Flexible Lease Agreements Offer Alternatives

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  • Flexible cash rental lease is potentially fairer to both the landlord and the farm operator
  • Best way to establish base rental rate is to have a rental rate per acre that is agreeable to both landlord and farm operator
  • Flexible lease agreements, as well as all land rental contracts, should be finalized with a written agreement

The base yield for a crop can be determined by either using the proven yield (APH) for Federal Crop Insurance, which is updated annually, or some other acceptable method of yield determination. Actual yield calculation on the farm can be determined by warehouse receipts, settlement sheets, scale tickets, bin measurements, grain cart weigh wagons, yield monitors or any other method that is acceptable to both the landlord and farm operator.

In many cases, the base price for a crop is the new-crop price at the local grain elevator for that crop on a specified date (say, April 1 for corn and soybeans), and the final price is the price for that crop at the same local elevator on a specified date in the fall (for example, Oct. 15). In some cases a weekly or monthly average price at the local grain elevator from planting to harvest is used to determine the final price. Another alternative that is easy to follow is to use the Revenue Assurance (RA) crop insurance base price for a crop as the base price for the flexible lease, and the RA harvest price as the final price, which are based on Chicago Board of Trade (CBOT) futures prices. Whatever method is used to determine both the base and final prices should be consistent, using either local cash prices or RA prices from the CBOT. The details for determining prices and yields should be spelled out in a written land rental agreement that is signed by all parties.

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