September 30, 2025 • 42 mins
Jim Jansen from the University of Nebraska-Lincoln, joins Michael Langemeier to discuss cash rent considerations for irrigation, pasture, and hay leases. They provide factors affecting cash rent including maintenance costs, insurance, and land productivity and emphasize the importance of clear lease agreements. This episode highlights terms related to the three P's of irrigation: pivot, pump, and power; the big three in pasture: fencing, water supply, and controlling noxious weeds; as well as cow-calf pairs and hay cash rental calculations. Offering practical advice for both landlords and operators on fair rental agreements.
You can find the FULL video episode on our YouTube channel. Visit https://youtu.be/NbMwKl2w2GY to subscribe and watch.
To learn more about Indiana's 2025 farmland cash rental rates, listen to episode #195 on the Purdue Commercial #AgCast. https://purdue.ag/agcast
Podcast provided by Purdue University's Center for Commercial Agriculture. Slides and the transcript from the discussion can be found at https://purdue.ag/agcast197.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:04):
Welcome to Purdue Commercial Ag Cast,Purdue University Center for Commercial
Agriculture Podcast, featuring farmmanagement news and information.
I'm your host, Michael Langemeier,Director of the Purdue Center
for Commercial Agriculture.
And joining me today is Jim Jansen fromthe University of Nebraska -Lincoln.
Today's podcast we're gonna discusscash rent results from the '25 Purdue
Farmland and Cash Rent Survey in additionto some cash rent results from Indiana.
(00:29):
But we're gonna take a deeper dive thanwe typically do, talking about irrigation
leases, pasture leases, and hay leases.
And so before we get started Jim,why don't you tell us a little
bit about what you do at Nebraska.
Yeah, so at the University ofNebraska- Lincoln as part of
the extension service there.
There are four of us spreadthroughout the state in addition
to the specialists on campus.
(00:49):
And one of our major forms of outreachtypically involves each year talking
about farmland values, cash rentalrates, different types of lease
arrangements across Nebraska, and, justsummarizing those trends and trying
to deliver on different things thatalso change things like the farm bill.
Crop insurance, grain marketing,livestock marketing, different types
(01:09):
of new insurances that have come out.
So annually each year we talk aboutirrigated cash rents in Nebraska and
beyond the center pivot irrigated cashrents, we also talk about gravity or
flood irrigated, which I would, I wouldassume here in Indiana is maybe not
nearly as present as center pivot is.
But today we can highlight someof the things to be aware of.
Yeah.
(01:30):
when we talk about Indiana cashrents, there's two different sources
of information to give estimates.
One is the Purdue CashRent and Land Value Survey.
That contains information andcash rent and land values at
the regional and state level.
If you want something at the countylevel, we actually go to USDA NASS.
USDA NASS has extensive informationon cash rent county lease rates, for
(01:51):
non-irrigated in particular, but alsohas some information for irrigated and
pasture, which we're gonna focus on today.
Before we get to the irrigatedresults, Jim, one of the things to
note here is the, Indiana averagefor non-irrigated ground is $225 for
the USDA NASS survey in, in 2025.
That's about $40 lower, than the,than the, average, cash rent in the
(02:16):
Purdue Cash Rent and Land Value Survey.
And, Todd Kuethe's talked before aboutthe difference between the USDA survey
and the Purdue survey, and I think thiswould be typical of, of state surveys.
When you think about difference inthe USDA, the USDA numbers tend to
be lower, because the USDA numberswould contain a lot of leases
that may not be arms' length.
Right.
Uh, Whereas the Purdue Survey,Nebraska Survey, Iowa Survey,
(02:39):
Illinois survey, those aretypically arms length transactions.
And so if you were thinking about rentingsome ground that you just inherited.
You would probably, take first lookat the state surveys and then maybe
the USDA NASS knowing that the USDANASS numbers are a little bit lower.
But that's the information we havein terms of irrigated lease rates.
The one comment I will make onthe dry land crash rental rates,
(03:00):
Purdue has it broke down byregion or division of the state.
You can at least gain some insight fromthe USDA NASS information on how do the
cash rental rates vary around by county.
The dry land at least can giveyou some ideas on how cash rents
do vary around by the county.
And that I kind of tell people theNA rental rates, you might think of
'em almost as a cookie cutter to giveyou some ideas, and there definitely
(03:22):
are differences in soil, rainfall,whatever productivity factor is a
big determining factor of force.
Now, on the irrigated here in the stateof Indiana, we have a snapshot where
they have enough people responding to thesurvey to provide an estimate by county.
And I'm not very familiarwith the state of Indiana.
Nonetheless, there are differences inthe type of soils, rainfall, quality,
(03:45):
overall quality of the property?
Is it a nice contiguous parcel?
Is it a parcel that's cut up?
Do you have to have a bridge orsomething for the pivot to cross it?
All those things have aninfluence on the cash rents and
on the irrigated cash rents.
One of the reasons we see a difference onthe, differential between the irrigated
and the dry land is just not all thosethings I mentioned, but also you have
(04:06):
upkeep associated with the pivot.
So whether that's maintenance, upkeep,depreciation, whatever the case might be.
You also have, insurance on the unit.
And at least in the state of Nebraska,and I would assume the same for Indiana
with higher and higher expenses associatedwith establishing the irrigation
equipment, insurance rates have followed,especially with having a lot of wind
(04:28):
events in the state of Nebraska.
There have been cases where theinsurance premiums have almost doubled
over the last three to five years.
So that's why we see some of thosebreakouts or the differentials
that we see between, it'sjust not a return on the land.
It's also return on those improvementsassociated with the irrigation equipment,
the pivot, the pump, and the power unit.
(04:49):
So the below ground aswell as the above ground.
And that's some of thedifferentials that we see here.
Center pivot is the mostcommon type of irrigation.
Another thing that does happen, andthis happens in Nebraska and Indiana and
other states, sometimes when you haveirrigation, you have the opportunity
to produce maybe a higher valued crop.
In Indiana, a couple examples ofthat is melons in the Southwest, Knox
(05:10):
County in particular, but also whenyou get to the North central region,
we have more seed corn production.
So certainly in those regions, you'regonna probably see some higher,
irrigated cash rents than other regionsthat don't have those opportunities.
Right.
So let's talk a little bit abouthow irrigation equipment works
in these irrigation leases.
And that's one of the reasonsI really wanted to have Jim on
(05:31):
here because, you know, Nebraskaobviously has a lot of irrigation.
So, they have some things that theythink about, when they're thinking
about leases for irrigation.
We'll start with someequipment lease provisions.
Yeah.
As I said before, the big three P's ofirrigation: pivot, pump, power unit.
So your below ground as wellas your above ground equipment.
We make the general assumptiontypically all day expenses associated
(05:53):
with running and operating.
The pivot with respect to the physicalequipment, not necessarily the energy,
whether a diesel, or natural gas, orpropane, whatever you're pumping with.
That's a land ownership expensebecause if you kick that tenant
off that property, they're notgonna take the pivot with them.
Now we do see in leases, and it's notuncommon to see tenants providing sweat
equity, so the use of their time, skills,talents, equipment, whatever it might be.
(06:18):
So they provide a labor component.
And also it's not uncommon to see a landtenant provides some degree of parts,
what we refer to as the consumables.
Some of the bigger consumables, theyinclude the nozzles on the actual pivot
itself, some of the dropdown hoses, aswell as the tires or the gear boxes.
So you might see in the lease thatpeople specify that the tenant's
(06:40):
responsible for, let's say, the first500 to even up to $1,500 a year in
expenses with those consumables.
Now, the cost of repairs and upkeephave increased exponentially.
You know, if you have someone come outand replace a tire on a pivot, that might
be a thousand bucks, especially if it'sin the dead of summer and you can't get
equipment to it and you have to carryit through a hot corn field or whatever.
(07:03):
On the, upkeep though, that'sdefinitely a negotiable thing.
And if you're someone struggling onsetting a cash rental rate with a
landlord, I typically see landlords,they sometimes fail to acknowledge the
value, the sweat equity value, becauseif you hire a irrigation company to work
on it, usually it's a service call plusso many hundreds an hour after that.
So what's that tenant worth?
(07:24):
It's a value that might be $30 anacre or something to that effect.
Yeah, we, talk about how the maintenanceworks, and how the cash lease are
adjusted depending on ownership.
Talk a little bit about,different ownership of the
irrigation equipment in Nebraska.
Just to give some idea how much differencethere is depending on the tract of land.
Yeah.
So, on the information we report.
(07:45):
And I would assume with the USDA,they assume that the landowner
owns the entire irrigation system.
Pivot, pump, power unit.
If the tenant is providing one of thosecomponents, most commonly it would be
maybe the power unit, the diesel engine ornatural gas, whatever you're pumping with.
And secondarily, it might be the pivot.
So surrounding those things,we might discount that.
(08:07):
And the one side note that I might mentionis when it comes to the upkeep, we always
jokingly say it's always the other partythat's responsible for maintaining it.
Just like when you rent an apartment or ahouse here at Purdue outside campus, it's
not my responsibility to mow the lawn.
It's not my responsibility to paint it.
It's always someone else.
Well assuming when the lease initiallystarts, what we found based on
(08:29):
our survey work, it's the landlordand the tenant are typically the
ones responsible for the upkeep.
