Hay land share rental agreements
Determining a fair rental agreement on hay land is a complicated issue. The complexity is due largely to the variation of two key factors, crop yield and crop value.
The other factor to consider is the cost of making the hay, the value of each field operation necessary to put the crop into a salable form. Although these costs will vary from farm to farm, one common method of determination is to use the average custom rates. Although this may not be a perfect method, the use of a custom operator is one viable option for the landowner if they are unable to perform the various field operations, and are not averse to marketing the crop.
Historically, hay land share rental agreements provide the tenant with 40 percent of the crop, and the remaining 60 percent for the landlord. With this arrangement, the landlord is responsible for the expenses of soil fertility and new crop establishment. If these expenses are shared, the landlord often receives 40 to 50 percent of the crop.
Assuming the use of average custom rates is the most logical method to use; the next consideration is the cost of field operations. Note that cutting and raking are valued per acre while baling and moving are per bale.
The various field operations will affect the cost for each ton of hay produced. The cost per acre increases as the yield increases because the cost of baling and moving are calculated on a per bale basis. More yield, more bales. Yield has little impact on the cost of cutting and raking
The final consideration is the value of the hay. Both value and yield affect the portion of the crop that would need to be sold to cover the cost of custom field operations. For example, if one ton (per cutting) were sold for $100 per ton, 34 percent of your income would be needed to pay for custom field operations.
Using the custom rate approach, the landowner is responsible for all production expenses, including fertilization, lime, wood ash, and the cost of new crop establishment.
The cost of new crop establishment is high and must be considered. Again, using the custom rate approach, the cost of converting an old stand into a new stand would likely run $125 to $150 per acre. This assumes the cost of spraying, plowing, disking, cultivation (3 times) and planting 10-12 pounds per acre of alfalfa and 3-5 pounds per acre of grass. The actual cost will vary with your seed selection.
This does not include the cost -- or value -- of an oat nurse crop, nor does it include the cost of soil amendments such as fertilizer, lime or wood ash.
A fair share agreement is affected by hay yield, hay value and current custom rates. The difficulty is finding the middle ground acceptable to both tenant and landowner when hay yield and value are moving targets that often vary each year.
The most sustainable agreement will be one in which the each party realizes an adequate return to their contribution and is willing to make concessions when these targets move in the wrong direction.
For more information on this topic, contact me at the Polk County Extension office in McIntosh at 800-450-2465, or at the Clearwater County Extension office on Wednesdays at 800-866-3125. If e-mail is your thing, contact me at firstname.lastname@example.org.