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3.Organic Transition Period <br /> USDA organic certification requires a three-year transition period during which prohibited inputs cannot be used, <br /> yet crops must be sold at conventional market prices.During this period,yields commonly decline while <br /> commodity prices received remain unchanged,resulting in reduced revenues. <br /> Organic corn and soybean production typically experiences yield reductions of 15-30%or more compared to <br /> conventional systems.At the same time,labor and management costs often increase due to more intensive weed <br /> and pest control methods. <br /> Additionally,organic grain marketing infrastructure in Central Illinois is limited.Many local elevators do not <br /> handle organic grain,potentially increasing transportation costs or requiring reliance on specialized buyers such <br /> as Clarkson Grain. <br /> 4.Lease Structure and Risk <br /> Currently,the City farms are leased under a cash rent arrangement,meaning the tenant bears all production risk <br /> and receives 100%of the production.Under this lease structure,the City would not benefit from organic price <br /> premiums realized after the three-year transition period,as they do not receive a share of the crop. <br /> The benefit of the current cash rent lease with a bonus provision is that it limits risk by establishing a guaranteed <br /> base rent while still allowing for upside potential tied to yields and commodity prices.To fully capture organic <br /> premiums,the farms would need to transition to a crop-share lease,typically involving a 50/50 risk-sharing <br /> arrangement between landowner and tenant.In this arrangement the City would pay half of the input costs and <br /> receive half of the grain to market.This exposes the City to significantly greater risk,weather related production <br /> risk,commodity market volatility risk,etc.without guaranteeing increased profitability. <br /> From an economic standpoint,cash rents in Central Illinois have remained high relative to operator returns in <br /> recent years. Without rent adjustments,it may be difficult for tenants to financially justify transitioning to organic <br /> production.If the City's primary objective is to maximize financial returns,an aggressive flat cash rent structure <br /> remains the most profitable and lowest-risk approach. <br /> Conclusion <br /> Based on the considerations outlined above,transitioning City of Decatur farmland to organic production under a <br /> crop-share lease would increase financial and operational risk without guaranteeing improved economic returns. <br /> Conservation objectives may be more effectively achieved through conventional production systems utilizing no- <br /> till practices and cover crops while maintaining the current cash rent lease structure.Under a cash rent <br /> arrangement,the City receives predictable income and avoids exposure to production risk,weather variability, <br /> and commodity price volatility.In contrast,pursuing organic price premiums would require a shift to a crop-share <br /> lease,increasing the City's financial exposure through shared input costs and marketing responsibilities without <br /> assurance of higher net returns.Given the limited availability of qualified organic tenants,anticipated yield <br /> reductions,and the multi-year transition period without premium pricing,maintaining the existing lease structure <br /> represents the most reliable and lowest-risk approach for leasing City-owned farmland while continuing to <br /> advance soil conservation goals consistent with the RCPP. <br /> Sincerely, <br /> trig <br /> Megan E.Fredrickson <br /> Vice President and Department Head <br /> Farm Manager <br />