While there are many farmers who own some of the land they work, more go into the planting season with plans to rent some or all of the ground they work. Depending on how the rental arrangements are made, landowners can either expect cash up front before the ground is prepared or they can plan to receive a share of the proceeds of the crop.
This second form is known as tenant farming. Generally, farm ground is rented on the understanding that the landowner will receive a portion of the profits for the crop. In that instance, they also share a portion of the financial responsibilities of planting.
Information. If you've never farmed, the idea of sharing expenses with the farmer who's going to be working the ground can seem a bit like a risky gamble. The initial cash outlay to invest in everything needed for the crop, such as seeds, herbicides, pesticides and crop insurance, can be daunting. However, the landowner is not the only person making the investment. Yes, they're providing the land and a portion of the money needed to get things started. The farmer is providing their expertise, equipment, consumables such as fuel, and their portion of everything needed for the crop.
Rental length. Early in their working relationship, farmers and landowners may only want to rent one planting season at a time. If either party feels they're being treated unfairly or that the other party is not fulfilling the terms of the agreement, either can break the arrangement. This flexibility benefits the landowner. Farmers generally need longer-term rental contracts as security of future income. Their investments, such as equipment, take much longer to pay off. It's critical for the protection both of farmers and landowners that rental agreements are made in writing.
Hobby farms. If you're just starting out as a farmer, you may not have the skills and expertise needed to plant crops that can supply you with a living wage. Depending on how much ground you own and your farming goals, it's a good idea to set up a rental agreement with a skilled farmer to work your tillable acreage. For example, if you've always wanted a place in the country with good hunting but don't have the equipment or knowledge to work your land, a good relationship with a knowledgeable tenant farmer can help you build skills for the long-term. In addition, a farmer who cares for your land means the soil will stay healthier over the long-term and local wildlife will prosper.
Who gets crops? A tenant farming agreement will include a percentage split of the harvest. That is how the landowner is paid for their ground and the farmer is paid for their labor. As an investor in the crop, both sides of the tenant farming agreement will likely invest in crop insurance. This way, even if the crop is damaged by conditions such as drought, hail, excess water or pests, both farmer and landowner will receive some payout. For landowners with little farming experience, working with a knowledgeable farmer is critical. As the farmer is managing planting, maintenance and harvest timing, they can offer landowners a great benefit if they manage the process well. Once the crop is harvested, all of the product is shipped to market. Payment is received and both farmer and landowner receive a portion of the compensation, which may be anything from 70/30 to 50/50. This percentage split should be determined at the start of the contract.
Rental costs. If you've ever rented a house, you know that payment is generally made on a monthly basis. However, farm rents are most often paid in lump sums after the harvest. Both landowners and farmers may have to make a large cash outlay before they receive any payout. One of the challenges of learning the business of farming is that each season is different. Planting and harvesting conditions can be new every season. If you're new to the business of farming and own land, finding a farmer with experience and a great deal of knowledge is a very good investment.