When we say the landlord and thetenant, once again, maybe the tenant
provides some of that sweat equity timerelated to, putting air in the tires,
topping off, fluids, gear boxes, oilgrease, whatever the case might be.
Our survey.
I also find a third of the timethe tenant takes care of it.
(08:50):
The remainder of the time thelandlord takes care of it.
I can't emphasize enough.
It's a joint decision betweenthe landlord and the tenant.
A tenant needs to communicateto the landlord if they'd see
that there are issues arising.
Hey, you might have to pullthat pump out of the ground.
Uh, hey, you might haveto re-drill that well.
Let's share that as part of thelease negotiation with that landlord.
(09:10):
So we can make appropriate plans there.
Significant capital outlays todrill a new well to have any
kind of major well service done.
So that kind of surroundsthe maintenance and upkeep.
But once again, with the irrigatedrental rates, it's a return
on just not the land and theincreased productivity of the land.
It's also return on the equipment,the upkeep through depreciation,
(09:32):
maintenance, things like that.
So if you have a situationhere, we do take a look at what
would we discount the cash rent?
And Michael mentioned this when we firststarted today, there was a differential
between the dry land and the irrigated.
Well, there's a differentialor a discount, how much you
might take off the cash rent.
And we found this as part of some of oursurvey worked in Nebraska back in '23.
(09:54):
We asked the question if thetenant is the one providing pivot.
So the landowner owns everythingexcept for that pivot.
Something happened to the old pivot orthe 10, more often than not, usually
you see a tenant get a new pivot ontheir ground, their existing pivot on
the rented ground, it's not that great.
So they move that one off andbring their used one over.
That still works.
Works better than what might beout there onto that property.
(10:18):
Well, what we found with our surveywork is just slightly over half the
time, the discount is somewhere between26 to $50 an acre, meaning let's say
you want to charge, $300 an acre forcenter pivot, irrigated cropland about
half the time you take off 26 to 50.
So you might be paying an effective cashrent to the landlord of, let's say 250,
(10:40):
262, 270 because we are discounting thatcash rent to account for the fact that
the tenant is the one responsible forthe pivot, the upkeep, the insurance.
Third of the time we found 10to 25, and the remainder of time
we found it greater than 51.
One of the things that's so importantwith these irrigation leases.
And leases in general is communication.
(11:00):
That's why you talked about theimportance of knowing beforehand.
Who's responsible for the maintenance,how are we gonna discount the cash rent,
based on who owns the pivot, and so on.
We wanna make sure that that'ssettled, before we start irrigating,
because we all know that the timingof irrigation is so important.
You don't want to have any downtime.
You need to have a plan on howyou're gonna fix that pivot
(11:22):
in a very timely fashion.
Because when the crop needswater, it needs water.
You don't wanna be,delaying that decision.
That's right.
Landlords may not always trustthat the tenant is properly
maintaining the power unit.
Diesel engines are probably themost common from what I see.
Sometimes when people have accessto a natural gas or propane service,
(11:43):
especially natural gas, you haveto be near the pipeline for it.
If the tenant provides the power unit,the thing that's actually pumping the
water, how much would you take offthe cash rent to account for that?
So the way we look at it, it's abouta third of the time in Nebraska, the
discount is between one to $9 and anotherthird of the time it's between 10 to 20.
What I've seen more often than not,based on our phone calls from our
(12:06):
extension offices, we take off 10 to$15 an acre is a pretty common discount.
So if the irrigated cash rent's 300an acre, the tenant provides the
power unit, we would might be payingan effective 2 85 or even two 90.
We are discounting that cash rent toreflect the contribution of the tenant.
So we gotta keep track of all thesedifferent items and who's paying for that?
(12:29):
So in net, if you as a tenant, if youprovide both the power unit and the pivot,
your discount might exceed $50 an acre.
In Nebraska, a new irrigationsystem installed, if you could get
it ordered and get it paid for,you're talking in excess of 120,000.
So here's a setup for a question weget in our extension offices, and they
(12:49):
usually happen in the dead summer.
It's still hot, the crop's growing, and,uh, the tenant ended up having to call the
local irrigation company to come work onsomething that they weren't able to fix.
And the landlord wasinaccessible to approve it.
They might've been on vacation,didn't answer their phone.
So who should pay that bill ifthe tenant went and contacted
(13:11):
someone to make that repair?
Well, ideally, another element of anirrigated lease is we need to specify
how the repair bill is handled.
If the tenant pays it, you might discountsome of that cash rent and it's not such
a big deal when you have small repairs.
But when you have big repairs,10, $20,000, we need to specify
(13:33):
how those expenses are handled.
Does a tenant pay it and get reimbursed?
If it's a large capital outlay, dothey discount the cash rent for the
next year, two years, three years?
Be someone you're working with overmultiple years we more often than not
see a kind of a deductible associatedwith using the irrigated ground.
The tenant's responsible for thefirst 500 to 1500 a year in expenses.
(13:57):
Anything that exceeds that, that's whenthe landlord steps in and pays that,
especially when it's below ground things.
The actual, well, the pump below theground, the quality of your water has a
definite, influence on the reliabilityand how often you have to rebuild
different components on that itself.
So we're gonna switch gears hereand talk a little bit about pasture.
(14:18):
Yeah.
the Purdue Cash Rent and Land ValueSurvey, again, does not currently contain
information on pasture rental rates.
And there's a couple different ways, Jim,you can think about pasture rental rates,
and we're gonna talk about both of those.
One is to think about it ona per ac a per acre basis.
So how much, you know, $50 peracre, for example, $75 per acre.
And, you know, how do to come up withthat, that figure, we'll talk about that.
(14:40):
You can also think about rental rateson a, on a cow calf pair That's right.
And in the Western Corn Belt, Nebraskaand Kansas, they, they talk about both.
Yeah.
But a lot of times they'll talkabout the rent for the cow calf pair.
So we're gonna talk through that too.
If you have rent for cow calf pairor maybe borrow the, the rental rate
from the Western Corn belt and adoptit, to Indiana, how would you use
(15:02):
that to come up with a reasonablerental rate for your pasture.
Yep.
Yeah, so let's, I don't have any slidesprepared today to talk about cow calf pair
rental rates, but we'll just go over that.
The idea behind a cow calf pairrental rate, so that's a stock cow
for one cow with a calf its side.
In Nebraska, the grazing season'susually about five months.
Based on rainfall and growing season.
(15:25):
In Nebraska this past year, we'veseen cash rents trail livestock prices
with cattle prices being higher.
We also saw, the cow calfpair rental rates go up.
In Nebraska, I remember in the centraldistrict, in our state, the central part
of the state, we had an average cow calfpair rental rate of about $70 a month.
If you're renting for the season, 70times five would be about $350 per pair.
(15:50):
And, in the lease you're goingto specify how many pairs you're
allowing out on a property.
Sometimes when you're renting bythe acre, you don't always specify
how many animal units or how manyhead or however, whatever the
measurement is that you're using.
Probably number a head, how many head oflivestock you might have out on there.
So that's one tip that youcan take from a cow calf pair.
(16:11):
So let's specify the animal units.
There's many different ways to figureout, I think have counted almost 10
different ways to figure out a cowcalf or a per acre, per animal unit per
month, per week, per day, per season.
What matters the most though iswhat is someone willing to pay and
what is someone willing to accept?
I like that the cow calf pair rentalrate starting there and then thinking
(16:32):
about how many acres per cow do we needfor that cow calf pair, and then getting
the rental rate from that information.
The reason why I like that in Indianaand for states similar to Indiana,
where you don't have as many cattleand so there's not a plethora of rates.
You can't go to your neighborand say, well, what are you
renting your pasture for?
Their neighbor might not have any pasture.
They might mean obviously being apasture within miles, of your pasture.
(16:54):
And so, in that particular case, usesomething from an area that has a
lot of cow calf pair rental rates.
Again, Nebraska, Kansas, $350 per acre.
Look at the acres per cow.
Divide the 350 by the acres per cowand get a rate per acre that way.
Yeah.
Having said that, there is some USDAnumbers on, cash rent, county estimates.
And talk, so talk a littlebit about that, Jim.
(17:16):
Yeah, so those folks that are justlistening today, you can't see this
image, but I'm pretty sure we'll probablybe posting some of these at some point.
The slides, and you can find this.
The USDA annually releases inlate August, their county level
cash rent survey estimates.
For in Indiana, there's limitedirrigated as well as grazing
land in addition to dry land.
I think they have a rate foralmost every county in the state.
(17:38):
A breakout that we havehere varies significantly.
we had a low, you know, dollars peracre of 21.50 an acre all the way
to a high of 107 in Delaware County,down to 21.50 in Switzerland County.
My guess in this state isanything that's grazing land is
basically things you can't farm.
So is there some factoror feature to the ground?
(17:59):
Is it a wet parcel of ground that,you know what, it doesn't make sense
to farm it or there's limitations infarming it, but it makes it absolutely
greater, phenomenal grazing land.
Some wet ground, some rough ground.
And I would guess some of the higher ratesthat we have on our map here in the state
probably reflect some areas that havepretty good crop land, but also don't
necessarily have as much grazing land.
(18:19):
Another consideration here,and, I don't know if you collect
this on your survey or not.
I know Kansas has a littlebit of information on this.
