Farm Leasing

Ohio Farmland Leasing Update webinar is March 1

As we enter the 2024 crop season, it’s time for an update on economic and legal information that affects Ohio farmland leasing. Join our Farm Office team members on March 1, 2024 from 10 a.m. until noon for a special edition of our Farm Office Live webinars.  In the Ohio Farmland Leasing Update, we’ll share the latest information on these leasing topics:

  • Cash Rent Outlook – Key Issues and Survey Data
  • Negotiating Capital Improvements on Leased Farmland
  • Dealing with Conservation Practices in a Farmland Lease
  • Executing and Recording Farm Leases
  • Legal updates and new Farmland Leasing Resources

Our speakers for the webinar include:

  • Barry Ward, Leader, OSU Production Business Management
  • Peggy Hall, Attorney, OSU Agricultural & Resource Law Program
  • Robert Moore, Attorney, OSU Agricultural & Resource Law Program

There is no cost to attend the Ohio Farmland Leasing Update, but registration is necessary unless you’re already registered for our Farm Office Live webinars.  To register, visit go.osu.edu/register4fol.

Is AI Ready to Draft Your Farm Lease?

By: Robert Moore, OSU Extension

In a previous post “Artificial Intelligence – What Is it and How to Use It”, I briefly discussed AI, how it works and some of its potential uses.  There is no doubt that AI will have profound effects on each of us and our society in general.  In this post, I am going to examine how AI works for a specific task related to agricultural law and measure its performance.

Surveys by Ohio State University indicate around 50% of farmland in Ohio is leased.  Therefore, farm leases are an important legal document for many Ohio farmers.  While some farm leases are still only verbal, many tenants and landowners recognize the benefits of a written lease and have at least a basic written lease in place.  Some leases are written by the tenant or landlord while other leases are written by attorneys.  The issue addressed in this article is: is AI ready to draft your farm lease?

The Process

To address the above question, ChatGPT and Google Bard, two of the more prominent AI interfaces, were each tasked with the following: “draft a cash farm lease”.  This command was broad and vague but would likely reflect what a tenant or landowner might request.  This exercise was performed on May 30, 2023 and each AI tool provided a cash farm lease.  The exercise was again performed on October 4, 2023 to assess if AI’s capabilities changed over time.

To measure the effectiveness of AI, the drafted leases were compared to the recommended lease terms provided in OSU Extension’s bulletin “What’s In your Farm Lease?  A Checklist of Farm Lease Provisions”.  This bulletin was written by Peggy Hall and provides 26 key terms that should be included in most farm leases.  Each draft lease was scored based on the number of terms that were included.

The Results

The following is the score for each draft, with the score reflecting the number of recommended terms from the lease bulletin that were included in the lease drafts:

ChatGPT, May 2023                   8

Google Bard, May 2023             10

Chat GPT, October 2023             9

Google Bard, October 2023        7

As the scores show, neither ChatGPT nor Google Bard included even one-half of the recommended terms and the best was 10 out of 26 or 38%. Two important items of note.  First, no drafts included terms to prevent the tenant from assigning the lease to someone else – an extremely important provision to include in farm leases. Second, no drafts addressed landowner or tenant signatures needing notarized.1

I would describe these drafts as “bare minimum” leases.  They are probably better than having no lease at all, but they could be much better and do not include several key terms.  Also, there was no significant improvement of performance over time.  In fact, the Google Bard score was lower in the later draft.  Asking ChatGPT or Google Bard to “draft a farm cash lease” is not going to provide a satisfactory lease.

Providing Input to AI to Improve Output

As I discussed in my prior AI post, one of the benefits of AI is the ability to chat with it.  That is, you can provide feedback to the AI to assist it in providing a better outcome.  So, that’s what I did.  After reviewing the first two rounds of lease drafts, I asked ChatGPT and Google Bard to draft a third cash farm lease and to specifically include the 26 recommended terms from the lease bulletin.  The resulting leases were better and scored as follows:

ChatGPT           16

Google Bard      20

As you can see, the scores increased significantly.  So, the feedback provided to AI was integrated into the resulting drafts and made the leases better.  This is one of the major advancements of AI. It allows someone like me that has little computer proficiency to provide untrained input that causes a significantly better result.

While the scores did increase, there were still some major issues with the drafts.  I was probably generous in the scoring and gave credit if an issue was addressed, even if somewhat incomplete.  For example, in its first two drafts, ChatGPT did not include a term addressing who receives FSA payments, the tenant or landowner.  ChatGPT did address this issue after being prompted but stated that the landowner would receive all FSA payments.  According to FSA rules, the tenant must receive at least some of the program payments and it is customary for the tenant to receive all FSA payments.  So, while ChatGPT included a term about FSA payments, the included term was not completely accurate or correct.

