Custom farming is closely associated with leasing farmland, but it is not a lease agreement. The landowner retains the right of use and possession of the property, and hires a farmer as a contractor to operate the farm. The level of operation depends on the agreement between the parties. Some landowners may hire a custom farmer to do specialized tasks while the landowner or a farm tenant continues to do the majority of the farming. In other situations a custom farmer may complete nearly every aspect of the farm operation.
This option can have significant financial benefits as well as improving sustainability.
- The landowner has complete control over all land use decisions.
- The landowner decides what inputs are used and how and when they are applied.
- The landowner receives all of the income from sales.
- The landowner is considered materially participating in farm operations for tax purposes.
- The landowner can receive all of the eligible farm program payments.
- The farm operator does not have an incentive to maximize production to the detriment of stewardship.
However, custom farming can have disadvantages, depending on the landowner’s circumstances.
- The landowner has complete control over all land use decisions, which means time for operational management.
- The risk of the operation is completely on the landowner.
- Iowa State University Extension provides estimates of custom rates.
- Changes in the costs of fuel and labor should be considered when determining rates.