Is services provided?
The big one is water.
is there water in that pasture?
And if there's not, how are you gonna,how are you gonna cover that cost?
And so how good, how, howgood a quality is the water?
Is it, is it a stream?
is it, is it a windmill?
(18:40):
What is it?
in terms of a water source,.
That's also very important.
we're gonna talk a little bit aboutfences, but also fence maintenance.
So talk a little bit about those items.
You know, how you can think aboutthose when you're renting a pasture.
What I tell people, so the first questionis always, who's responsible for upkeep?
Control of noxious weeds, unwantedbrush, and just not shade trees.
(19:00):
Livestock needs shade, good shade trees.
There's nothing wrong withthat, but things that are
almost noxious weeds in a way.
Who's responsible for that?
The thing we always tell peoplein our meetings from what we can
tell based on our phone calls,it's always the other party.
It's always someone else.
It's not me, it's them.
Well, I try to relate this back.
Imagine you're or gonna be living offcampus outside of Purdue University
(19:20):
here, and you're someone that'slooking to rent a, an apartment or
a home with some of your friends.
When you initially rent a property.
Well, we need to make theassumption it has decent fencing.
It has a secure water source thatunless it's extremely dry, that's good
safe water for the livestock to drink.
Weeds are at a minimum, unwantedthistles or whatever might be out there.
(19:42):
Same way with just when yourent a residence here in West
Lafayette, you wanna rent a propertythat's fairly well maintained.
It's easier to get someoneto maintain something.
It's easier to negotiate that into thelease if the property is well maintained.
Basic upkeep on the fencesand that big of a deal.
If you're a new tenant and yousee that the fence is already well
(20:02):
established, you have to do a littlebit of work after it snows or something.
But it's not that bad.
If the fence is dilapidatedand falling over.
That's where we need to probably stepback and come up with a plan materials,
major materials, if you have to replacea quarter mile fence or whatever the
distance is, those materials are alandowner expense because if the tenant
vacates, they're not gonna remove a fivewire or three wire barbed wire fence.
(20:26):
Now, in addition to the fence, if theyare using their equipment, skid steers,
tractors, whatever, to establish thatfence, maybe we need to be looking
at discounting that cash rent forthe next year or three years or five
years or whatever period of time.
you know what you want to charge,but you discount it to account
for the value of that time.
same way if you have someone with a skidsteer that goes out there and shreds on
(20:48):
unwanted brush or whatever the materialsare that aren't desirable to be grazed.
the one sticking point that I see mostcommon is, thistles or noxious weeds.
Your tenant might be the bestperson in the state of Indiana
when it comes to maintaining weeds.
If your neighbor is not, especially ifyou have running water sources or wind
(21:09):
or whatever, those things continuallyspread onto your ground and you might
think it's the fault of your tenant.
we need to have somebody, if someone canfigure out how to automate a drone to only
spray noxious weeds and pastures, theycan become a very wealthy person, right?
Yeah.
But, what I tell people on herbicideexpenses, at least in Nebraska, if you
have a situation where the tenant'swilling to do the work, but you're in
(21:31):
an area where there's a high pressure insome of these unwanted factors related
to forages, let's come up with a cashrental rate where we maybe cost share
with the tenant if you're a landowner.
To split some of those expensessurrounding herbicides or
whatever control measures you'reusing to control those things.
So those are kind of the big three.
(21:52):
Fencing, water supply and control,noxious weeds, unwanted brush,
whatever you have out there.
and if you're doing those kinds of things,then all of that impacts the rental rate.
Yes.
And so if the tenant is responsiblefor maintaining those weeds and
there's no cost share on herbicide,he shouldn't be paying as much,
in terms of renting that pasture.
If he's responsible wholly for thefencing, he shouldn't be paying as much.
(22:14):
Another factor that we sometimestalk about, you talk about, you know,
various regions, corn belt and also theplains is, the quality of the grass.
we get into it is it native,is it improved pasture?
What is it?
but also just some simple things likeeyeballing it and say, is that fair?
is that good?
And maybe make someadjustments related to that.
I actually have some of that froma, an animal science professor
(22:35):
here at Purdue provided me with.
Provided me with some information aboutan adjustment factor related to the
quality of the grass, and that's builtinto, the pasture and hay ground leasing
publication that's now on the Centerfor Commercial Agriculture website.
And so, and that's why I likethe, I'll go back to the cow calf
pair I like that lease becausea lot of times in that lease.
(22:56):
You dictate the stocking rate.
One of the problems with a peracre lease is you really need
to talk about the stocking rate.
The last, if you're a landlord and you'rean absentee landlord in particular, you
need to, you need to know how many animalsthey're putting out there, whether that be
sheep, goats, cattle, whatever it may be.
You need to know that so thatit doesn't become a, a, you
(23:16):
know, good grass to poor grass.
Right.
I think it's an obvious thing, butit's something you need to think
about, very, very carefully whenyou're thinking about pasture leases.
My final comment I've seen on pasture, andI don't know if it's this present here in
Indiana, especially in the ranching areasin Nebraska, people are getting older.
The average age of ranchersexceeds the age of farmers.
(23:37):
If you have a situation where someoneis taking livestock in, meaning, hey,
you have someone that wants to bringstockhouse in from a neighboring area.
The cash rental rates the USDA, assumethat the landowner is not providing
any services related to watching thelivestock, making sure they're staying and
putting mineral and salt out or something.
If you're someone that owns grazing land,You're not necessarily taking cattle
(23:59):
in, but you're pretty darn close to it.
Maybe due to your age or health,you don't want to own the livestock.
But in the summer you can go out thereand do some of these different services,
Michael mentioned, that can provideadditional cash rent to you, especially
if that person, all they have to dois drive the cattle off and then come
back in the fall and pick 'em back up.
Or only have to come and visitthe property once a month or once
every other week or something.
(24:20):
And I could see that coming up, a pastureis limited in Indiana, and if you have
someone that has a, has a decent sizedcow herd, they may have to go quite
a ways, for some of that pasture.
And so just having the landlord orthe landlord lives locally, just
checking to see if the cattle are in.
Yeah.
I know there's people, I knowpeople in Nebraska and Kansas that
actually pays someone, you know, acertain dollar per acre, to do that.
(24:42):
Yeah.
because they don't liveright next to the cattle.
It's several miles away.
So yeah, those are veryimportant considerations.
We don't talk about it extensivelyin our survey, the USDA survey of
Indiana, but, grazing, corn stockgrazing rental rates for livestock.
some of the cash rental rates that wehave reported go from what degree of
services does the landlord, do you haveany type of fence around the property?
(25:03):
I would assume here in Indiana witha heavy, heavy row crop present that,
you know, people that do graze cornstalks, there's nothing wrong with
grazing corn stalks, but, the value maynot be quite as high as Nebraska is.
There would definitely be some moneyexchange hands though, in some cases.
Yeah.
So you have to pay something for that.
It also comes up, and I know this comesup in Nebraska too, if you are, if
maybe you're, you're renting your, someof the grass is related to cover crop.
(25:27):
I mean, we don't have as much grazinga cover crop as Nebraska would have,
and that's one of the disadvantages wehave, in terms of cover crop is we don't
have those opportunities, because wedon't have, near as big a cattle herd.
But, talk a little bit aboutthat, how that might work.
Yeah.
So treatment of grazing of covercrops in the monetary perspective
is fairly similar to corn stalks.
It can go from anything from free,especially when you get into some of
(25:50):
these years when you have a bunch ofdown corn that even after you combine
it, bailing a corn stocks is a littlebit more of a concern with the amount of
nutrients removed relative to livestock.
Livestock than nutrient cycle ascattle roam through there, especially
use the old ranchers adage,you graze half, you leave half.
If you, now there are ways toover graze corn stalks and some
of that, and you overgraze.
(26:11):
But, cattle are a great, especially incover crops, it's a great way if you have
to terminate it, cattle can easily doa fair amount of, you know, utilize the
forage and then almost kill it off in away, depending on how heavy you graze it.
And, kind of in summary on some of the bigthings when it comes to grazing land that
we need to negotiate different things.
(26:31):
specifying the stocking rate's critical.
The big three disaster.
One of my colleagues always used tocall it was fire, hail, and drought.
If you have to have an earlyremoval of that property,
what happens to the cash rent?
So we need to specify that.
And I do think in Indiana there's probablystill a fair amount of hunting and green.
How do you treat that crop?
Land lease versus a pasture lease?
(26:52):
Pasture leases, you're usuallytalking just the summertime.
Cropland leases is more of ayear round deal where you have
off season operations occurring.
And sometimes people that own that ground,maybe they don't hunt themselves, but
they have a relative or extended familymember that really wants to hunt it.
Just make sure youcommunicate in that lease.
Maybe the tenant that's running theircows out there and need to remove their
(27:14):
cattle two weeks before the deer season'cause somebody has to set up their
deer stand or whatever the case is.
Just make sure you understandwhat's going on out there and
what do you wanna have occur.
As a little side note here,something to watch for if you're
driving through Nebraska is theamount of cattle you have grazing.
Yes.
On corn stalks, even on I 80,which is a pretty flat, pretty flat
(27:34):
highway compared to most of Nebraska.
It's just unbelievable how manycows are grazing those corn stalks.
