Acres & Assets | Putting a Wrap on the 2023 Season

Now that harvest has been completed or is winding down, there are important details to handle in order to wrap up the 2023 growing season.  Yes, seasons greatly overlap this time of year as harvest comes to an end while decisions, tillage, and fertilization are being completed for the 2024 crop all at the same time.  From harvest to the start of winter is a hectic period but the effort by farmers and landowners to wrap up the season is time well spent for both.

As a farmer, I visited with my crop share landowners prior to harvest about any unusual expenses for fertilizer or lime and about the delivery and sale of their grain.  We also discussed any conservation work to be done after harvest if time and weather allowed.  I would keep them updated during harvest with any changes. 

After harvest was completed on their farm I would visit the landowner with a full accounting for their grain production and to deliver any checks from the grain elevator.  We would evaluate how the season turned out with a run through of the successes and challenges.  Any harvest time expenses that I incurred on behalf of the landowner were also presented to them.  In the end, we could wrap up the current season in preparation for moving to the next. 

With many if not a majority of leased farms in some areas being cash rented today, wrapping up the season becomes a little different for the landowner and the tenant.  It is still important for the landowner to know the yields and grain produced on their farm.  Knowing yields helps the landowner better understand the productivity of their farm and also allows them to evaluate their tenant to see if they are doing a good job caring for the farm and are profitable enough to pay the rent. 

Of great importance to both the tenant and landowner is the final accounting for any rent payments due.  There are now several types of payment terms for cash rent leases.  One is where 100% of the fixed cash rent for the year is paid upfront usually by March 1.  This is straight forward for the landowner but requires the tenant to come up with the full payment prior to the planting of the crop.  With this type of payment terms, there normally should not be any extra settling up after harvest for rent.

The long-standing practice around payment terms for cash rent leases was that one half was due in the spring before planting and one half was due in the fall after harvest usually with a November 1 or December 1 due date.  These terms recognized the cost burden of the tenant who could delay part of the rent payment until when they had funds from harvest sales of grain lessening their need to borrow money, if needed, to operate on.   The landowner takes on some extra risk if the tenant would end up not making the last half payment or would delay for months. 

With flexible cash rent leases, it becomes more important for the landowner to know yields from their farm as potentially a portion of their rental income will depend on it.  A flex lease normally requires a sizable base rent payment paid before planting that amounts to 90-95% of what a fixed cash rent amount would be.  The formula set up to calculate the flex or bonus payment after harvest will detail how the grain price is determined and the percentage of the crop to be used in setting the final rent payment if any.  The yield obtained from the crop is the final factor to be plugged into the formula to see if any further rent is owned.   Landowners accept some extra risk in this type of cash rent lease with the somewhat lower base payment in exchange for the opportunity to participate in the higher income generated in years in which yields and/or prices are above average.  The cash rent tenant takes on added responsibilities to correctly report final yields and to make the final rent payment.

In addition to wrapping up production and leasing details for the season, post harvest is an appropriate time for the tenant to update the landowner on any improvement projects in the works or to discuss those that are needed.  Improvements that a landowner might want to do include installation of drainage tile, conservation measures such as waterways or terracing, or upgrades to existing irrigation systems if present on the farm. 

Good communication between landowner and tenant is critical for the profitability of a farming operation and for the current income and long-term value of the farm for the owner.  No matter the type of lease in place, the information shared and matters discussed at the end of the season will help make the leasing relationship better and more profitable for both parties.  Putting a wrap on a season after harvest is another of the important tasks that both tenant and landowner should set as a priority.