Google Bard also had similar issues.  In its first two drafts, it did not address what happens in the event of eminent domain takes a portion of the leased property.  A typical lease term would say that the tenant is compensated for any crop damage caused by eminent domain and the landowner would keep the acquisition proceeds.  Google Bard included a provision about eminent domain but stated the tenant would receive all eminent domain proceeds.  Allowing the tenant to keep eminent domain proceeds would be very unusual and not something a landowner should agree to.

I would assess these leases as “better but still not good”.  These drafts did include more of the recommended terms but included many of them in an insufficient or incomplete manner.  The third round of leases did show that AI can learn and improve with feedback but also that it has a long way to go.  The craft and nuance of drafting legal documents still seems to belong to the domain of people.

Conclusion

There are some well-known people, such as Elon Musk, who claim that we should have serious concerns about AI eventually taking over the world.  Their concerns may be valid, but as of now I don’t believe AI is going to take over farm lease drafting anytime soon.  An experienced attorney can do a much better job of drafting a farm lease than today’s AI.  For a tenant or landowner who are unwilling to hire an attorney or may not have the resources to pay an attorney, a farm lease drafted by AI may be better than nothing but that’s about it.  The best source of legal services remains to be attorneys and likely will be for the foreseeable future.  AI is not ready to replace your attorney – yet.

1Leases for more than three years must be notarized.

Weakening Crop Prices and High Production Costs Weigh on Farmer Sentiment

Source: James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

Click here to listen

Agricultural producers’ sentiment declined for the second month in a row during September as the Purdue University-CME Group Ag Economy Barometer fell 9 points to a reading of 106. Producers expressed concern about both their current situation as well as future prospects for their farms. The Current Conditions and Futures Expectations Indices both declined 10 points in September leaving the Current Conditions Index at a reading of 98 while the Future Expectations Index stood at 109. Weakening prices for major crops and ongoing concerns about high production costs and interest rates weighed on producers’ minds this month. September’s declines left all three indices below year-ago levels. This month’s Ag Economy Barometer survey was conducted from September 11-15, 2023.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-September 2023.
Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-September 2023.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-September 2023.

Read More Here

 

Farmer Sentiment Dips Amid Weaker View of Current Conditions

Source: James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

U.S. farmers’ sentiment weakened in August compared to July as the Purdue University-CME Group Ag Economy Barometer dipped 8 points to a reading of 115. This month’s decline was fueled by producers’ weaker perception of current conditions both on their farms and in U.S. agriculture as the Current Conditions Index fell 13 points to a reading of 108. The Future Expectations Index also declined in August to a reading of 119, 5 points below a month earlier. This month’s Ag Economy Barometer survey was conducted from August 14-18, 2023. Although producer sentiment weakened in August, producers’ rating of farm financial conditions changed little this month, as the Farm Financial Performance Index declined just one point to a reading of 86. However, producers’ perspectives on farm financial conditions were noticeably weaker than a year earlier when the index stood at 99. Weaker producer sentiment this month did translate into a decline in the Farm Capital Investment Index. The investment index fell to 37, eight points lower than in July and two points lower than a year earlier. Among producers with a negative view of the investment climate, the increase in prices for farm machinery and new construction along with rising interest rates were the two most commonly cited reasons for their negative view. In a related question, over half (60%) of producers in this month’s survey said they expect interest rates to rise in the upcoming year.

When asked about top concerns for their farming operations in the next 12 months, producers continue to point to higher input prices and rising interest rates as their top two concerns. Higher input prices was chosen by one out of three (34%) and rising interest rates was chosen by one out of four (24%) survey respondents as a top concern. Even though crop prices weakened significantly this summer, producers ranked declining commodity prices as their number three concern, chosen by one out of five (20%) producers.

Click here to download the full report

 

 

Ohio’s Farm Lease Termination Deadline Approaching

Source: Robert Moore

A new Ohio law took effect last year that impacts some landowners who want to terminate their farm crop leases. If a farm lease does not include a termination date or a termination method, the law requires a landowner to provide termination notice to the tenant by September 1. The law was adopted to prevent late or otherwise untimely terminations by landowners that could adversely affect tenants.

