Dear
Jeff,
I recently purchased 80 acres in Indiana. About 30 acres
are tillable. A local farmer asked about the hay, and I agreed
to let him have it if he wanted to cut and bale it. He approached
me the next year asking if I wanted to make some money on
the farm and suggested planting a winter wheat crop and baling
the straw. After that a new hay crop would be planted. I told
him that I was indeed interested. Unfortunately, I have found
out from the other neighbors that he took it upon himself
to plant soybeans and has now planted all 30 acres in winter
wheat. This was done without my knowledge or consent, and
without any lease agreement. I am now looking for a reasonable
solution.
I know that he has invested in lime, seed, probably weed
killer and fertilizer. I really think he thought he could
slip one by me. All of the other farmers I have talked to
said that I should get a long-term (4 or 5 years) lease from
him. They also said that he could expect to square bale 100
bales of hay per acre twice a year.
My questions:
- Is that a correct (or reasonable) estimate for the hay
yield?
- Would it be reasonable to allow him any and all profits
from the wheat and straw in 2007, provided he plants a hay
crop?
- Would it be reasonable to request $50 per acre for the
next 4 years as a lease on that hay crop?
I don't want to be unreasonable, but I don't want to be taken
advantage of either. The other farmers have said that my proposal
is more than fair. I know this is not your typical farming
question, but I really could use some direction in this.
Thanks in advance.
Mark Wiggershaus
Ohio
Dear Mark,
You're right, this isn't the typical farming question, but
that doesn't make it any less relevant. Landowners like yourself
all over the country struggle with similar issues dealing
with land rental agreements (or, as in your case, lack of
a formal agreement). Land rental agreements between neighbors
run the gamut of complexity and formality of terms. They can
be a handshake deal over the fence row, or a legal lease agreement
signed in an office with an attorney present. The point is,
there is no right or wrong way to conduct this type of business,
provided all parties involved feel comfortable with the terms
and happy with the outcome. As in your case, the lack of a
formal written agreement can lead to misunderstandings, or
even blatant disregard for the other party.
I always suggest the use of a written agreement signed by
all the parties involved with each retaining a copy. This
generally helps avoid any misunderstanding. This could be
a simple typed or handwritten one-page letter with a place
to sign and date, stating what should happen with the land,
who is responsible for what (crop selection, input costs,
etc.), how and when payment is made, and the length of time
of the agreement.
When it comes to payment there are as many terms as you can
imagine, from “farm it as you want; I'm glad someone
is” to cash payment on a per-acre basis, to splitting
the crop. All have their good and bad points. If you have
no use for a percentage of the crop and do not wish to get
involved in crop sales, I suggest cash payment.
In regard to your question on yield of straw, hay and wheat—weather
and farming practices will dictate what they will be. As for
bale count on hay, it all depends on the type and size of
the bale. If you link your payments to crop yield, I suggest
you base it on tonnage or weight, not on bale counts.
In most cases, if you are not directly involved with the
land, I suggest strictly cash rent. I suggest you research
similar rents paid in your area for land of equal quality.
If that is $50 as you propose in your question, then go with
that. If it is more or less, make the appropriate adjustment.
Again, all parties should come away feeling positive about
the outcome.
Now for the length of the lease: Here again, it is all about
comfort levels. Some farmers want to get a multi-year lease
to enable them to establish cover crops and take advantage
of soil improvements and/or the addition of slow-release soil
additives. Oftentimes, the landowner benefits from a multi-year
lease knowing that they have a reliable income from the land
and that the soil is being better managed. If a farmer only
has a year-to-year lease, they may assume a "take"
attitude toward the soil since they may be in or out at any
given time.
In any regard, work with your farmer to find a positive
solution to your rental agreement, do your homework to find
a farmer who has similar interest for the land as you do and
is willing to work with your time frame, and come up with
a crop rotation and management strategy that you can all agree
with.
Good luck,
Jeff |