And so if you get a chance to drivethrough Nebraska, check that out.
We're gonna go ahead and, talk ingeneral about, calculating cash rent.
Yeah, so one common question areextension offices, I'm sure they get 'em
here too, is what's the county yield?
(27:55):
Well, within the last year or two,the USDA Risk Management Agency pushed
forward a website, if I was on Googleor some search end, do a search for
something like USDA county yield report.
You can look by county, bycrop, by production practice,
irrigated, non irrigated.
And what we do in this example, we'retaking a look at basically modifying a
(28:15):
county cash rental rate and discountinga little bit to reflect a property.
So we are looking at the countywe're sitting in today had an
average crop yield over the lastfive years of 217 bushel per acre.
We also took a look and it just asa side note, the Purdue Farm Real
Estate Survey and report also hassome of this information on the idea
of what we call rent per bushel.
(28:37):
Just be aware that the PurdueFarm Real Estate Survey and
report does report on it.
And what we start with iswe had our average five year
yield was 217 bushel per acre.
If you divide the two of thosetogether, that gives us what is
called the county rent per bushel.
What the county rent per bushel means isa dollar 38 per bushel is going towards
(28:58):
what it's going towards paying the cashrent, and the farm real estate survey for
Purdue has some very similar estimates byquality of land and things of that nature.
We're gonna take that a dollar 38a bushel from dividing the county
rental rate or the regional rentalrate by at the county yield.
And on our farm that we wannarent, in this example, it only
yields a 202 bushel per acre.
(29:19):
It's not as productivefor whatever reason.
And you could come, that numbermight come from the APH, the actual
production history from crop insurance.
You might look at the last three years,the last five years, whatever the APH
or your yield expectation for theproperty, we come up with a farm level
(29:40):
cash rent of $278 and 33 cents per acre.
The idea is we are stepping down whatwe know on the left hand side of this
slide where it's stepping down ourcounty rental rate and we're stepping
it down to the farm level cash rent.
If a landlord calls me and asking somegeneral questions related to rent, I of
course point them to the Purdue survey.
(30:01):
In particular, I point themto this rent per bushel.
And then my next question is, what is a,what is a typical corn yield on your farm?
There's quite a few landlords don't knowthat, and so that's something they're
gonna have to ask their operator.
But really to, think aboutcash rent intelligently, you
really need that information.
What's my corn yield?
you know, what's the rent per bushel?
(30:23):
With that, I can come up with a, atleast a first estimate or guesstimate,
of what the cash rent, should be.
There's other factors, of course, thatmay come in there, but it gives you a,
a kind of a first impression, of whatthat ground, might, might be worth.
And so I, I really like that method.
And one of the things that we do inthe Purdue survey that I'm so glad they
started doing in the mid seventies.
is when we have a professionalfarm manager or an appraiser,
(30:46):
give us land values and cash.
We ask them.
Okay.
on that track that you're looking at,we're calling it average productivity.
Average productivity isnot the same to everybody.
Mm-hmm.
What I call average may not be the same.
What, what someone else calls average.
And so we ask for the associatedcorn yield with that rent and
land value that they're giving us.
And we have them do that.
(31:07):
For what they consider top,average and poor quality.
We ask for that information.
Use it, when you're trying to thinkabout cash rent, for your farm
or for different tracks of land.
I think that's a reallygood way of doing that.
Also you wanted to talk a littlebit about, crop share leases.
Yes.
So what are some sources of informationwhen we think about crop share leases?
You bet.
(31:27):
And one thing I wanna plug on,some folks that you may have never
heard of, county rent per bushel.
Especially in Iowa, they talk aboutthe CSR, the corn suitability rating.
They do a very similar idea onthe corn suitability rating when
it comes to setting cash rent.
But it's just that it's a productivityvalue that you're trying to encompass
the good, the bad, and everything inbetween on the features of the ground.
(31:49):
And how does that tie into theultimate output being the yield.
Now our second idea for settingcash rent here is called cash
equivalent from crop share.
So let's say we set up anexample under a 50 50 crop share.
Split, meaning the landlord getshalf the yield, but they also
get half the seed, fertilizerand chemicals or the pesticides.
And on their survey, they took a look at.
(32:11):
I pulled, the fertilizer seed andpesticide expenses, so if you added all
those up together on a corn rotation, soI believe that was corn soybean rotation.
If you add the two of thosetogether and divide that by two.
So I said the landowner gets halfof that yield, so about 108.5
or about 109 bushel per acre.
And this is an examplewe're trying to do for 2026.
(32:33):
I thought fall of 2026 corn mightbe worth, let's say 4 46 a bushel.
So the landowner's getting halfof the crop revenue per acre.
And in addition to that, they're payinghalf of the big three from the prior
slide, half of the seed, fertilizer,and chemical or pesticide expenses.
And the difference between thosetwo, we given before the farm ER
(32:55):
landowner has to pay real estate taxes.
regardless of his crop share or cash rent.
The difference between those twothat gives us what the landowner
anticipates, they'll make the netreturn to the owner, 2 58 91 an acre.
Now, if you look through the, ourexample, we have set up, we can
look at March, we can look at July,and then we can look at November.
(33:17):
Once you pay the inputs in the UnitedStates, once you pay the inputs,
that's a fixed expense for that season.
You can't get a refund on your chemicals.
But once that seed is planted,the fertilizer is applied.
Those are locked in forat least that season.
So we let the cat and the yieldis probably gonna be different
than what you exactly anticipated,although there's less yield
variability in Indiana than Nebraska.
(33:38):
But anyways, we go through theexample and we let that price vary.
We go from 4.46 to 3.92 to 4.27.
The idea is depending upon whenyou're negotiating those things.
Your cash rent, what you think it couldbe or should be is probably gonna vary.
Do you know what your property yields?
Do you know what the yieldto price expectation is?
That's probably the point of consternationbetween the landlord and tenant because
(34:01):
they have different expectations.
Maybe you understand the expense side,but you think the price of corn's gonna
be 5.46 a bushel or whatever the price is.
Who knows?
So this is one way to estimate cash rentsfor the upcoming 2026 planting season.
We wanna switch gears here alittle bit again, and we're, we've,
(34:21):
focused on, irrigation leases.
irrigated crop leases.
And then we, talked about pasture leases.
Now I wanna talk, briefly abouthay market, price or hay leases.
And one of the things that Irecommend using, is to have some
idea of what the hay yield is.
and also the hay market prices,and we can use that information
along with some typical shares, tocome up with some rental values.
(34:42):
I think that's a verylogical way, to do this.
So walk us through the exampleyou've got on your slides.
So the USDA has a divisionscalled AMS, Ag Marketing Services.
And the thing I'll point out on the USDAhay report for Indiana there, from what
I could see, there were two hay auctionsthat they reported on, and I think
they report every other week, or one'sone week and one's a following week.
(35:04):
Depending on where you're livingat in the state, you might
pull from a neighboring state.
If you're in southern Indiana,maybe you're gonna pull from, I
don't know, Tennessee or something.
just be aware that depending on whereyou're at in the state, you might
have to look at a neighboring statebecause the number of sales might be
low certain times throughout the year,and it's a resource that you can find
online that you don't have to payanything or have a subscription through.
(35:25):
The example report we pulledtogether here, we took a look at,
pulling together some price ranges.
And the one interesting thingthat stood out to me when I looked
through the prices of mixed, whatthey call mixed hay, grass hay.
Prices in Indiana this year are abouttwice what they are in Nebraska.
So obviously there's some, distance.
You can't move hay, unlimiteddistance like you can a grain.
(35:46):
It's not as compact, but we use theprice, based on the USDA report here.
Yes.
and so if you do have a cow herd, notonly you have to go further to probably
get some pasture for all your cows.
You probably have to go ways to gethay if you're not producing yourself.
And so it's a more challengingsituation when it comes to pasture
and hay, in Indiana for the cow capproducer than would be, in Nebraska.
Plus we actually got rain this year.
(36:07):
Yeah.
Two years that we've had in some areasfavor very favorable rainfall amounts.
So in this example, we take that cashequivalent from crop share and we apply
it to cash equivalent from hay share.
We know we wanna work together,we just don't know what we
should charge for cash rent.
Maybe it's an odd shaped field.
Maybe it's on the side of a hill.
That's why we don't crop it.
(36:28):
So let's say this field yieldstwo and a half tons per acre.
Maybe you cut it once, maybeyou cut it twice, who knows?
But if you get two and a half tonsper acre, we have two situations.
We could do a one third, two thirdsplit, or we could do a 50 50 split.
So the landowner's gonna get,a third in the, one example,
half the yield in the other.
And, based on the prices,you can't see this if you're
(36:48):
just listing the long today.
Well, we used a price of $190 a ton, solet's make the assumption it's pretty.
Fairly good quality hay.
And, under the one third, twothird expense or split crop share
or hay share, the landowner isnot paying for any expenses.
On the right hand side, let's saythey put down $50 worth of fertilizer
with the tenant and they also spent,$20 on sprained some noxious weeds or
(37:12):
something, so they invested $70 an acre.
Remember, we split half theseed fertilizer chemicals.
So the landowner's gonna take off $35under the 50 50 split because they have
to share in some of those expenses.
So the hay gets put up,you bail everything.
