Custom farm / crop share question

[farawayguy]

Question for any of you who have experience with either custom farming or an 80/20 crop share lease. I've gotten to the point of talking to one of my current tenant (577 acres) about trying an 80/20 lease, where I pay the input costs and the farmer gets 20% of the revenue. Just wondering how to take into account the work that 3rd parties do, like ag coops and such. Seems like more of the work is done this way than way back when I was involved and I'm not sure how to account for it in the grey area where it could be done either by the custom farmer or a local coop. How have others dealt with this? Seems like we need to work out some details where there's incentive for the farmer to do some of the work that might be in question. 

[jrjfarms]

My take on it is spraying is asorbed by custom operator. If you have firtilizer applied or spraying for  aphads or what ever that takes

special equipment, such as firtilizer spreader, high boy, or air plane then it you should be on you. 

Never was involved in a 80/20 lease but I did a 2/3-1/3 where I paid everything but taxes and I took 2/3,

[rswfarms]

I run a 80/20 Crop Share Lease on just a 1/4 section of my land and it really shouldn't be a gray area. As an example I am assuming you have at least 200 Bushel/acre corn dirt/top soil as we do in Iowa. So on a 80/20 split and a 200bu yield, your tennet is getting 40 bushels of corn per acre as payment. Next you can plug in an average corn price of say $5 for the entire 2013 Marketing year, that is a gross payment of $200/acre for his Equipment and Labor. Thake into account that the high-end Custom Farming Lease pays the Custom Operator $150/acre.and that $150/acre fee you pay him DOES INCLUDE a section for spraying. meaning in most Custom arrangements, spraying is part of the Custom Operators job. If your Custom Guy feels different. you then could look at doing say a 83/17 split where you recieve 83% of the corn crop. That is 6 bushels of corn more than a 80/20 split and 6 bushel more is an increase of $30/acre at $5 corn. But to sum up here you have several ways of getting the spraying cost covered I hope this helps but to be honest with you in terms of the many. many, types of farm leases out there, it is really like the WILD WEST out there with no 100% actual rules regarding your question.

[farawayguy]

With regards to having the custom operator cover everything, how far do you carry that? Do your custom and crop share operators pay for crop dusting - minus the cost of the sprays? I do understand that it's all negotiable, but I want to go into this having thought through things. The current tenant and I haven't had a detailed discussion yet - just the very basics of a 80/20 crop share. 

Yes, I think it's land that yields 200bu corn, except for some reason these two particular farms have had a three year stretch of low rainfall. Just bad luck, so far as I know. 

[farmerguy89]

Faraway look at the Ida thread. This guy has once again dodged a meetup. You should tread extremely carefully.

[rswfarms]

Did you say Xrop Dusting as tu an airplane??? I have never used a plane in my 25+ years of Custom Farming. Boy, that's a new one for me!!!!!!!! I just know on a normal 80/20 split that the Custom guy pays for a high-boy if needed for spraying. I would think that there  would be aloi mote guys on here that Custom there land, but with  2 respmesm thar usn't the case.

[Taylor ECIL]

Haven't you ever sprayed fungicide or insecticide on tasseled corn? Back before BT corn Spraying for ECB was a preety common occurance....at least here in central Illinois. What about spider mites? Sure you can ground spray them, but you run over quite a bit of beans and it pays to use a plane if you are doing a big field.

Faraway guy all of your expectations need to be hammered out betwen what you expect of your tenent. What tillage practices you expect to what is expected of him for things like mowing ditches and binsites. A friend of mine custom farms for a guy and all he does is no-till plant and harvest. The landowner pays for everything else.

[farawayguy]

Like I've said, I've been away for years, but I remember in the '70's my father having crop dusters come in, and he was no progressive. And when I was last back in the summer, they were some crop dusting fields around there. When I asked about it, I think someone did say it was for spider mites and it sounded like a routine thing. Seriously, they don't crop dust in Iowa?

I was assuming I'd be paying for that kind of thing. But I've notice that the local coops seem to do a lot more of the routine work now, such as putting on anhydrous. I don't know how expensive the labor part of that is, but clearly there has to be some disincentive for the farm operator to turn to the coops for this, if it's at my expense. 

