Communicating with landlords is crucial for tenants, regardless of the type of lease that is used. It’s prudent for a tenant to provide updates of crop conditions throughout the year and make sure that crop shares and possible bonuses emanating from flexible cash leases are understood by both parties.
This article discusses how to communicate effectively through timely reports and the importance of providing an end-of-the-year report.
Many landowners, particularly those who farmed the ground in the past or grew up on the farm, have interest in what is going on during the growing season. Landlord reports could include a description of what was planted, how the crops are developing, rainfall and photos of the crops.
For a crop share lease, it’s important to keep the accounting of the expenses current. Explain each item on the bill, and make sure landowners understand each expense. It’s often important for landowners to be able to classify each expense — such as seed, fertilizer and pesticides — for income tax purposes. Also, landowners often need information pertaining to historical crop yields so they can make crop insurance decisions.
Review important details
For flexible cash leases, it’s important to provide potential yield and price information to landowners so they have a feel for whether they may or may not receive a bonus. Of course, landowners should have a detailed explanation as to how base cash rents and bonuses are computed. (Don’t assume they will remember the details or understand exactly how they work as easily as you do.)
We encourage tenants to provide an end-of-the-year report to each landowner. This report should include at least the following information: crops planted, crop yields by field or tract, production notes (including challenges), land issues (such as drainage problems), and plans for next year. This will be crucial after such an unusual year as 2019.
For crop share leases, a detailed summary of shares should be included. For flexible cash leases, components of the rent formula (crop yields and prices) should be included for review.
Langemeier is a Purdue University Extension agricultural economist and associate director of the Purdue Center for Commercial Agriculture. He writes from West Lafayette, Ind.