Sustainable Farm Lease

Custom farming is closely associated with leasing farmland, but it is not a lease agreement.  The landowner retains the right of use and possession of the property, and hires a farmer as a contractor to operate the farm.  The level of operation depends on the agreement between the parties.  Some landowners may hire a custom farmer to do specialized tasks while the landowner or a farm tenant continues to do the majority of the farming.  In other situations a custom farmer may complete nearly every aspect of the farm operation.

This option can have significant financial benefits as well as improving sustainability.

• The landowner has complete control over all land use decisions.
• The landowner decides what inputs are used and how and when they are applied.
• The landowner receives all of the income from sales.
• The landowner is considered materially participating in farm operations for tax purposes.
• The landowner can receive all of the eligible farm program payments.
• The farm operator does not have an incentive to maximize production to the detriment of stewardship.

However, custom farming can have disadvantages, depending on the landowner’s circumstances.

• The landowner has complete control over all land use decisions, which means time for operational management.
• The risk of the operation is completely on the landowner.

Additional Resources:

2010 Custom Rate Survey

• Iowa State University Extension provides estimates of custom rates.
• Changes in the costs of fuel and labor should be considered when determining rates.

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