Category Archives: Cash Rent/Lease

Ag and Flex Lease Workshop

Cash lease questions are continually one of the top questions I answer in the office.  We’d encourage landlords, tenants, and spouses to attend this or a workshop near you to hear the most updated information for the coming year!

agleaseworkshop

Keeping Your Farm in the Family for the Next Generation

I would encourage any farmers, spouses, and adult children to consider attending this Farmers and Ranchers Program! Communication and fair transition plans are keys to keeping family ties and the family farm strong. I’ve watched too often where communication doesn’t occur-even most recently with my extended family-and the heartache caused as a result. Work on the communication and transition plan now before it’s too late!

Views from VanDeWalle

The final Farmers & Ranchers College program for the 2012-13 programming year will be held on March 14, 2013 starting at 6:00 p.m. with a meal and the program to follow. It will be held at Evening with Friends Restaurant in Milligan and will feature Dr. Ron Hanson, Neal E. Harlan Professor of Agribusiness, Ag Economics Dept., UNL. A description of Hanson’s program is provided below.Logo

The entire process for mapping out a succession plan to transfer the eventual ownership of a family farm from one generation (parents) to the next generation (their adult children) can be an overwhelming task for many families.  Where does this process even begin?  Who makes the final decisions?  Can you be fair to everyone involved?  What if there is not good communications within the family?  How do you keep emotions and personal jealousies from taking over and preventing good decision making?  These…

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Updated Cash Lease Considerations

Landlord/tenant workshops have occurred throughout the State and I hope you had the opportunity to attend one of them. Survey numbers fromAl Vyhnalek, UNL Extension Educator teaching at the Landlord-tenant lease workshops UNL and USDA (click on 2012 County Level Cash Rents) are available for starting points even though basing lease arrangements off the productivity of the land may be fairer. A 50/50 share lease is still the fairest lease arrangement yet I realize for a number of reasons many landlords are switching to cash rent. I also realize we continue to see situations of very high cash rent numbers. These numbers aren’t the norm and they don’t pencil out when cost of production is factored in.

In this post I wrote about considering cash rent based on the productivity of the land and provided a formula for it. Essentially take a 5 year Olympic average yield for the field.  Multiply by an agreed price such as fall harvest price or whatever both parties agree upon.  Then multiply by 1/3 and it gives you an idea of where to start. The price can be adjusted from there depending on if the tenant provides additional services, etc. Granted this formula isn’t perfect because a high average yield with a very high price can result in the high cash rents we’re hearing.  It’s another formula to consider.

A flexible cash lease is another way to arrive at a cash rent price. These leases can be as simple or complicated as you would like to make them. Flexes can be made for yield alone but we wouldn’t recommend flexing on price alone.  If you consider flexing on price, you should consider a combination with price and yield.

Communication is Key!

For both landlords and tenants: communication is key. I’m always amazed how many landlords tell me they don’t know the yields their tenants are receiving. If you don’t think your tenant will provide that every year by just asking for it, then build it into the written lease.  Landlords, if there are things you want tenants to do like keeping the sprayer boom away from your plum bushes that you like to pick for jam or mow your ditches a certain way, you need to communicate those things to your tenant and/or build those things into the lease as well. Building all these unmentioned things into a written lease also greatly helps family members understand why things are done a certain way when the family member who is the landlord is no longer able to take care of these things.

Landlords: while you hear high crop prices, many of your tenants did not sell $8 corn; most sold at some price along the way.

Tenants: it is important to be fair with your landlords. In good years consider giving them a share of the profit-that’s another reason to consider flexible cash leases because these things can be built in to be fair to the landlord in good years and to the tenant in bad years.

Landlord Tenant Cash Lease Workshops

Cash rent questions are the top question I receive in the office and are difficult to answer directly.  There’s no great formula or survey that can provide a magic number for every situation.  The following post provides some thoughts regarding this.

One thing we do know is that developing farm cash leases that meet the needs of both landlord and tenant while maintaining a positive relationship will be the goal of a UNL Extension workshop series.  The Landlord/Tenant Cash Lease workshops will be held in November and December at sites across the state.  It is helpful if both the tenant and landlord can attend together.

Topics

UNL Extension educators will present on the following topics, providing information and common sense tips for landlords and tenants.

  • Expectations from the lease, including goal setting for the rental property
  • Lease communication, determining appropriate information sharing for both the tenant and landlord
  • Tips for farm leases that include relatives
  • Alternative cash lease arrangements, flexible provision considerations for your situation
  • How the 2012 drought affects leases, irrigation systems, grain bin rental, and other topics related to leases will be discussed as time allows.

These free workshops are sponsored by the Nebraska Soybean Board and the North Central Risk Management Agency. A meal and handouts are included. Participation is limited. To register, contact the local UNL Extension office hosting the workshop.

For more information, contact Allan Vyhnalek, UNL extension educator in Platte County, at 402-563-4901 or avyhnalek@unl.edu.

