Category Archives: Cash Rent/Lease

JenREES 12-29-19

Often the phrase “there’s always next year” is heard when hard times hit individuals. This speaks to the optimism many have! 2019 has been challenging for many, perhaps also cumulative from previous years. There’s no promise of life being easy on this earth; it’s broken as is everything in it. Challenges, adversity provide potential to build something rich and lasting-things like one’s faith, relationships, and character. As we enter this new year, may we seek to live life with purpose, focus on the important things, and dig deep/come alongside others in the midst of difficulty. Wishing everyone a blessed 2020!

Extension Survey: Being funded by tax payer dollars, Extension employees need to justify the work we do in reports. Whether you only interact with me by reading this column or have asked me horticulture or ag related questions, I’m asking for your feedback. Please go to: slido.com, join with code 4EXT and fill out a quick, anonymous, 7 question survey for me! Thank you!

Winter Programs: Those in agriculture in this part of the State should have received (or will soon receive) a mailing from your local Extension Office that shares our winter program brochure, a pesticide letter, and additional program flyers. Following is what’s happening the week of January 6th.

Landlord/Tenant Lease Workshops: These 3-hour workshops will cover: ag finance and the real estate market; current trends in ag finance across Nebraska; negotiation skills for effectively managing land leases; and more. No charge. Jan. 7, 1:30 p.m., Extension Office in Seward (402-643-2981); Jan. 8, 9 a.m., 4-H Building in York (402-362-5508); and Jan. 15, 1 p.m., Fairgrounds in Clay Center (402-762-3644).

York Ag Expo: Come out to the York Ag Expo at the Holthus Convention Center January 9th and 10th! The Expo features a number of vendors and free ag appreciation lunches both days catered by Kerry’s. On January 9th, I’m providing private pesticide applicator training at 9:30 a.m. and on January 10th, chemigation training is provided at 9:00 a.m. You can find more information at: https://yorkchamber.org/event/ag-expo/. RUP Dicamba training is not offered at the Expo. You can complete that at other face to face trainings or online at: https://pested.unl.edu/dicamba after Jan. 1.

Private Pesticide Training: Training dates/locations are available at: go.unl.edu/2020pat. Cost for face to face training is $40. Options for initial license include attending a face to face training or taking the online course (cost $75) at pested.unl.edu. Options for renewal include: attending a face to face training, taking the online course, or attending a Crop Production Clinic (Beatrice Jan. 10, York Jan. 14, cost $80) or the Nebraska Crop Management Conference in Kearney (Jan. 22-23) agronomy.unl.edu/cpc.

Chemigation Training: To apply chemicals/fertilizer through irrigation systems, chemigation certification is needed. View dates/locations for initial and recertification training at: go.unl.edu/2020chemigation. Those recertifying may also complete the training and test online without testing with Extension: https://water.unl.edu/article/agricultural-irrigation/chemigation. Wait till after Jan. 1, 2020.

Annie’s Inspired Workshops: These provide women involved with agriculture an opportunity to network and learn together while having fun! All workshops have a hands-on component and will be held from 6-8 p.m. beginning with a light meal. Cost is $5 per person per session. Join us for Beef 101 at the Polk County Fairgrounds in Osceola, Jan. 6th! Please RSVP: (402) 367-7410 or (402) 362-5508.

Good Farmer, Great Manager is taught by Tina Barrett, Executive Director of Nebraska Farm Business, Inc. The difference between a good farmer and a great manager often comes down to knowing the true financial position of a farm. This class will be held in York from 1-5 p.m. Jan. 23 and Jan. 24, from 8-Noon at the 4-H Bldg at Fairgrounds in York. The course fee is $50 per participant; limited to 25 people. Learn more and register at: https://wia.unl.edu/GFGM. Tina shares more at: https://youtu.be/LaVZRPzG1HM.

JenREES 12-15-19

The past few weeks I’ve had several questions regarding cash rents/leases. My colleague Allan Vyhnalek wrote an article addressing several of these questions, so sharing some of his thoughts. You can read his full article here: https://go.unl.edu/qxt7.

“What should I rent my ground for? (How do I calculate a fair rental rate?): Land rent can be based on several things. Rental rates of the local area, percentage return on investment, survey data showing rental rates, percent of gross income, and many others. The recommendation is to calculate the estimated rental rate based on three or four of these calculations and then decide.

  1. The local rental rate might be obtained from an ag loan officer at your local bank, by ag real estate professionals, or from professional farm managers.
  2. To calculate a percent return on investment, multiply the value of the land by the percent return that you’d like to receive. Be sure to factor in expenses such as land taxes when making this calculation.
  3. Land Value Surveys:
    UNL land value survey: https://agecon.unl.edu/realestate/2019-farm-real-estate-report
    Nebraska Ag Statistics Service (NASS) survey: https://www.nass.usda.gov/Statistics_by_State/Nebraska/Publications/County_Estimates/19NEcashrents.pdf
  4. The percent of gross income is calculated by taking the average yield of the commodity grown multiplied by the expected price for that commodity which equals the gross income per acre. The landlord would typically receive about 30% of the gross income calculation; however, the number will change based on yield and price. The percentage should represent an average across 5 or more years.

The bottom line on rental rate is that it will be what the renter agrees to pay and the landlord agrees to accept. Pricing will also be based on supply and demand of farmland rental ground in the area. There is no right or wrong definitive rental price. The final rent is simply an agreement between parties involved. Typically this constitutes a fair and equitable trade price for the use of the ground.

