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Ag Lease 101: A New Approach to Farm Lease Education

Ag Lease 101: A New Approach to Farm Lease Education. 2013 Extension Risk Management Education National Conference April 3-4, 2013. North Central Farm Management Extension Committee. Farm lease publications developed in the 1950s as regional bulletins Cash leases Crop-share leases

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Ag Lease 101: A New Approach to Farm Lease Education

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  1. Ag Lease 101:A New Approach to Farm Lease Education 2013 Extension Risk Management Education National Conference April 3-4, 2013
  2. North Central Farm Management Extension Committee Farm lease publications developed in the 1950s as regional bulletins Cash leases Crop-share leases Irrigation leases Pasture leases Blank lease forms included Distributed by North Central states and the Midwest Plan Service Revised in the 1990s, again in 2012.
  3. Latest Revisions Done and posted Fixed and Flexible Cash leases, Crop share leases Pasture leases In process Farm building leases Breeding livestock leases Machinery and equipment leases Proposed How to be a good tenant How to evaluate tenants
  4. All publications… Are focused on developing equitable lease agreements Discuss advantages and disadvantages of the lease type to landowner and tenant Include examples for calculating rent under different methods Describe methods for valuing contributions of parties Emphasize need for communication Have been reviewed by ag lawyers
  5. Fixed Cash Rent Methods Cash rent market approach Landowner’s cost or desired return Landowner’s adjusted net-share rent Operator’s net return to land Percent of land value Percent of gross revenue Dollars per bushel of production Fixed bushel rent
  6. Other Options to Determine Fixed Cash Rent Bid Auction Professional farm manager
  7. Putting Flexibility in Cash Rent Agreements Crop-share leases were the original flexible rents The scale of today’s operation makes share rents impractical Cash rents may be adjusted by market prices, crop yields, production costs, or a combination
  8. Establishing a Crop-Share Arrangement Share yield-increasing variable expenses in the same percentage as the crop Adjust arrangement as technology changes relative costs Share total returns in the same proportion as parties contribute resources At the end of the lease, compensate operators for portion of long-term investments made that are not fully depreciated
  9. Pasture Rental Arrangements Possible ways to delineate stocking rate By the head By animal units By pounds Important to agree on the number, size, type of animals and grazing period duration Establishing land owner and livestock owner contributions Cash, share of gain, price risk adjustment
  10. Great resources for a variety of programs… Women in ag conferences Stand-alone farm lease meetings Annie’s Project series Farm real estate conferences Webinars Client requests
  11. The Next Step….. Additional publications and lease forms More FAQs Links to other farm leasing materials Additional regional webinars for educators Sample flexible leases Survey of farm building rental rates
  12. Questions?
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