Figuring How much Land Rent to Offer

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Figuring How much Land Rent to Offer

Sep 17, 2015 | 09:47 1 In our area (SW Alberta) most have gone away from the old 1/3 crop share agreement to a cash rent because of rising input costs, etc.
If 33.3% is too high, then what percentage of gross returns do you base a fair land rent price on?
Also, who owns the straw with most contracts?
Other considerations? Reply With Quote
Sep 17, 2015 | 10:56 2 33% is insanity.

20% would be my top end. Reply With Quote
Sep 17, 2015 | 11:17 3 33%?! No wonder you grain farmers don't make squat. You give the profit to someone else! Reply With Quote
Sep 17, 2015 | 11:17 4 33%?! No wonder you grain farmers don't make squat. You give the profit to someone else! Reply With Quote
Sep 17, 2015 | 11:26 5 33% must be with paying some inputs also? Reply With Quote
Sep 17, 2015 | 12:01 6 Not much shares here unless family as many arguments over how much grain there was or not moved in time etc etc. But it used to be 25% or if 33% then 33% of input costs also. Reply With Quote
Sep 17, 2015 | 12:04 7 We did 33% with one landlord this year. He paid 33% of all inputs except fuel. We felt we did well. Landlord did very well. Crop was canola and yield was extremely good. Reply With Quote
farmaholic's Avatar Sep 17, 2015 | 12:08 8 There is a 20-25% crop share with a "minimum" cash value rent. Kinda different. If you bomb you still owe a cash rent. Not sure on values though. Reply With Quote
Sep 17, 2015 | 12:30 9 The more you give away on the crop share the less income tax you pay

You don't get a donation receipt though... Reply With Quote
fjlip's Avatar Sep 17, 2015 | 13:43 10 Crop share is a storage hauling selling nightmare, I was told by one who has 5 such landlords. Reply With Quote
blackpowder's Avatar Sep 17, 2015 | 13:47 11 Could be different from area to area. Used to be 33% at one time here with owner paying 1/3 of seed fert chem and ci. Most went cash here. Some are going back to a % of gross, no expenses. Most are at %25.
@ the time, on the land I had under these arrangements, I compared the two scenarios, %25 vs %33.3. They worked out very close to the same.
Having said that, the % of gross is enough hassle without keeping inputs seperate. Dont forget your %1 aginvest loss if u sell in his name.
My preference would be %20 of gross. Especially as most landowners have no bins. Of course depending on cash rates in your area!! This is with cash in our area of $80 - $115 / ac.
Any higher % takes too much in the great years, and still gives them a decent minimum in poor years. They have no ins.
All of this is moot of course as, with the price of gas, you pay the market or walk. And your competitors may have a lower fixed cost than you so can pay more.
Remember the beneficiaries who get the land will require a %5 roi including appreciation. Good luck! Reply With Quote
blackpowder's Avatar Sep 17, 2015 | 13:48 12 Could be different from area to area. Used to be 33% at one time here with owner paying 1/3 of seed fert chem and ci. Most went cash here. Some are going back to a % of gross, no expenses. Most are at %25.
@ the time, on the land I had under these arrangements, I compared the two scenarios, %25 vs %33.3. They worked out very close to the same.
Having said that, the % of gross is enough hassle without keeping inputs seperate. Dont forget your %1 aginvest loss if u sell in his name.
My preference would be %20 of gross. Especially as most landowners have no bins. Of course depending on cash rates in your area!! This is with cash in our area of $80 - $115 / ac.
Any higher % takes too much in the great years, and still gives them a decent minimum in poor years. They have no ins.
All of this is moot of course as, with the price of gas, you pay the market or walk. And your competitors may have a lower fixed cost than you so can pay more.
Remember the beneficiaries who get the land will require a %5 roi including appreciation. Good luck! Reply With Quote
blackpowder's Avatar Sep 17, 2015 | 13:49 13 Oops. This seems to be the only site i have this problem with. Reply With Quote
Sep 17, 2015 | 20:47 14 I think it's all cash here these days. I ended my last crop share a dozen years ago. Grew 30 bu green peas got 9.50 / bu, anyway LL got $100/ acre me got $200/acre. Only trouble was all in I spent North of $200. Next spring LL suggested I seed whole farm to those green peas. Reply With Quote
Sep 17, 2015 | 20:59 15 A third crop share is from a few years back. Gave it up, couldn't afford it. Had to have a starting point for discussion. Wanted to know other operations views or ways of figuring a "pain"(paying) threshold Reply With Quote
Sep 18, 2015 | 07:19 16 I once spoke to a lady in Alberta whose renter gave her the first 8 bushels of whatever crop was grown. Reply With Quote
farmaholic's Avatar Sep 18, 2015 | 07:27 17 TRUST!!! Crop sharing requires the Landlord to trust their tenant. I agree with Fj though. Although I don't rent any land I wouldn't want that sort of arrangement, too much of a pain in the ass.

Pay them cash, no questions asked. Easy.

p.s. if you can find the down payment then make the payments for the same or a bit more than the price of the rent, offer to buy it. Reply With Quote
Sep 18, 2015 | 13:32 18 Useful video: https://www.fcc-fac.ca/en/ag-knowledge/production/farmland-buy-or-rent-with-merle-good.html

18-22% of last 3 years Gross Revenue Reply With Quote