Is a Crop Share Lease still a valid lease? Yes, it is still a fair lease. It is probably the fairest lease that you can have. In periods of commodity price stability, the cash lease gained popularity because the landlords didn’t like to pay for their part of the expenses and most didn’t care to have to market their share of the crop. A crop share lease indicates your willingness to share the risk of farming. Crop Share leases share the risk between landlord and tenant. Cash leases put all risk of production on the tenant solely.

What is the Most Common Share Lease Used? There is no share lease that is more or less correct or appropriate for one situation or another. The distribution of the share (50/50, 60/40. Etc.) depends largely on the agreement between the land owner and the tenant. In some cases, the agreed to distribution in the lease, is 60% tenant and 40% landowner; in other cases the distribution depends on the final inputs, for example, the tenant would pay all seed and chemical, and landowner paying all land and drying. Your final distribution will depend on your expectations and the agreement with the tenant.”

Farm Real Estate Resources:  https://cropwatch.unl.edu/economics/realestate
Fillable Lease Templates: https://aglease101.org/DocLib/default.aspx
Flexible Cash Lease Calculator: https://farm.unl.edu/cash-rent-flex-calc

Landlord/Tenant Cash Rent Workshops: These three-hour workshops will cover: agricultural finance and the real estate market; current trends in ag finance across Nebraska; negotiation skills for effectively managing land leases; current considerations on lease provisions; and strategic farmland succession and communications. There is no charge and please RSVP to the Extension Office in the county you wish to participate. Closest locations to this area will be: Jan. 7, 1:30 p.m., Extension Office in Seward; Jan. 8, 9 a.m., 4-H Building in York; and Jan. 15, 1 p.m., Fairgrounds in Clay Center.

JenREES 11-10-19

With harvest wrapping up, many of the questions/conversations this week involved economics in some way. So this week’s column will focus on upcoming learning opportunities. But before I get to that, thank you to all our veterans for your service and sacrifices! Thank you also to your families!

Ag Land Management Webinar: On Monday, November 18th at 6:30 p.m., Jim Jansen, an agricultural economist, and Allan Vyhnalek, a farm and ranch succession specialist, will lead their final ‘Agricultural Land Management Quarterly’ webinar of the year. They will provide an overview of the 2019 Cash Rental Rate Survey, conducted by the USDA National Agricultural Statistics Service, and discuss prevented planting considerations for Farm Service Agency programs and crop insurance. The importance of landlord/tenant communication during the winter months and tips for leasing also will be discussed. The free session is open to everyone at https://agecon.unl.edu/landmanagement. The recorded webinar will be archived there, along with past sessions. There will be time for participants to ask questions at the end of the session. Questions also may be submitted in advance at https://agecon.unl.edu/landmanagement.

Dr. Kohl to present at Farmers and Rancher’s College: On December 9th Dr. David Kohl, Professor Emeritus at Virginia Tech and popular for his insights, will be presenting at the Bruning Opera House in Bruning from 1-4 p.m. about “Agriculture Today: It is What it is…What Should We Do About It”. There is no charge for the program due to the Farmers and Rancher’s College sponsors, but please RSVP for meal at: (402) 759-3712 or online at: https://extension.unl.edu/statewide/fillmore/agriculture-0/.

Women Managing Ag Land Conference: Female agriculture landowners, farmers, and ranchers looking to increase their business management skills are encouraged to register for the 2019 Women Managing Agricultural Land conference. The conference will be held Dec. 11 at Nebraska Innovation Campus, 2021 Transformation Drive in Lincoln. Participants will have the opportunity to hear from leading experts in land values, Nebraska property taxes, cash rental rates and cultivating landlord-tenant relationships. Jim Jansen, co-author of the Nebraska Farm Real Estate survey, will discuss trends in Nebraska land values. Mykel Taylor, of Kansas State University, will share resources related to negotiations and communication between landowners and tenants. Cathy Anderson, from the Nebraska USDA Farm Service Agency, will discuss the 2018 Farm Bill and its implications for Nebraska agriculture. The full conference schedule and registration form are available at https://wia.unl.edu/wmal. A registration fee of $45 per person covers materials, meals, and breaks. The conference is hosted by Nebraska Extension and is inspired by Annie’s Project. In Nebraska, Annie’s Project is supported by Farm Credit Services of America. Also, a reminder that all Farm Bill information and upcoming meetings can be found at: http://farmbill.unl.edu.

Cover Crop Day: On November 20, a workshop focusing on cover crops will be held from 9 a.m.-1 p.m. (Reg. 8:30) at the 4-H Building in York. Presentations from NRCS, UNL, and Pheasants Forever will cover using cover crops to address soil compaction and improve soil health; precision conservation opportunities to increase farm profitability while conserving soil, water, and wildlife; and opportunities for cover crop on-farm research and cost share options. A free meal and optional field tour is provided but please RSVP to: http://nebraskapf.com/product/cover-crop-field-day-habitat-tour/
or call the Extension Office at (402) 362-5508.

On-Farm Research Searchable Database: A helpful resource to view studies growers’ peers have conducted with the economics provided can be found at https://resultsfinder.unl.edu. It’s a little picky based on the words one chooses, but has a lot of great info. Also, for anyone interested in conducting studies involving anhydrous with and without inhibitors this fall or spring, I have on-farm research protocols developed, so please let me know.

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…

View original post 348 more words

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.

%d bloggers like this: