Finding Land to Farm: Crop Share

Today's blog is the second in a series on ways for beginning farmers to access land.

Crop Share

In this model, rent payment consists of part of the crop, most often paid as part of the income from total crop sold. Also known as “share-crop” and “share lease,” this was historically disadvantageous to tenant farmers, but can work well for beginning farmers without start-up capital. Crop share arrangements are common in perennial crops and some commodities, for example fruit and nut operations, hay, field crops, processing tomatoes. Agreements may have maximum and minimum limits to protect the farmer and landowner, respectively.
 
Crop Share Lease
 
◊ Rent payment consists of part of the crop, most often paid as part of the income from total crop sold but can also be calculated as a portion of net income after expenses, payment is usually not required until the crop(s) comes in.

◊ Risks is shared between parties.

◊ This kind of lease is historically disadvantageous to tenant farmers, but may be a good option for beginning farmers without start-up capital.

◊ It can be hard to budget for an exact rent amount.  Neither party knows what a farm will yeild, so payment amounts are uncertain.  Owners don't want the rent to be too low.  Tenants don't want it to be too high.

◊ If the tenant farmer does very will, the crop share rent may exceed local cash-lease rates.  You may wish to include a "maximum paymenet clause," which would protect the tenant against paying too much for rent.

◊ Conversely, a "minimum payment clause" would protect the landowner from receiving too little payment (for example, in case of crop failure by tenant), but should reflect the "shared risk" between the landlord and tenant.

Tomorrow we'll take a look at long-term lease.