Dates and Locations

  • Dakota City — Nov. 5, 11 a.m. – 3 p.m., USDA Service Center, 402-987-2140
  • Pender — Nov. 7, 11 a.m. – 3 p.m., Fire Hall, 402-385-6041
  • Wayne — Nov. 7, 5:30 p.m. – 9 p.m., Fire Hall, 402-375-3310
  • Curtis — Nov. 8, Noon – 3:30 p.m., NCTA Ag Industry Education Center, 402-367-4424
  • McCook — Nov. 8, 5:30 – 9 p.m., Fairgrounds, 308-345-3390
  • Imperial — Nov. 9, 11 a.m. – 3 p.m., Fairgrounds, 308-882-4731
  • Fairmont — Nov. 13, 11 a.m. – 3 p.m., Legion Hall, 402-759-3712
  • Fairbury — Nov. 13, 11 a.m. – 3 p.m., 4-H Building/Fairgrounds, 402-729-3487
  • Blue Hill — Nov. 13, 5:30 – 9 p.m., Community Center, 402-746-3417
  • Lexington — Nov. 14, 11 a.m. – 3 p.m., Extension Office, 308-324-5501
  • North Platte — Nov. 14, 5:30 – 9 p.m., West Central Research, 308-532-2683
  • Hastings — Nov. 15, 11 a.m. – 3 p.m., Fairgrounds, 308-461-7209
  • Grand Island — Nov. 15, 5:30 – 9 p.m., Extension Office/College Park, 308-385-5088
  • Humboldt — Nov. 27, 11 a.m. – 3 p.m., Ag Building/Fairgrounds, 402-852-2970
  • Auburn — Nov. 27, 5:30 p.m. – 9 p.m., Nemaha Co. 4-H Building, 402-274-4755
  • Hartington — Nov. 29, 11 a.m. – 3 p.m., City Auditorium, 402-254-6821
  • Nebraska City — Nov. 29, 5:30 – 9 p.m., Kimmel Center, 402-267-2205
  • Blair — Dec. 4, 11 a.m. – 3 p.m., City Office, 402-426-9455
  • Tekamah — Dec. 4, 5:30 – 9 p.m., First National Bank Northeast, Nebraska meeting room, 402-374-2929
  • Burwell — Dec. 5, 11 a.m. – 3 p.m., Legion Club, 308-346-4200
  • Arcadia — Dec. 5, 5:30 – 9 p.m., Legion Club, 308-728-5071
  • Bloomfield — Dec. 6, 11 a.m. – 3 p.m., Community Center, 402-288-5611
  • O’Neill — Dec. 6, 5:30 – 9 p.m., Courthouse Annex, 402-336-2760
  • Elba — Dec. 11, 11 a.m. – 3 p.m., Community Center, 402-745-1518
  • Albion — Dec. 11, 5:30 – 9 p.m., Casey’s Community Building, Fairgrounds, 402-395-2158
  • Neligh —Dec. 12, 11 a.m. – 3 p.m., Legion Hall, 402-887-5414
  • Osceola — Dec. 13, 11 a.m. – 3 p.m., Fairgrounds, 402-747-2321

Cash Rent Questions

Cash rent questions continue to be the primary question I receive and it’s been hard for me to keep sharing numbers based on the UNL or USDA surveys as I question how useful the surveys alone really are.  I caught up with Al Vyhnalek, Extension Educator in Platte Co. during the crop production clinics.  Al’s specialty is risk management.  He shared the following with me which may be helpful to you as well.  This isn’t research-based or based on surveys; it’s based on land productivity and yield potential.  But it’s another potential tool to reach a starting point for cash rent considerations.  The numbers discussed below assume the landlord owns the irrigation equipment.

“Farmers and landowners alike want to know what they should offer or charge for farmland next year.  The question is simple, while the answer is more complicated.  There is no formula or equation available that will definitively provide an objective value for farm or pasture land.  The caller wants to know what the UNL or USDA survey of cash rental rates says to help them determine the correct starting point for discussing cash rent for the following year.  While I am glad to provide that information and do provide that information, I am more uncomfortable than ever in providing that information.  Why am I not feeling good about that?  Because the price of cash rent for a piece of farm ground should be based on the productivity of the ground.  It is important to think about the value being tied to yield potential. 

One quick way to do the calculation of productivity is to take the last 5 year average corn and/ or soybean yields for the farm you are renting times the local elevator price for 2012.  This calculation equals the estimated gross income per acre.  Take that number multiplied by 25-30% for corn or 30-33% for soybeans with the lower percentages for dry land crops and the higher ones for irrigated acres.  It gets you to a starting point for that cash rent negotiation.  Many want to set rent based on the 2011 high price of about $7.00 per bushel, but that price has never been available for the 2012 crop.  Using the 2012 fall elevator price is more realistic of what might happen next year.  Using this information as a starting point and combining it with the information from the surveys will help with fair negotiations of the cash lease.  The example percentages were determined by working through UNL budgets when determining cost/acre.

As an example – 200 bushel irrigated corn times $5 per bushel (2012 harvest price) is $1,000 gross per acre.  30% of 1000 is $300 per acre (corn acres).  Soybeans:  60 bushel beans times $11 per bushel is $660 times 33% is $220 per acre – landlord’s share.  If we have 1/2 acres beans and 1/2 acres corn then average the two rent numbers – or $260 per acre average for the farm.  That is how I think we should arrive at a discussion point for cash rents in the upcoming year based on productivity.”  For more information, please contact Allan Vyhnalek, 402-563-4901 or e-mail AVYHNALEK2@unl.edu.

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