To me it seems like no-till would be perfect for the custom farm thing. But I grew up in an era when we tilled the soil until it was powder if we could, so it's a foreign concept to me. And I wouldn't ask a custom (or crop share) farmer to farm a different way than he knows.

[Taylor ECIL]

Yeah, a lot of the crop services around here offer custom nitrogen application, from anhydrous ammonia in fall and spring, (I think for $2 per acre (been awhile since I heard)) to weed and feed in spring (which I have them do for me). I was just saying that you can pay the farmer as much or as little field work/ spraying that you want. Then use the coop to do the rest. Your current tenant may prefer to do it his way, because he is not set up for another, you can always work with him though if you want, or find one who will work with you if he doesn't want to work with you. The options of the contract are ...well really endless, just make sure they are spelled out so that both parties know what is expected of tenant. Things like road mowing and waterway mowing(if you have those) to finding and fixing tile holes and everything in between. I am just saying there are a lot of things I do for my landlords because I am getting income off the land (it is a pride thing) that I might not do if I was getting paid to just plant and harvest.

http://web.extension.illinois.edu/lmw/cat82_497.html

Here is a web site from U of I that shows rates for each operation.

[itsmetoo92774]

Wow, I'm not worth $Million, I only farm one little southern Iowa branch, not a north central and eastern branch to my farm operation.  I have to spend all day taking care of cattle and doing tractor monkey work and very little time on management.  But dumb ole me still has enough time that I find that every year for the last several years there have been benefits for using a plane.  Sometimes it has been applying fungicide to increase yields and "ROI".  Others it has been to control aphids in soybeans or other yield robbing critters.  I have used a plane a couple times to fly on nitrogen at tasseling time after wet early summers when we had lost nitrogen.  This summer I even flew on rye and radishes into standing corn to get some extra grazing and improve the soil during the crop "offseason."  Maybe some guys should spend more time learning about products on the market today and scouting his fields for critters then counting their money and telling everyone about it. 

I do custom work for 3 other people which includes planting and combining.  They typically do any tillage and hauling of grain themselves.  I just get paid $X per acre planting or combining or whatever other work I may do for them.  If your guy does any spraying, you would just need to add that into what they get paid or percent of the crop they get.  If you have a local ag supplier do it, then you would need to reduce it. 

One thing to consider is what other things will your custom guy do for you?  I take it you don't live in the area of your land so will he be keeping a eye on things and scouting.  Calling you or ag supplier about weeds breaks that need attention or critters that need sprayed.  Will they have to go pick up seed from the dealer and haul it to the field?  Its worth something to do that.  One thing I do for 2 of my guys is select their seed for them.  That way I know what maturities they have and have a plan of attack that fits my own crops for harvest and planting time.  If I wasn't involved in seed selection then my crops and their crops might all be ready to harvest the same day which I can't do all the same day.  So we can spread out maturities that fit with what I can harvest timely but the time I invest in seed selection is worth something to them. 

I can't give you the right answer about crop dusting because there may different factors as to why its being done.  I have never custom farmed on a share but I have rented some land in the past 2/3-1/3 where I paid the expenses and got 2/3 and the land owner got 1/3.  I paid all the normal expenses, seed, fert, herbicide, etc and did the work.  However any "extra" or "non traditional" things like applying fungicide we split the cost by our share of the crop.  It would be hard for me to pay 100% of something to get a few more bushels and only get 2/3s of the bushels.  Most years if I paid all of it, I might breakeven with the extra money I spent and the landlord would have made got a few more "free bushels." 

I'm not sure what the right way to handle late season weeds breaks or insect issues that cause increased trips with a sprayer.  Most years this isn't an issues, but some years they are and adds expense that some one has to eat.  If you don't do anything, you will both still get a crop, but it will most likely be reduced from what it could have been.  So that may need to be something that is split by crop share as well to be fair to both parties.  However, if the tenant does the spraying or is doing the scouting to find the problem, then maybe they have done their part to earn their share of the crop without paying anything out of pocket to fix the problem. 

Lots of little things to think about and figure out how to handle.  That's why the ole 50/50 and cash rent have been so common, because they are for the most part simple and every one knows what they are responsible for.

Good luck.