input costs.
Farmers make decisions; there’s no shortage of responsibility in their DNA. The problem can be the action itself. Do you maintain a losing proposition as-is by, say, rolling debt into refinancing your mortgage or opening a long-term line of credit—in the hopes income will begin moving back up soon? Or do you decrease your acres or take some other action that means you’re not growing as much, but also spending less?
In addition to enterprise analysis, we offer a lease termination service if you do want to send that notice, to make certain you’re following specific state law to the letter and protecting yourself. We can also assist in reviewing your obligations to help you decide if debt restructuring or even bankruptcy is a responsible choice.
If you’re not satisfied with your financial situation, do something sooner than later. It’s tempting to say, “I’m going to keep doing the same thing”—but making no change is actively deciding to do nothing. This has created regret for some farmers we’ve helped, who waited until the last minute to call us and learned they would have had more options if they had reached out when they first noticed a problem.
(319) 363-1641
At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy.
Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late.
