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. �"
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