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HomeMy WebLinkAboutThe Lucknow Sentinel, 1987-03-18, Page 42Paso 2A Land rental strategies for 1987 crop production by Art Lawson, Farm Business Advisor London OMAF Close to a third of the crop land in On- tario is farmed on a rental or share basis. The cost of renting land may be much lower than the cost of owning the land, but these days it is still hard to generate pro- fits from crop production even at modest rental rates. Prices of many field crops are at very low levels. Stabilization will apply to the pricing of many crops. Analysis of some farm records shows that demands for operating costs, fixed costs and the operator's living will require 95 to 100 bushels of corn (at stabilized price) per acre. At that level of yield, there is still no money left for land rental, depreciation of equipment or reduction of debt principal. My calculations are based on averages. Each producer will have a different situa- tion and different requirements. You'll need to push a pencil to work out your financial needs. The point I'd like to make is that many producers can't afford to pay any rent. Every dollar in rent they pay will be either a dollar out of their savings or another dollar in debt. It's a tough situation but that's the way it is. I know of a few people who were able to get land for free last year, but most pro- ducers are not facing that prospect. Most —landlords are depending upon some rent as part of their retirement income or to cover some of the ownership costs of their land. What do you do if you can't afford to pay rent and your landlord can't afford to give away the use of his land? Know the Land You Rent , You may have some alternatives in the crops you grow. The land you havemay be relatively better suited to some crops than others. If your land is relatively better suited to beans than corn, you may be best off to shift your crop acreage that way. This is a short term solution - sooner or - later you'll need to rotate to other crop alternatives. Your cropping experience should be your guide. Don't throw in big acreages of something you've never tried before. You may have areas that are best not cropped at all. You need about 70 bushels per acre just to pay for cash inputs, fuel and repairs. There may be areas that should just be retired either temporarily or permanently. Know Your Landlord You need to be open and honest with your landlord. You need some mutual ap- preciation of needs and wants. There may be some non-cahs things you can do to either supplement or replace ren- tal payments. There may be services such as snow blowing, yard and building maintenance, firewood and so on that you can provide. These things have value to the landlord, but may be more economical than a cash outlay on the part of the tenant. Payment terms may also be negotiable. Can part of the rental payments be timed to wait until stabilization is received? Stablization may be a major part of your crop returns. Try to anticipate the cash flow to minimize credit needs. Similarly, you might agree on a low basic rental rate but provide for bonus payments depending upon yields or prices above some pre -determined levels. For ex- ample, basic rent might be $25 per acre, plus $1.00 per bushel for every bushel of corn yield over 120 bushels. If there are windfalls, you should plan to share some of the benefits with the landlord if he'll give you a break on rental rates. The key is mutual trust. Document your agreement. Keep in touch through the season. Do your best to follow the prepared agreement. Share Rental Agreements There has been a steady growth in the CROP INPUTS Come to SPRUCEDALE AGROMART Branches at Hanover & Tara FERTIL ILZE Ralf If • Dry Fertilizer Bags or Bulk Standard Grades or Custom Mixed to your Specifications • Liquid 28% Nitrogen •Anhydrous Ammonia •Custom Application, 440 Spreader Trucks and Three Wheel Full Flotation Terra Gator Airflow Spreading and Seeding , ,DES *Full line of Herbicides ora your crop needs •Custom Spraying • Buik Herbicides - for additional savings and convenience Sprayer Trucks — SEEDS— •Cereals - bags or mini bulk - bags or bulk •Soybeans • Forages - custom mixed on the spot to your specifications • Corn -Northrup King & Jacques •Canola WE ARE NOW A DEALER FOR PATZ EQUIPMENT •stable cleaners •silo unloaders '*feeding equipment •etc. COME IN AND SET UP YOUR CROP INPUTS FOR '87 TODAY number of share agreements in recent years. There can be some real advantages to both the landlord and tenant in using share arrangements . Share crop income can qualify as farm- ing income for the landlord. Cash rental does not qualify the landlord as a farmer. Crop received as share income can be covered with both. crop insurance and stabilization. A properly documented and registered share agreement may provide the landlord with greater security in the event of the financial failure of the tenant. The tenant benefits in reduced cost of in- puts and the sharing of risk with the landlord. The closer involvement of the landlord is an advantge in keeping him tuned in to the realities of both the produc- tion and marketing of the crop. There is mutual benefit in improved crop and soil management. A good basis for calculating shares can provide the foundation of a longer term rental agreement. The coming crop year looks like a lean one. Here are some real challenges to both landlords and tenants. With a little cooperation and mutual understanding, you can both make it through to better times. Who is that executive in overalls What is a farmer? Farmers are found in fields - plowing up, seeding down, rotating from, planting to, fertilizing with, splraying for and harvesting if. Wives help them, little boys follow them, city relatives visit them, salesmen detain them, meals wait for them, weather, can delay them, but nothing can stop them. A farmer is a paradox. He is an overalled executive with his office in his home. He is a scientist who uses fertilizer attachments, a purchasing agent in an old straw hat, a per- sonnel director with grease under his finger- nails, a dietician with -a passion for fresh fruits and vegetables, a production expert faced with a surplus, and a manager battl- ing a price -cost squeeze. He manages more capital than most -of the businessmen in town. He likes sunshine, good food, county fairs, dinner at noon, auctions, his neighbors, his shirt collar unbuttoned and above all, an above average annual rainfall. He is not much for droughts, ditches, freeways, weeds, the eight-hour day, dusty roads, development, insects, disease, freez- ing weather or helping around the house. Nobody else gets so much satisfaction out of, modern plumbing, good weather, automatic furnaces, electric blankets and homemade ice cream. Nobody else has in his pockets at one time a three -bladed knife, a chequebook, a billfold, a pair of pliers and a combination memo book and general farm guide. A farmer is both Faith and Fatalist. He must have faith to meet the challenges of his capacities amid the ever-present possibility that an 'act of Ood (a late spring, an early frost, flood, drought) can bring his business to a sudden halt. You can reduce his acreage, but you can't diminish his optimism. Might as well put up with him. He is your friend, your competitor, your customer, your source of food and fiber. He is your countryman - a demim-dressed, business - wise statesman of stature. And when he comes in at noon having spent the energy of his hopes and dreams, he can be recharged anew with the magic words - "The market's up. �" 1 0 t d p a T SI 0 th fo"