It is important to note that the law only applies to verbal leases or written leases that do not include a termination date or method of notice of termination.  If a written lease includes a termination date or method of notice, the terms of the lease apply and not the termination notice law.  Also, the law does not apply to leases for pasture, timber, farm buildings, horticultural buildings, or equipment.

The notice can be provided to the tenant by hand, mail, fax, or email.  If termination is provided by September 1, the lease is terminated either upon the date harvest is complete or December 31, whichever is earlier.  While no specific language is required for the termination notice, it is good practice to include the date of notice, an identification of the leased farm and a statement that the lease will terminate on the completion of harvest or December 31.  If termination is provided after September 1, the lease continues for another year unless the tenant voluntarily agrees to terminate the lease early.

A tenant is not subject to the new law and can terminate a lease after September 1 unless the leasing arrangement provides otherwise.  Because it is generally easier for a landowner to find another tenant, even on short notice, the law protects only the tenant from untimely terminations, not landowners.

For more information, see Ohio’s New Statutory Termination Date for Farm Crop Leases law bulletin available at farmoffice.osu.edu.

Farm Real Estate Values and Cash Rents

Source: USDA

The 2023 average Ohio farm real estate value, including land and buildings, averaged $7,800 per acre, according to Ben Torrance, State Statistician of the USDA, NASS, Ohio Field Office.

Farm real estate values in Ohio were up 8.3 percent from 2022. Ohio is in the Corn Belt region, which also includes Illinois, Indiana, Iowa, and Missouri. The Corn Belt region value was $8,100 per acre, up 7.1 percent from 2022. The value of farmland in States bordering Ohio were: Indiana, $9,100 per acre; Kentucky, $4,700 per acre; Michigan, $6,400 per acre; Pennsylvania, $7,610 per acre; and West Virginia, $3,200 per acre.

Ohio’s cropland value was $8,200, an increase of 8.6 percent from the previous year. The Corn Belt region experienced a 7.7 percent increase to $8,540 per acre. The average value of cropland in the United States increased 8.1 percent from 2022 to $5,460 per acre. Ohio’s pasture value was $3,700 per acre, up 2.8 percent from 2021.

Ohio’s cropland cash rent was $178 per acre in 2023, up $8.00 from the previous year. Cropland cash rents in the Corn Belt region increased $13.00 from last year to $236 per acre. The cropland cash rents in the States bordering Ohio were: Indiana, $226 per acre; Kentucky, $168 per acre; Michigan, $148 per acre; Pennsylvania, $107 per acre; and West Virginia, $45 per acre.

Pasture cash rents in the Corn Belt region increased $1.00 to $42.50 per acre. Pasture cash rent in the United States was $15.00 per acre.

Click here to download the report

Determining a Fair Cash Rent Value in Knox County

 

Ohio may soon have new regulations for solar energy development

By: Peggy Kirk Hall, Attorney and Director, Agricultural & Resource Law Program

A long process to update Ohio’s regulations for solar energy facility development has nearly reached its end.  On July 20, the Ohio Power Siting Board (OPSB) adopted new rules that include revisions to rules that apply to solar facilities under its jurisdiction—those that have a nameplate capacity of 50 megawatts or more.  The rules will next go to the Ohio legislature’s Joint Committee on Agency Rule Review (JCARR) for a final review before they can become effective.

The OPSB began the rules review in 2020.  The process included stakeholder meetings, public workshops, a draft proposal of revisions, and a review of comments to the draft rules.  Many parties and interested individuals followed the process, and the agency received formal input from 20 parties and over 400 informal public comments.  The OPSB recognized that the rules review “inspired a robust discussion from numerous interested stakeholders.”

What are the proposed changes?

OPSB summarizes the rule changes it adopted as follows:

  • Public information: Siting project applicants must host two public informational meetings for each standard certificate application. The first meeting will describe the scope of the project. The second meeting, held at least 90 days before an application filing, will focus on the specifics of the application.
  • Site grading: Applicants must provide a preliminary grading plan that describes maximum graded acreage expectations.
  • Drainage and field tile: Applicants must describe and map field drainage systems and demonstrate how impacts to those systems will be avoided or mitigated, describe how damaged drainage systems including field tile mains and laterals will promptly be repaired to restore original drainage conditions and describe the data sources and methods used to obtain information for field drainage system mapping.
  • Vegetation management: Applicants must prevent the establishment and spread of noxious weeds within the project, including setback areas, during construction, operation, and decommissioning. Applicants must provide annual proof of weed control for the first four years of operation with the goal of weed eradication significantly completed by year three of operation.
  • Noise: Noise limits for renewable energy facilities cannot exceed the greater of 40 decibels (dBA) or the ambient daytime and nighttime average sound level by more than 5 dBA.
  • Surface water protection: Solar energy facility applicants must develop and implement a stormwater pollution prevention plan, a spill prevention control and countermeasure plan, and a horizontal directional drilling contingency plan, to minimize and prevent potential discharges to surface waters.
  • Fencing: Solar energy facility perimeter fencing must be small-wildlife permeable and aesthetically fitting for a rural location.
  • Setbacks: Solar energy facility panel modules must be setback at least 50 feet from non‑participating parcel boundaries, at least 300 feet from non-participating residences, and at least 150 feet from the edge of the pavement of any road within or adjacent to the project area.
  • Regulatory: Compliance monitoring and reporting requirements to ensure applicants meet the commitments and conditions contained in each OPSB certificate.