You count the number of bails, thelandowner gets a third, and the one case
(37:32):
they get half the bails then the tenantturns around and says, listen, why don't
we go weigh some of these and why don't Ijust haul these off and write you a check.
Cash equivalent from hay share.
We're taking the yield.
And depending on how much thelandowner invested, they are
getting an effective cash rent.
They get a gross check divided bythe number of acres, and that's
how we figure out the cash rent.
(37:53):
I'm using a very similarcalculation in my pasture and
hay ground leasing publication.
In fact, I use a onethird, two thirds in there.
very similar to the example,that you talk about here.
I think it makes a lot of sense.
You know, what's theyield, what's the price?
How much income are we getting from that?
If we don't wanna share expenses, thatcan be difficult, to do in some Cases.
So we don't wanna share expensesthat one third, two thirds is a
(38:16):
good way to do it, and we can comeup with a net return, to the owner.
Now, when you're thinking aboutthe maximum amount of money.
That you'd be willing topay if you were an operator?
It should be obvious that, if you'relooking at the market rent for poor
quality land, hay should be under that.
Yeah.
And so if I'm in an area where mypoor quality land's getting $200 hay
should be something south of that.
(38:38):
And, it's not uncommon at all to see.
20, 30% discount, from hay groundcompared to crop land because
some hay ground's, hay groundbecause it's an odd shaped piece.
It's only a few acres.
It's just not suitable forcropping, for whatever reason.
So that's why it's hay ground.
Well, it shouldn't rentfor as much as crop land.
And so if you're landlord, just rememberthat you're not gonna get the same rent,
(39:00):
not even in some cases, not even closeto the same rent as you'd get if you
were, growing wheat, corn, or soybeans.
So just to summarize, we'vetalked today about irrigated
leases, irrigated crop leases.
pastor leases and hay leases.
before we leave this conversation,I think we'd be remiss if we
didn't mention Ag Lease 10 1.
This is an excellent, website.
(39:21):
The North Central Farm ManagementCommittee put this together years ago.
there's information in here aboutthe different types of leases,
vantages disadvantages of fixed,flexible, crop share leases.
It, there's, there's alsoinformation about pasture leases.
if you're thinking about leasingcows, there's a publication
on cow leasing in there.
some very useful general informationabout leases and probably of more
(39:43):
interest, to the listener hereis there's also some lease forms.
Now, don't use these blindly, but therecertainly gives you a place to start.
Yes.
And even if you trust your landlord.
Remember, you probably aren't gonna trusttheir probate judge if they're someone
that's in advanced age and they pass away.
That's why we always wanna get a lease.
And a good lease is just not forthe protection of the landowner.
(40:04):
It is for equally for theprotection of the tenant.
And if you sign a five year lease withsomeone that's in their nineties, that
lease is in effect until it is terminated.
So just make sure you get whateveryou wanna do, get it in writing.
You can go see a privateattorney, you can get, Ag Lease
101 is a good place to start.
I've seen it's a fairly, youknow, four or five pages long.
(40:25):
I've seen people cross out sections withtheir landowner and they both date it and
initial it when they sign the lease toacknowledge certain sections may not apply
to their situations, but it's a good startif you don't want to go see an attorney.
And we always recommend writtenleases, but in particular, a couple
different leases that I think it's soimportant that, that are written down.
(40:45):
One of those is flex leases.
if you have a flex crop lease, there'sso many different ways, to set the
trigger and to set the bonus paymentsthat you definitely want that in writing.
The other one is pasture.
Yes.
I think it's so important to havethese pasture leases in writing
because you need to know stocking rate.
You wanna make sure that they're notoverstocking or even under stocking,
(41:06):
properly stocking, that pasture,make sure that that's in there.
you wanna make sure that there's somethingin there about services, you know, who's
gonna provide the services, who's gonna.
Fix the fence, who's gonna payfor the repairs of the fence?
And so, pastor leases, eventhough there's not, it's not as
much money involved per acre.
it's so important that there's,some things written down.
and so thanks Jim for joiningus today and, this was a very
(41:29):
interesting conversation.
Hopefully our listeners will equallyfind it, interesting as we do, we,
of course, we, you do a lot of leasemeetings in Nebraska and I do a lot
of lease meetings, here in Indianaand so we've tried to cover some of
the things that come up, when we'retalking to landlords and operators.
So that concludes thispodcast focused on cash rents.
I encourage you to take a look at that.
(41:50):
Also, we're have a separate podcastrelated to land values, I encourage
you to also watch, listen, check outthe slides, check out the written
material, related to land values.
Thank you for joining us.
Alright, very good.
Welcome to Purdue Commercial Ag Cast,Purdue University Center for Commercial
Agriculture Podcast, featuring farmmanagement news and information.
I'm your host, Michael Langemeier,Director of the Purdue Center
for Commercial Agriculture.
And joining me today is Jim Jansen fromthe University of Nebraska -Lincoln.
Today's podcast we're gonna discusscash rent results from the '25 Purdue
Farmland and Cash Rent Survey in additionto some cash rent results from Indiana.
(00:29):
But we're gonna take a deeper dive thanwe typically do, talking about irrigation
leases, pasture leases, and hay leases.
And so before we get started Jim,why don't you tell us a little
bit about what you do at Nebraska.
Yeah, so at the University ofNebraska- Lincoln as part of
the extension service there.
There are four of us spreadthroughout the state in addition
to the specialists on campus.
(00:49):
And one of our major forms of outreachtypically involves each year talking
about farmland values, cash rentalrates, different types of lease
arrangements across Nebraska, and, justsummarizing those trends and trying
to deliver on different things thatalso change things like the farm bill.
Crop insurance, grain marketing,livestock marketing, different types
(01:09):
of new insurances that have come out.
So annually each year we talk aboutirrigated cash rents in Nebraska and
beyond the center pivot irrigated cashrents, we also talk about gravity or
flood irrigated, which I would, I wouldassume here in Indiana is maybe not
nearly as present as center pivot is.
But today we can highlight someof the things to be aware of.
Yeah.
(01:30):
when we talk about Indiana cashrents, there's two different sources
of information to give estimates.
One is the Purdue CashRent and Land Value Survey.
That contains information andcash rent and land values at
the regional and state level.
If you want something at the countylevel, we actually go to USDA NASS.
USDA NASS has extensive informationon cash rent county lease rates, for
(01:51):
non-irrigated in particular, but alsohas some information for irrigated and
pasture, which we're gonna focus on today.
Before we get to the irrigatedresults, Jim, one of the things to
note here is the, Indiana averagefor non-irrigated ground is $225 for
the USDA NASS survey in, in 2025.
That's about $40 lower, than the,than the, average, cash rent in the
(02:16):
Purdue Cash Rent and Land Value Survey.
And, Todd Kuethe's talked before aboutthe difference between the USDA survey
and the Purdue survey, and I think thiswould be typical of, of state surveys.
When you think about difference inthe USDA, the USDA numbers tend to
be lower, because the USDA numberswould contain a lot of leases
that may not be arms' length.
Right.
Uh, Whereas the Purdue Survey,Nebraska Survey, Iowa Survey,
(02:39):
Illinois survey, those aretypically arms length transactions.
And so if you were thinking about rentingsome ground that you just inherited.
You would probably, take first lookat the state surveys and then maybe
the USDA NASS knowing that the USDANASS numbers are a little bit lower.
But that's the information we havein terms of irrigated lease rates.
The one comment I will make onthe dry land crash rental rates,
(03:00):
Purdue has it broke down byregion or division of the state.
You can at least gain some insight fromthe USDA NASS information on how do the
cash rental rates vary around by county.
The dry land at least can giveyou some ideas on how cash rents
do vary around by the county.
And that I kind of tell people theNA rental rates, you might think of
'em almost as a cookie cutter to giveyou some ideas, and there definitely
(03:22):
are differences in soil, rainfall,whatever productivity factor is a
big determining factor of force.
Now, on the irrigated here in the stateof Indiana, we have a snapshot where
they have enough people responding to thesurvey to provide an estimate by county.
And I'm not very familiarwith the state of Indiana.
Nonetheless, there are differences inthe type of soils, rainfall, quality,
(03:45):
overall quality of the property?
Is it a nice contiguous parcel?
Is it a parcel that's cut up?
Do you have to have a bridge orsomething for the pivot to cross it?
All those things have aninfluence on the cash rents and
on the irrigated cash rents.
One of the reasons we see a difference onthe, differential between the irrigated
and the dry land is just not all thosethings I mentioned, but also you have
(04:06):
upkeep associated with the pivot.
So whether that's maintenance, upkeep,depreciation, whatever the case might be.
You also have, insurance on the unit.
And at least in the state of Nebraska,and I would assume the same for Indiana
with higher and higher expenses associatedwith establishing the irrigation
equipment, insurance rates have followed,especially with having a lot of wind
(04:28):
events in the state of Nebraska.
There have been cases where theinsurance premiums have almost doubled
over the last three to five years.
So that's why we see some of thosebreakouts or the differentials
that we see between, it'sjust not a return on the land.
It's also return on those improvementsassociated with the irrigation equipment,
the pivot, the pump, and the power unit.
(04:49):
So the below ground aswell as the above ground.
And that's some of thedifferentials that we see here.
Center pivot is the mostcommon type of irrigation.
