Transcript AgLease101 Farm Leasing Educational Site

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
 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.
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
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
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
Other Options to Determine Fixed
Cash Rent
 Bid
 Auction
 Professional farm manager
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
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
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
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
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
Questions?