Machinery partnership advice
My neighbor and I both own combines that have seen better days. He farms 750 acres, and I farm 900. We both have about an even split between corn and soybeans. We are planning to sell our combines soon and buy one decent combine — not new, but bigger and better than we have now. What type of agreement should we have between us on this combine? If our partnership works out on the combine, we may decide to form a partnership on all of our equipment. Please advise.
Swanson: The capital investment should be based on the proportion of acres used by each. Other expenses such as repairs, improvements and insurance should be shared the same way. Each party should pay for all the fuel used when harvesting.
There needs to be an understanding on the sequence of harvesting each party’s crops. Also, you need to agree on how to deal with changes in crop acreage should they occur, as well as an exit clause. The agreement should be in writing in case anything would happen to either party in the future. ISU Extension has bulletin PM 1373, “Joint Machinery Ownership,” that discusses these issues in detail.
Gassett: The parties should have a written agreement on when and how decisions will be made on the use of the equipment. The agreement should also explain how the joint ownership will be dissolved. The agreement should describe how one partner will reimburse the other partner for unequal use. One approach to this is to multiply the custom rate by the number of acres by which one owner’s share exceeds half of the total acres harvested. The partner with the additional acres would compensate the partner with the fewer acres. The custom rate should be reduced by 20% to 30% if labor and fuel are furnished by each owner.
Edwards: Owning one newer combine between you should give you better performance with considerable savings. In addition, harvesting together should be more efficient for both of you. If you think your acreage will stay the same, you can divide the initial investment in the same proportion as your acres. If acres change later, one of you can reimburse the other. A written agreement should cover the initial investment, any financing arrangements, responsibility for repairs and maintenance, and how you will terminate the agreement. The ISU Extension Ag Decision Maker website at www.extension.iastate.edu/agdm has example agreements and fact sheets on machinery sharing. Midwest Plan Service at www.mwps.org offers a complete manual called “Farm Machinery and Labor Sharing.”
How much for pasture rent?
There are a lot of quotes and reports regarding how much per acre people are paying to rent ground for corn and soybeans these days, but I don’t see anything printed as to what pastureland is renting for. I have a grass farm in southwest Iowa. What should I be charging per acre?
Note: Tim Eggers, Iowa State University Extension farm management specialist, provides the following answer:
Two survey summaries are helpful. One is ISU’s annual land rental rate survey; the other is an Iowa Beef Center survey conducted a few years ago.
The annual ISU Extension cash rental rate survey reports pasture rental rates by crop reporting district. Since cropland cash rent has most interest and is the main focus of the survey, there aren’t as many responses regarding pasture rental. So we average the pasture rent responses together and report them on a crop reporting district level instead of individual counties.
To find the survey results, go to ISU’s Ag Decision Maker site www.extension.
iastate.edu/agdm. In the left column scroll down to the “Whole farm” section, click on “Leasing” and look for file C2-10, “Farmland cash rental rate survey.” It includes pasture rental rate information. The tables of estimated cash rental rates for crop reporting districts can be found by clicking on the “pdf” icon at top of that page.
The Iowa Beef Center conducted a survey focused on pasture rental arrangements published in 2007. It is helpful. Go to www.iowabeefcenter.org, and in the left column click on “Forages, hay & grazing.” Then click on “Grazing,” then “Pasture management,” and scroll down to “Iowa cattle grazing survey” and click on Part 1 and Part 2. These two “Cows & Plows” documents have useful information about pasture leasing agreements and custom grazing.
Also, ISU economist William Edwards has put together a fact sheet and spreadsheet to help you determine appropriate pasture rental rates. Both are on ISU’s Ag Decision Maker site. Go to the site, click the “Whole farm” tab, scroll down to “Cash leases” and look for file C2-23.pdf titled “Computing a pasture rental rate.” Click the appropriate icon to go to the spreadsheet “C2 23pastureandhaycashrent.xls.”
This article published in the April, 2011 edition of WALLACES FARMER.