Another thing that does happen, andthis happens in Nebraska and Indiana and
other states, sometimes when you haveirrigation, you have the opportunity
to produce maybe a higher valued crop.
In Indiana, a couple examples ofthat is melons in the Southwest, Knox
(05:10):
County in particular, but also whenyou get to the North central region,
we have more seed corn production.
So certainly in those regions, you'regonna probably see some higher,
irrigated cash rents than other regionsthat don't have those opportunities.
Right.
So let's talk a little bit abouthow irrigation equipment works
in these irrigation leases.
And that's one of the reasonsI really wanted to have Jim on
(05:31):
here because, you know, Nebraskaobviously has a lot of irrigation.
So, they have some things that theythink about, when they're thinking
about leases for irrigation.
We'll start with someequipment lease provisions.
Yeah.
As I said before, the big three P's ofirrigation: pivot, pump, power unit.
So your below ground as wellas your above ground equipment.
We make the general assumptiontypically all day expenses associated
(05:53):
with running and operating.
The pivot with respect to the physicalequipment, not necessarily the energy,
whether a diesel, or natural gas, orpropane, whatever you're pumping with.
That's a land ownership expensebecause if you kick that tenant
off that property, they're notgonna take the pivot with them.
Now we do see in leases, and it's notuncommon to see tenants providing sweat
equity, so the use of their time, skills,talents, equipment, whatever it might be.
(06:18):
So they provide a labor component.
And also it's not uncommon to see a landtenant provides some degree of parts,
what we refer to as the consumables.
Some of the bigger consumables, theyinclude the nozzles on the actual pivot
itself, some of the dropdown hoses, aswell as the tires or the gear boxes.
So you might see in the lease thatpeople specify that the tenant's
(06:40):
responsible for, let's say, the first500 to even up to $1,500 a year in
expenses with those consumables.
Now, the cost of repairs and upkeephave increased exponentially.
You know, if you have someone come outand replace a tire on a pivot, that might
be a thousand bucks, especially if it'sin the dead of summer and you can't get
equipment to it and you have to carryit through a hot corn field or whatever.
(07:03):
On the, upkeep though, that'sdefinitely a negotiable thing.
And if you're someone struggling onsetting a cash rental rate with a
landlord, I typically see landlords,they sometimes fail to acknowledge the
value, the sweat equity value, becauseif you hire a irrigation company to work
on it, usually it's a service call plusso many hundreds an hour after that.
So what's that tenant worth?
(07:24):
It's a value that might be $30 anacre or something to that effect.
Yeah, we, talk about how the maintenanceworks, and how the cash lease are
adjusted depending on ownership.
Talk a little bit about,different ownership of the
irrigation equipment in Nebraska.
Just to give some idea how much differencethere is depending on the tract of land.
Yeah.
So, on the information we report.
(07:45):
And I would assume with the USDA,they assume that the landowner
owns the entire irrigation system.
Pivot, pump, power unit.
If the tenant is providing one of thosecomponents, most commonly it would be
maybe the power unit, the diesel engine ornatural gas, whatever you're pumping with.
And secondarily, it might be the pivot.
So surrounding those things,we might discount that.
(08:07):
And the one side note that I might mentionis when it comes to the upkeep, we always
jokingly say it's always the other partythat's responsible for maintaining it.
Just like when you rent an apartment or ahouse here at Purdue outside campus, it's
not my responsibility to mow the lawn.
It's not my responsibility to paint it.
It's always someone else.
Well assuming when the lease initiallystarts, what we found based on
(08:29):
our survey work, it's the landlordand the tenant are typically the
ones responsible for the upkeep.
When we say the landlord and thetenant, once again, maybe the tenant
provides some of that sweat equity timerelated to, putting air in the tires,
topping off, fluids, gear boxes, oilgrease, whatever the case might be.
Our survey.
I also find a third of the timethe tenant takes care of it.
(08:50):
The remainder of the time thelandlord takes care of it.
I can't emphasize enough.
It's a joint decision betweenthe landlord and the tenant.
A tenant needs to communicateto the landlord if they'd see
that there are issues arising.
Hey, you might have to pullthat pump out of the ground.
Uh, hey, you might haveto re-drill that well.
Let's share that as part of thelease negotiation with that landlord.
(09:10):
So we can make appropriate plans there.
Significant capital outlays todrill a new well to have any
kind of major well service done.
So that kind of surroundsthe maintenance and upkeep.
But once again, with the irrigatedrental rates, it's a return
on just not the land and theincreased productivity of the land.
It's also return on the equipment,the upkeep through depreciation,
(09:32):
maintenance, things like that.
So if you have a situationhere, we do take a look at what
would we discount the cash rent?
And Michael mentioned this when we firststarted today, there was a differential
between the dry land and the irrigated.
Well, there's a differentialor a discount, how much you
might take off the cash rent.
And we found this as part of some of oursurvey worked in Nebraska back in '23.
(09:54):
We asked the question if thetenant is the one providing pivot.
So the landowner owns everythingexcept for that pivot.
Something happened to the old pivot orthe 10, more often than not, usually
you see a tenant get a new pivot ontheir ground, their existing pivot on
the rented ground, it's not that great.
So they move that one off andbring their used one over.
That still works.
Works better than what might beout there onto that property.
(10:18):
Well, what we found with our surveywork is just slightly over half the
time, the discount is somewhere between26 to $50 an acre, meaning let's say
you want to charge, $300 an acre forcenter pivot, irrigated cropland about
half the time you take off 26 to 50.
So you might be paying an effective cashrent to the landlord of, let's say 250,
(10:40):
262, 270 because we are discounting thatcash rent to account for the fact that
the tenant is the one responsible forthe pivot, the upkeep, the insurance.
Third of the time we found 10to 25, and the remainder of time
we found it greater than 51.
One of the things that's so importantwith these irrigation leases.
And leases in general is communication.
(11:00):
That's why you talked about theimportance of knowing beforehand.
Who's responsible for the maintenance,how are we gonna discount the cash rent,
based on who owns the pivot, and so on.
We wanna make sure that that'ssettled, before we start irrigating,
because we all know that the timingof irrigation is so important.
You don't want to have any downtime.
You need to have a plan on howyou're gonna fix that pivot
(11:22):
in a very timely fashion.
Because when the crop needswater, it needs water.
You don't wanna be,delaying that decision.
That's right.
Landlords may not always trustthat the tenant is properly
maintaining the power unit.
Diesel engines are probably themost common from what I see.
Sometimes when people have accessto a natural gas or propane service,
(11:43):
especially natural gas, you haveto be near the pipeline for it.
If the tenant provides the power unit,the thing that's actually pumping the
water, how much would you take offthe cash rent to account for that?
So the way we look at it, it's abouta third of the time in Nebraska, the
discount is between one to $9 and anotherthird of the time it's between 10 to 20.
What I've seen more often than not,based on our phone calls from our
(12:06):
extension offices, we take off 10 to$15 an acre is a pretty common discount.
So if the irrigated cash rent's 300an acre, the tenant provides the
power unit, we would might be payingan effective 2 85 or even two 90.
We are discounting that cash rent toreflect the contribution of the tenant.
So we gotta keep track of all thesedifferent items and who's paying for that?
(12:29):
So in net, if you as a tenant, if youprovide both the power unit and the pivot,
your discount might exceed $50 an acre.
In Nebraska, a new irrigationsystem installed, if you could get
it ordered and get it paid for,you're talking in excess of 120,000.
So here's a setup for a question weget in our extension offices, and they
(12:49):
usually happen in the dead summer.
It's still hot, the crop's growing, and,uh, the tenant ended up having to call the
local irrigation company to come work onsomething that they weren't able to fix.
And the landlord wasinaccessible to approve it.
They might've been on vacation,didn't answer their phone.
So who should pay that bill ifthe tenant went and contacted
(13:11):
someone to make that repair?
Well, ideally, another element of anirrigated lease is we need to specify
how the repair bill is handled.
If the tenant pays it, you might discountsome of that cash rent and it's not such
a big deal when you have small repairs.
But when you have big repairs,10, $20,000, we need to specify
(13:33):
how those expenses are handled.
Does a tenant pay it and get reimbursed?
If it's a large capital outlay, dothey discount the cash rent for the
next year, two years, three years?
Be someone you're working with overmultiple years we more often than not
see a kind of a deductible associatedwith using the irrigated ground.
The tenant's responsible for thefirst 500 to 1500 a year in expenses.
(13:57):
Anything that exceeds that, that's whenthe landlord steps in and pays that,
especially when it's below ground things.
The actual, well, the pump below theground, the quality of your water has a
definite, influence on the reliabilityand how often you have to rebuild
different components on that itself.
So we're gonna switch gears hereand talk a little bit about pasture.
(14:18):
Yeah.
the Purdue Cash Rent and Land ValueSurvey, again, does not currently contain
information on pasture rental rates.
And there's a couple different ways, Jim,you can think about pasture rental rates,
and we're gonna talk about both of those.
One is to think about it ona per ac a per acre basis.
So how much, you know, $50 peracre, for example, $75 per acre.
And, you know, how do to come up withthat, that figure, we'll talk about that.
(14:40):
You can also think about rental rateson a, on a cow calf pair That's right.
And in the Western Corn Belt, Nebraskaand Kansas, they, they talk about both.
Yeah.
