Ask the Farmer: Fair land lease agreements

Originally posted on March 15, 2007

Rodale Institute Farm Director Jeff Moyer talks about what is happening in our fields and yours.

Mark asks:

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.

Jeff says:

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.

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