FARM MANAGEMENT | CASH RENT
Understanding Your Leasing Options
CASH RENT
A cash rent lease might be the best option for your farm.
A cash rent lease is a good fit for landowners seeking very little risk. Under a cash rent lease arrangement, the operator pays a fixed amount of rent and is entitled to farm the land. The landowner does not contribute to the crop production. Typically all of the rent is due March 1st prior to the growing season. When selecting an operator it is important to review the financial stability, method of farming, and evaluate a few of the farms he is currently operating. The lease should be analyzed every year and adjusted according to market conditions.
A Flexible Cash Rent Lease can be utilized to share risk and achieve a higher return in years of higher prices and favorable yields.
Flexible cash rent leases have become more common due to the volatility in commodity prices. There are several different types of flexible leases. The lease can be based on crop prices, yields, or a fixed percentage of income.
Typically a “Base Rent” is paid March 1st. Depending on lease provisions, a bonus rent may be triggered in years of favorable crop prices and yields. The balance or “bonus rent” is typically paid in the fall. Base rents are usually set below what the farm would cash rent for under a fixed cash rent lease. However, the bonus rent can be substantial if conditions are favorable. Flexible cash rent leases carry slightly more risk than a fixed cash rent lease.
CROP-SHARE LEASES
A crop share lease might be your best option for farmland planning in 2024.
The 50/50 crop share lease is one of the oldest leases in agriculture. All income and expenses are split 50/50. The landowner provides the land and the farm operator provides his labor and machinery. Due to the large increase in land values, this lease has become outdated and less common. It still works in certain situations and landowners have since altered the lease to increase returns. Some landowners have made tenants pay a fixed rent in addition to the lease or had the farm tenant pay additional input costs.
Under a Custom Share Lease, the landowner provides all of the land and inputs and receives 75%-80% of the crop. The farm tenant provides the equipment and labor and receives 20%-25% of the crop in return for their contribution. The lease typically has higher returns than the normal 50/50 crop share lease.
CUSTOM AGREEMENT
Create a custom lease agreement for 2024 with Summit Agricultural Group.
A custom agreement carries the most risk of other alternatives, but typically lends the highest return on average.
Under a custom agreement the landowner pays all inputs and expenses. The landowner receives 100% of the crop in the fall. Typically a local farmer is hired to plant, till, spray, and harvest the crops. The farmer is paid for his labor and machinery according to University custom farming rates which are published annually.
We can help you negotiate and implement a lease that meets your goals as a landowner.
At Summit Ag Management, we have the expertise to provide you the best lease options for your farm.
Plan your Successful 2024 Leasing Agreement
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