But a lot of times they'll talkabout the rent for the cow calf pair.
So we're gonna talk through that too.
If you have rent for cow calf pairor maybe borrow the, the rental rate
from the Western Corn belt and adoptit, to Indiana, how would you use
(15:02):
that to come up with a reasonablerental rate for your pasture.
Yep.
Yeah, so let's, I don't have any slidesprepared today to talk about cow calf pair
rental rates, but we'll just go over that.
The idea behind a cow calf pairrental rate, so that's a stock cow
for one cow with a calf its side.
In Nebraska, the grazing season'susually about five months.
Based on rainfall and growing season.
(15:25):
In Nebraska this past year, we'veseen cash rents trail livestock prices
with cattle prices being higher.
We also saw, the cow calfpair rental rates go up.
In Nebraska, I remember in the centraldistrict, in our state, the central part
of the state, we had an average cow calfpair rental rate of about $70 a month.
If you're renting for the season, 70times five would be about $350 per pair.
(15:50):
And, in the lease you're goingto specify how many pairs you're
allowing out on a property.
Sometimes when you're renting bythe acre, you don't always specify
how many animal units or how manyhead or however, whatever the
measurement is that you're using.
Probably number a head, how many head oflivestock you might have out on there.
So that's one tip that youcan take from a cow calf pair.
(16:11):
So let's specify the animal units.
There's many different ways to figureout, I think have counted almost 10
different ways to figure out a cowcalf or a per acre, per animal unit per
month, per week, per day, per season.
What matters the most though iswhat is someone willing to pay and
what is someone willing to accept?
I like that the cow calf pair rentalrate starting there and then thinking
(16:32):
about how many acres per cow do we needfor that cow calf pair, and then getting
the rental rate from that information.
The reason why I like that in Indianaand for states similar to Indiana,
where you don't have as many cattleand so there's not a plethora of rates.
You can't go to your neighborand say, well, what are you
renting your pasture for?
Their neighbor might not have any pasture.
They might mean obviously being apasture within miles, of your pasture.
(16:54):
And so, in that particular case, usesomething from an area that has a
lot of cow calf pair rental rates.
Again, Nebraska, Kansas, $350 per acre.
Look at the acres per cow.
Divide the 350 by the acres per cowand get a rate per acre that way.
Yeah.
Having said that, there is some USDAnumbers on, cash rent, county estimates.
And talk, so talk a littlebit about that, Jim.
(17:16):
Yeah, so those folks that are justlistening today, you can't see this
image, but I'm pretty sure we'll probablybe posting some of these at some point.
The slides, and you can find this.
The USDA annually releases inlate August, their county level
cash rent survey estimates.
For in Indiana, there's limitedirrigated as well as grazing
land in addition to dry land.
I think they have a rate foralmost every county in the state.
(17:38):
A breakout that we havehere varies significantly.
we had a low, you know, dollars peracre of 21.50 an acre all the way
to a high of 107 in Delaware County,down to 21.50 in Switzerland County.
My guess in this state isanything that's grazing land is
basically things you can't farm.
So is there some factoror feature to the ground?
(17:59):
Is it a wet parcel of ground that,you know what, it doesn't make sense
to farm it or there's limitations infarming it, but it makes it absolutely
greater, phenomenal grazing land.
Some wet ground, some rough ground.
And I would guess some of the higher ratesthat we have on our map here in the state
probably reflect some areas that havepretty good crop land, but also don't
necessarily have as much grazing land.
(18:19):
Another consideration here,and, I don't know if you collect
this on your survey or not.
I know Kansas has a littlebit of information on this.
Is services provided?
The big one is water.
is there water in that pasture?
And if there's not, how are you gonna,how are you gonna cover that cost?
And so how good, how, howgood a quality is the water?
Is it, is it a stream?
is it, is it a windmill?
(18:40):
What is it?
in terms of a water source,.
That's also very important.
we're gonna talk a little bit aboutfences, but also fence maintenance.
So talk a little bit about those items.
You know, how you can think aboutthose when you're renting a pasture.
What I tell people, so the first questionis always, who's responsible for upkeep?
Control of noxious weeds, unwantedbrush, and just not shade trees.
(19:00):
Livestock needs shade, good shade trees.
There's nothing wrong withthat, but things that are
almost noxious weeds in a way.
Who's responsible for that?
The thing we always tell peoplein our meetings from what we can
tell based on our phone calls,it's always the other party.
It's always someone else.
It's not me, it's them.
Well, I try to relate this back.
Imagine you're or gonna be living offcampus outside of Purdue University
(19:20):
here, and you're someone that'slooking to rent a, an apartment or
a home with some of your friends.
When you initially rent a property.
Well, we need to make theassumption it has decent fencing.
It has a secure water source thatunless it's extremely dry, that's good
safe water for the livestock to drink.
Weeds are at a minimum, unwantedthistles or whatever might be out there.
(19:42):
Same way with just when yourent a residence here in West
Lafayette, you wanna rent a propertythat's fairly well maintained.
It's easier to get someoneto maintain something.
It's easier to negotiate that into thelease if the property is well maintained.
Basic upkeep on the fencesand that big of a deal.
If you're a new tenant and yousee that the fence is already well
(20:02):
established, you have to do a littlebit of work after it snows or something.
But it's not that bad.
If the fence is dilapidatedand falling over.
That's where we need to probably stepback and come up with a plan materials,
major materials, if you have to replacea quarter mile fence or whatever the
distance is, those materials are alandowner expense because if the tenant
vacates, they're not gonna remove a fivewire or three wire barbed wire fence.
(20:26):
Now, in addition to the fence, if theyare using their equipment, skid steers,
tractors, whatever, to establish thatfence, maybe we need to be looking
at discounting that cash rent forthe next year or three years or five
years or whatever period of time.
you know what you want to charge,but you discount it to account
for the value of that time.
same way if you have someone with a skidsteer that goes out there and shreds on
(20:48):
unwanted brush or whatever the materialsare that aren't desirable to be grazed.
the one sticking point that I see mostcommon is, thistles or noxious weeds.
Your tenant might be the bestperson in the state of Indiana
when it comes to maintaining weeds.
If your neighbor is not, especially ifyou have running water sources or wind
(21:09):
or whatever, those things continuallyspread onto your ground and you might
think it's the fault of your tenant.
we need to have somebody, if someone canfigure out how to automate a drone to only
spray noxious weeds and pastures, theycan become a very wealthy person, right?
Yeah.
But, what I tell people on herbicideexpenses, at least in Nebraska, if you
have a situation where the tenant'swilling to do the work, but you're in
(21:31):
an area where there's a high pressure insome of these unwanted factors related
to forages, let's come up with a cashrental rate where we maybe cost share
with the tenant if you're a landowner.
To split some of those expensessurrounding herbicides or
whatever control measures you'reusing to control those things.
So those are kind of the big three.
(21:52):
Fencing, water supply and control,noxious weeds, unwanted brush,
whatever you have out there.
and if you're doing those kinds of things,then all of that impacts the rental rate.
Yes.
And so if the tenant is responsiblefor maintaining those weeds and
there's no cost share on herbicide,he shouldn't be paying as much,
in terms of renting that pasture.
If he's responsible wholly for thefencing, he shouldn't be paying as much.
(22:14):
Another factor that we sometimestalk about, you talk about, you know,
various regions, corn belt and also theplains is, the quality of the grass.
we get into it is it native,is it improved pasture?
What is it?
but also just some simple things likeeyeballing it and say, is that fair?
is that good?
And maybe make someadjustments related to that.
I actually have some of that froma, an animal science professor
(22:35):
here at Purdue provided me with.
Provided me with some information aboutan adjustment factor related to the
quality of the grass, and that's builtinto, the pasture and hay ground leasing
publication that's now on the Centerfor Commercial Agriculture website.
And so, and that's why I likethe, I'll go back to the cow calf
pair I like that lease becausea lot of times in that lease.
(22:56):
You dictate the stocking rate.
One of the problems with a peracre lease is you really need
to talk about the stocking rate.
The last, if you're a landlord and you'rean absentee landlord in particular, you
need to, you need to know how many animalsthey're putting out there, whether that be
sheep, goats, cattle, whatever it may be.
You need to know that so thatit doesn't become a, a, you
(23:16):
know, good grass to poor grass.
Right.
I think it's an obvious thing, butit's something you need to think
about, very, very carefully whenyou're thinking about pasture leases.
My final comment I've seen on pasture, andI don't know if it's this present here in
Indiana, especially in the ranching areasin Nebraska, people are getting older.
The average age of ranchersexceeds the age of farmers.
(23:37):
If you have a situation where someoneis taking livestock in, meaning, hey,
you have someone that wants to bringstockhouse in from a neighboring area.
The cash rental rates the USDA, assumethat the landowner is not providing
any services related to watching thelivestock, making sure they're staying and
putting mineral and salt out or something.
If you're someone that owns grazing land,You're not necessarily taking cattle
(23:59):
in, but you're pretty darn close to it.
Maybe due to your age or health,you don't want to own the livestock.
But in the summer you can go out thereand do some of these different services,
Michael mentioned, that can provideadditional cash rent to you, especially
if that person, all they have to dois drive the cattle off and then come
back in the fall and pick 'em back up.
Or only have to come and visitthe property once a month or once
every other week or something.
