How Should Landowners Address Cover Crops in Cash Rent Agreements?

As the long-term steward of your farmland, conservation and sustainability are certainly a priority. Without these measures in place, you could risk damage to the land over the long term.

This is especially true if you’re entering into a cash rent agreement with a tenant farmer. These agreements generally incentivize farmers to make short-term decisions to maximize yield and reduce costs—which typically means they shortchange the long-term health of the land. 

Putting these conservation practices in writing can help you avoid confusion, set expectations, and set the tone for a long-term relationship with your tenant. In this post, let’s focus on one practice in particular: cover crops. 

What are cover crops & why should you use them? 

Cover crops help prevent soil erosion outside of the growing season for the primary crop; they’re an alternative to letting the land lie fallow. These crops can also double as feed for livestock, offering a potential second income stream. 

There are a number of benefits cover crops provide your soil, including rest, nutrition, aeration, and replenishing the soil’s own nutrients. They fall into three basic categories: grains, legumes, & broadleaves (like buckwheat and mustard). 

Because of the long-term soil health benefits, you should consider requiring cover crop planting as a term of your farmland rental agreement. 

What steps do farmers take to plant cover crops? 

To understand all the factors that go into farmers’ thinking when it comes to cover crops, it’s important to understand everything that goes into planting, growing, and terminating them. Here are some key steps to keep in mind. 

Choose the right crop for the climate and season

Some cover crops need to go in the ground immediately after the spring frost date, and others should go in later when the soil and weather are already warm. Farmers must ensure their cover crops align with the timeline for planting and harvesting your primary crop. 

Use high quality seed

If you want your cover crops to work effectively, your farmer has to put good seed in the ground. Depending on your agreement terms, this expense may be your responsibility, or it may be the farmer’s. Make sure you set your expectations in your agreement, especially if the farmer is responsible for those costs—because you don’t want them to skimp out! 

Prepare the land

Cover crops, like any crop, take time to plant. Specifically, it’s important to remove weed competition, although pulverizing the soil isn’t necessary (and can actually hurt the soil quality). Make sure you’re accounting for these practices when you and the farmer put together your timeline for the season. 

Be sure to plant enough seed

Another way to potentially stretch cover crop costs is by planting too little seed. This can be a problem, especially when weed pressure is heavy and your germination rate is low. Account for accurate seed quantities when determining cost responsibilities. 

Take care of the cover crop

Cover crops aren’t a “set it and forget it” exercise. It takes time to properly irrigate, feed, and monitor their growth and development. Otherwise, you might as well let the land grow fallow. Make sure that you take this into account when drafting your agreement, and consider additional compensation or incentives for the farmer.

What incentive issues do cover crops present? 

Like most conservation practices, cover crops present incentive issues that landowners must take into account. 

For example, net cover crop costs often hover around $25 per acre during the initial planting years. If your farmer returns $50 from farming that land, you’re requiring them to invest half their earnings back into the land. Not every farmer is willing to take that deal, especially if they’re in a short-term rental agreement. 

While farmers may accrue future economic benefits from cover crops, those benefits aren’t well documented. This is in contrast to some practices, like lime treatments, where the benefits are clear and established. 

Additionally, because cover crops improve the land quality, the cash rent value of the land will go up. Farmers may be hesitant to invest in a practice that goes against their bottom line, especially if they have a renewal date coming up. 

So If you want your farmers to invest in cover crops, you should provide incentives for them to do so:

• Lower the cash rental rate, so the farmer has more margin to invest in cover crops

• Subsidize or reimburse cover crop costs

• Form a long-term lease so the farmer is incentivized to engage in long-term conservation practices, like cover crops 

Of course, you could just mandate cover crop planting in your lease without making these suggested adjustments. However, don’t be surprised if you have trouble finding a tenant!

How to address cover crops in a cash rent agreement

As with most provisions in a cash rent agreement, the key to success with cover crops is to be as clear with your expectations as possible. Equally as important is considering who stands to benefit most from cover crops, and make sure they’re contributing fairly to the costs of production.

For instance, in many cases the cover crops provide the most benefit for the landowner, especially if the farmer is only leasing the land in the short term. But what if the farmer decides to use the cover crop for livestock grazing? In that case, aren’t they receiving a benefit from that revenue stream? 

As we discussed earlier, whether land is being leased short- or long-term will impact the farmer’s willingness to contribute to cover crops. If they’ve got “skin in the game,” as it were, then they’re going to take actions that contribute to the long-term health of the land. 

Make sure to spell out the following terms in your agreement:

1. Are you requiring the use of cover crops, or just encouraging and incentivizing them?

2. How and when will cover crops be planted? What is the latest agreeable planting date?

3. What species of cover crops will be planted? What’s your preferred seeding rate?

4. Who will pay for the cover crop establishment?

5. Who receives Environmental Quality Incentives Program (EQIP) payments?

6. How and when will the cover crops be terminated? Who will pay for it? 

Final thoughts

As effective as cover crops are as a conservation method, they often require more effort on the part of your farmers. Here are some ways to alleviate that burden:

• Longer-term leases, which can help the farmer demonstrate their interest in preserving the land for more than just a single season

• Implement cost-sharing measures to ensure that everyone has “skin in the game”

• Use soil tests as the marker for improvement, rather than specific practices; that way, the farmer can use multiple tools in your conservation toolbox to address the issue

Most importantly, it’s important to spell out your specific expectations in writing. That way, everyone knows what to expect, and the standards are clear for everyone involved.