Conservation practices, or other sustainable techniques, can increase the costs of the farm operation. It should be noted, however, that some practices may actually decrease farm expenses due to less reliance of external inputs. The increased competitive nature of farming can make it difficult for farm operators to take on additional expenses. This makes an offer to share additional expenses particularly attractive. It should also be noted that any reductions in expenses as a result of sustainable practices should also be considered.
You and your tenant are interested in switching to organic production. However, your tenant doesn’t have the time or resources to complete the paperwork and make sure the proper procedures are required for organic certification. You might consider agreeing to take care of the paperwork or legal fees in gaining organic certification.
Unique circumstances might also arise where the sustainable practices you desire require special equipment. In this situation you can agree to pay all or a portion of the cost to hire someone to complete the specialized tasks or to lease the specialized equipment.
An important consideration when developing creative cost-sharing arrangements is to ensure that the rent adequately reflects the contributions by both parties. Iowa State University Extension’s Ag Decision Maker has information on calculating crop-share rent and cash rent.
An example of a provision dividing the costs of the operation is provided below. This example contains typical items used in a farm operation, as well as a few that focus on conservation practices. This list is by no means exhaustive, however, and additional expenses should be considered.
A. The Landlord and Tenant each agree to furnish the items and pay the shares of expenses listed below. Any exceptions or alternatives to the stated shares for any items or categories of items are to be specified in Clause B.
Expense Tenant Landlord Expense Tenant Landlord Equipment: Tractor Fuel Tractor Other Fuel _____________ Weed Control Materials _____________ Insecticides _____________ Feed _____________ Livestock Expenses _____________ Liming Material Labor: Fertilizer Building Maintenance Grain Seed Fence Maintenance Legume & Grass Seed Machine Repairs Telephone Mowing Insurance on Buildings Lime Application Insurance on Crops Fertilizer Application Real Estate Taxes Organic Certification Personal Property Taxes _____________ Electricity _____________ Water Supply Custom Work _______________
B. Additional Expense Agreements:
C. Records of all expenses and yields will be kept by the tenant and shall be available to the landowner upon request.
There are additional considerations, such as taxes and farm program payments, when sharing expenses and decision-making regarding the farm operation.
Click here to go back and look at your options for reducing rent to share the costs.
Click this link to return to “What methods are you willing to use to encourage conservation of on-farm resources?“