What happens next?

Parties have 30 days from the July 20 adoption date to file a request for a rehearing on OPSB’s decision to adopt the rules.  A rehearing request to OPSB must be based upon an argument that the rules are unreasonable or unlawful.  Absent a rehearing request, the OPSB will forward the rules package to JCARR, a committee consisting of five representatives and five senators from the Ohio legislature.  JCARR must hold a public hearing to hear comments on the rules between 31 and 45 days after receiving them, then must review the rules to ensure they don’t exceed OPSB’s authority, conflict with existing rules or legislative intent, and include analyses of fiscal and business impacts. The committee will next either approve the rules or recommend invalidation of some or all of the rules by the Ohio legislature, and both the House and Senate would have to pass resolutions to follow JCARR’s invalidation recommendations.  If JCARR approves the rules, they’ll go into effect right away.

Webinar series on Solar Development in Ohio

Do you want to know more about what’s happening with Ohio solar energy development?  Join us for a five-part webinar series reviewing the current state of solar development in Ohio and explaining the solar development process. Attend one, several, or all of the following webinar sessions:

May 23: Solar Development Overview and Trends

• We’ll give an overview of Ohio solar development and discuss industry and technology trends, dual use of land for solar energy and agricultural production, and community and regulatory issues with solar development.

May 24: Leasing Land for Solar Development

• This session targets landowners considering a solar lease. We’ll cover pre-leasing issues, solar lease phases, common legal terms, and best management practices for leasing.

May 25: Connecting to the Electric Grid

• Approval to connect to the grid is a necessary and critical part of the solar development process. We’ll provide an overview of the electric utility system, regulatory jurisdiction, and interconnection procedures and timelines.

May 30: Solar Project Approval in Ohio

• Ohio regulatory requirements for solar projects have changed in recent years. This session explains solar project application procedures, state oversight, and new laws allowing county and township oversight of solar development. May 31: Construction and Post-Construction Considerations • What does solar project construction involve, and what happens at the end of a project’s life? We’ll cover the construction process, common construction issues, regulatory oversight of construction, and requirements for decommissioning a project in the future.

Learn more and register at go.osu.edu/solarwebinars.

Farm On financial management course offers farmers, ranchers training to meet new program requirements

A new online farm management course offered by The Ohio State University College of Food, Agricultural, and Environmental Sciences (CFAES) will help Ohio’s beginning farmers qualify for the requirements of the Ohio Department of Agriculture’s Beginning Farmer Tax Credit program.

Called Farm On, the self-paced, on-demand farm financial management course was created by Ohio State University Extension professionals and is offered through OSU Extension’s new Farm Financial Management and Policy Institute (FFMPI), said Eric Richer, assistant professor and OSU Extension field specialist in farm management.

OSU Extension is the outreach arm of CFAES.

“The Farm On financial management course was created to address the needs of Ohio’s new and beginning farmers who want to better prepare themselves to operate a commercial farm in Ohio and do that with a high level of economic stability while remaining profitable and responsible at every step along the way,” said Richer, who is the lead instructor for the Farm On course. “We believe Farm On will be a great deliverable to Ohio’s agriculture industry because it is on-demand, self-paced, and taught by Ohio State’s expert farm management instructor.”

What’s unique about the Farm On course is that, not only does it comply with the regulations of the new Ohio House Bill 95 Beginning Farmer Tax Credit program, it also meets the borrower training requirements for the U.S. Department of Agriculture Farm Service Agency’s Beginning Farmer and Rancher Loan Program, Richer said.

The Farm On course includes multiple video lessons, 10 quizzes, 10 exercises, individual and group consultations, and a 10-module course that covers the following topics: Continue reading →