Run cash bonus lease past landowner
The lease for farm ground Howard Doster likes best is a flexible lease. Some risk passes to the landowner, who also reaps reward if things go well. Doster is a former Purdue University Extension ag economist.
Doster may have been ahead of his time. This fall many tenants are at the teachable moment — what alternative do they have to straight cash rent when landowners ask for more?
What makes the request for higher rent hard to swallow is average to awful crops in much of Indiana. Although commodity prices are strong, they are not nearly as good as they were two months ago, and input prices are near record highs.
University of Illinois ag economist Gary Schnikey proposes a minimum base cash rent, with a bonus clause. Suppose the base cash rent is $200 for good land. Add a bonus based on crop revenue above a target amount. If revenue exceeds the target, the landowner gets a percentage both parties previously agreed to.
For examples, visit farmdoc.illinois.edu.
This article published in the November, 2011 edition of INDIANA PRAIRIE FARMER.
All rights reserved. Copyright Farm Progress Cos. 2011.