Air December 10, 2003

Thank you Gary, and good morning everyone. Officially winter may still be a few days off, but the weather is acting more and more like winter every day!

Given four years of drought and extreme variability in crop yields, it should come as no surprise that I've been receiving more and more questions from landowners regarding moving from the traditional share lease agreements and moving towards a cash lease for farm ground. The challenge is that these conversations usually start with the simple question, "What is farm ground cash renting for?" Unfortunately, I can't give you a stock answer like I do with pasture rental rates. The State Ag Statistics division does a great job of surveying bluestem pasture owners and renters and coming up with some good solid rental data. This isn't the case with cash rent of farm ground. The reporting district is much larger and the sample size is much smaller. So we end up with data that isn't very reliable. Cash rent leases aren't perfect and aren't for everyone just as a crop shares lease isn't perfect or meant for everyone. The landlord and tenant need to sit down and determine what they want. Communication is the key for everyone involved, and you need to start those discussions now, not next February or March or April. What is an equitable cash rent? It depends on the field or farm in question. The landlord has certain expenses that they need to cover. These expenses and opportunity costs establish the landlords floor. The tenant has to be able to pay for all the crop production expenses. This establishes the ceiling, or maximum that the tenant can afford to pay. And somewhere in between the two is the equitable cash rental rate. There are computer spreadsheets available that will help you analyze potential cash rental rates (or even crop shares rental rates for that matter). I can help you work through these or you can plug along on your own with them. They are excellent tools. But for a starting point, take the five year average yield of crops for your farm. Take 1/3 of that times the current market price (or a one or two year average market price) then multiply that all together. If you get something way under $30 per acre or way over $70 per acre then I think we need to talk. But the key in any lease, is communication. Start talking soon and don't ever stop.

This is Chuck Otte, Geary County Extension Agent, with Ag Outlook 2003.

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