Note 2—Revenue Recognition

For the majority of its leases, the Company receives at least 50% of the annual lease payment from tenants either during the first quarter of the year or at the time of acquisition of the related farm, with the remaining 50% of the lease payment due in the second half of the year. Rental income is recorded on a straight-line basis over the lease term. The lease term generally includes periods when a tenant: (1) may not terminate its lease obligation early; (2) may terminate its lease obligation early in exchange for a fee or penalty that the Company considers material enough such that termination would not be probable; (3) possesses renewal rights and the tenant’s failure to exercise such rights imposes a penalty on the tenant material enough such that renewal appears reasonably assured; or (4) possesses bargain renewal options for such periods. Payments received in advance are included in deferred revenue until they are earned.

Certain of the Company’s leases provide for a rent payment determined as a percentage of the gross farm proceeds (contingent rent). Revenue under leases providing for a payment equal to a percentage of the gross farm proceeds are recorded at the guaranteed crop insurance minimums and recognized ratably over the lease term during the crop year. Upon notification from the grain or packing facility that a future contract for delivery of the harvest has been finalized or when the tenant has notified the Company of the total amount of gross farm proceeds, revenue is recognized for the excess of the actual gross farm proceeds and the previously recognized minimum guaranteed insurance.

Certain of the Company’s leases provide for minimum cash rent plus a bonus based on gross farm proceeds. Revenue under this type of lease is recognized on a straight-line basis over the lease term based on the minimum cash rent. Bonus rent is recognized upon notification from the tenant of the gross farm proceeds for the year.

Most of the Company’s farming leases range from two to three years for row crops and one to seven years for permanent crops. Leases in place as of March 31, 2020 have terms ranging from one to 40 years. Payments received in advance are included in deferred revenue until they are earned. As of March 31, 2020 and December 31, 2019, the Company had $10.2 million and $0.1 million, respectively, in deferred revenue.

The following sets forth a summary of rental income recognized for the three months ended March 31, 2020 and 2019:


	Rental income recognized
	For the three months ended
	March 31,
(in thousands)	2020		2019
Leases in effect at the beginning of the year	$	9,341	$	9,514
Leases entered into during the year		732		158
	$	10,073	$	9,672

Future minimum lease payments from tenants under all non-cancelable leases in place as of March 31, 2020, including lease advances when contractually due, but excluding crop share and tenant reimbursement of expenses, for the remainder of 2020 and each of the next four years and thereafter as of March 31, 2020 are as follows:


(in thousands)	Future rental
Year Ending December 31,	payments
2020 (remaining nine months)	$	23,905
2021		21,034
2022		11,549
2023		5,171
2024		2,440
Thereafter		25,033
	$	89,132

Since lease renewal periods are exercisable at the option of the lessee, the preceding table presents future minimum lease payments due during the initial lease term only.

The Company records revenue from the sale of harvested crops when the harvested crop has been contracted to be delivered to a grain or packing facility and title has transferred. Revenues from the sale of harvested crops totaling $0.3 million and $0.4 million were recognized for the three months ended March 31, 2020 and 2019, respectively. Harvested crops delivered under marketing contracts are recorded using the fixed price of the marketing contract at the time of delivery to a grain or packing facility. Harvested crops delivered without a marketing contract are recorded using the market price at the date the harvested crop is delivered to the grain or packing facility and title has transferred.