(24:20):
And I could see that coming up, a pastureis limited in Indiana, and if you have
someone that has a, has a decent sizedcow herd, they may have to go quite
a ways, for some of that pasture.
And so just having the landlord orthe landlord lives locally, just
checking to see if the cattle are in.
Yeah.
I know there's people, I knowpeople in Nebraska and Kansas that
actually pays someone, you know, acertain dollar per acre, to do that.
(24:42):
Yeah.
because they don't liveright next to the cattle.
It's several miles away.
So yeah, those are veryimportant considerations.
We don't talk about it extensivelyin our survey, the USDA survey of
Indiana, but, grazing, corn stockgrazing rental rates for livestock.
some of the cash rental rates that wehave reported go from what degree of
services does the landlord, do you haveany type of fence around the property?
(25:03):
I would assume here in Indiana witha heavy, heavy row crop present that,
you know, people that do graze cornstalks, there's nothing wrong with
grazing corn stalks, but, the value maynot be quite as high as Nebraska is.
There would definitely be some moneyexchange hands though, in some cases.
Yeah.
So you have to pay something for that.
It also comes up, and I know this comesup in Nebraska too, if you are, if
maybe you're, you're renting your, someof the grass is related to cover crop.
(25:27):
I mean, we don't have as much grazinga cover crop as Nebraska would have,
and that's one of the disadvantages wehave, in terms of cover crop is we don't
have those opportunities, because wedon't have, near as big a cattle herd.
But, talk a little bit aboutthat, how that might work.
Yeah.
So treatment of grazing of covercrops in the monetary perspective
is fairly similar to corn stalks.
It can go from anything from free,especially when you get into some of
(25:50):
these years when you have a bunch ofdown corn that even after you combine
it, bailing a corn stocks is a littlebit more of a concern with the amount of
nutrients removed relative to livestock.
Livestock than nutrient cycle ascattle roam through there, especially
use the old ranchers adage,you graze half, you leave half.
If you, now there are ways toover graze corn stalks and some
of that, and you overgraze.
(26:11):
But, cattle are a great, especially incover crops, it's a great way if you have
to terminate it, cattle can easily doa fair amount of, you know, utilize the
forage and then almost kill it off in away, depending on how heavy you graze it.
And, kind of in summary on some of the bigthings when it comes to grazing land that
we need to negotiate different things.
(26:31):
specifying the stocking rate's critical.
The big three disaster.
One of my colleagues always used tocall it was fire, hail, and drought.
If you have to have an earlyremoval of that property,
what happens to the cash rent?
So we need to specify that.
And I do think in Indiana there's probablystill a fair amount of hunting and green.
How do you treat that crop?
Land lease versus a pasture lease?
(26:52):
Pasture leases, you're usuallytalking just the summertime.
Cropland leases is more of ayear round deal where you have
off season operations occurring.
And sometimes people that own that ground,maybe they don't hunt themselves, but
they have a relative or extended familymember that really wants to hunt it.
Just make sure youcommunicate in that lease.
Maybe the tenant that's running theircows out there and need to remove their
(27:14):
cattle two weeks before the deer season'cause somebody has to set up their
deer stand or whatever the case is.
Just make sure you understandwhat's going on out there and
what do you wanna have occur.
As a little side note here,something to watch for if you're
driving through Nebraska is theamount of cattle you have grazing.
Yes.
On corn stalks, even on I 80,which is a pretty flat, pretty flat
(27:34):
highway compared to most of Nebraska.
It's just unbelievable how manycows are grazing those corn stalks.
And so if you get a chance to drivethrough Nebraska, check that out.
We're gonna go ahead and, talk ingeneral about, calculating cash rent.
Yeah, so one common question areextension offices, I'm sure they get 'em
here too, is what's the county yield?
(27:55):
Well, within the last year or two,the USDA Risk Management Agency pushed
forward a website, if I was on Googleor some search end, do a search for
something like USDA county yield report.
You can look by county, bycrop, by production practice,
irrigated, non irrigated.
And what we do in this example, we'retaking a look at basically modifying a
(28:15):
county cash rental rate and discountinga little bit to reflect a property.
So we are looking at the countywe're sitting in today had an
average crop yield over the lastfive years of 217 bushel per acre.
We also took a look and it just asa side note, the Purdue Farm Real
Estate Survey and report also hassome of this information on the idea
of what we call rent per bushel.
(28:37):
Just be aware that the PurdueFarm Real Estate Survey and
report does report on it.
And what we start with iswe had our average five year
yield was 217 bushel per acre.
If you divide the two of thosetogether, that gives us what is
called the county rent per bushel.
What the county rent per bushel means isa dollar 38 per bushel is going towards
(28:58):
what it's going towards paying the cashrent, and the farm real estate survey for
Purdue has some very similar estimates byquality of land and things of that nature.
We're gonna take that a dollar 38a bushel from dividing the county
rental rate or the regional rentalrate by at the county yield.
And on our farm that we wannarent, in this example, it only
yields a 202 bushel per acre.
(29:19):
It's not as productivefor whatever reason.
And you could come, that numbermight come from the APH, the actual
production history from crop insurance.
You might look at the last three years,the last five years, whatever the APH
or your yield expectation for theproperty, we come up with a farm level
(29:40):
cash rent of $278 and 33 cents per acre.
The idea is we are stepping down whatwe know on the left hand side of this
slide where it's stepping down ourcounty rental rate and we're stepping
it down to the farm level cash rent.
If a landlord calls me and asking somegeneral questions related to rent, I of
course point them to the Purdue survey.
(30:01):
In particular, I point themto this rent per bushel.
And then my next question is, what is a,what is a typical corn yield on your farm?
There's quite a few landlords don't knowthat, and so that's something they're
gonna have to ask their operator.
But really to, think aboutcash rent intelligently, you
really need that information.
What's my corn yield?
you know, what's the rent per bushel?
(30:23):
With that, I can come up with a, atleast a first estimate or guesstimate,
of what the cash rent, should be.
There's other factors, of course, thatmay come in there, but it gives you a,
a kind of a first impression, of whatthat ground, might, might be worth.
And so I, I really like that method.
And one of the things that we do inthe Purdue survey that I'm so glad they
started doing in the mid seventies.
is when we have a professionalfarm manager or an appraiser,
(30:46):
give us land values and cash.
We ask them.
Okay.
on that track that you're looking at,we're calling it average productivity.
Average productivity isnot the same to everybody.
Mm-hmm.
What I call average may not be the same.
What, what someone else calls average.
And so we ask for the associatedcorn yield with that rent and
land value that they're giving us.
And we have them do that.
(31:07):
For what they consider top,average and poor quality.
We ask for that information.
Use it, when you're trying to thinkabout cash rent, for your farm
or for different tracks of land.
I think that's a reallygood way of doing that.
Also you wanted to talk a littlebit about, crop share leases.
Yes.
So what are some sources of informationwhen we think about crop share leases?
You bet.
(31:27):
And one thing I wanna plug on,some folks that you may have never
heard of, county rent per bushel.
Especially in Iowa, they talk aboutthe CSR, the corn suitability rating.
They do a very similar idea onthe corn suitability rating when
it comes to setting cash rent.
But it's just that it's a productivityvalue that you're trying to encompass
the good, the bad, and everything inbetween on the features of the ground.
(31:49):
And how does that tie into theultimate output being the yield.
Now our second idea for settingcash rent here is called cash
equivalent from crop share.
So let's say we set up anexample under a 50 50 crop share.
Split, meaning the landlord getshalf the yield, but they also
get half the seed, fertilizerand chemicals or the pesticides.
And on their survey, they took a look at.
(32:11):
I pulled, the fertilizer seed andpesticide expenses, so if you added all
those up together on a corn rotation, soI believe that was corn soybean rotation.
If you add the two of thosetogether and divide that by two.
So I said the landowner gets halfof that yield, so about 108.5
or about 109 bushel per acre.
And this is an examplewe're trying to do for 2026.
(32:33):
I thought fall of 2026 corn mightbe worth, let's say 4 46 a bushel.
So the landowner's getting halfof the crop revenue per acre.
And in addition to that, they're payinghalf of the big three from the prior
slide, half of the seed, fertilizer,and chemical or pesticide expenses.
And the difference between thosetwo, we given before the farm ER
(32:55):
landowner has to pay real estate taxes.
regardless of his crop share or cash rent.
The difference between those twothat gives us what the landowner
anticipates, they'll make the netreturn to the owner, 2 58 91 an acre.
Now, if you look through the, ourexample, we have set up, we can
look at March, we can look at July,and then we can look at November.
(33:17):
Once you pay the inputs in the UnitedStates, once you pay the inputs,
that's a fixed expense for that season.
You can't get a refund on your chemicals.
But once that seed is planted,the fertilizer is applied.
Those are locked in forat least that season.
So we let the cat and the yieldis probably gonna be different
than what you exactly anticipated,although there's less yield
variability in Indiana than Nebraska.
(33:38):
But anyways, we go through theexample and we let that price vary.
We go from 4.46 to 3.92 to 4.27.
The idea is depending upon whenyou're negotiating those things.
Your cash rent, what you think it couldbe or should be is probably gonna vary.
Do you know what your property yields?
Do you know what the yieldto price expectation is?
That's probably the point of consternationbetween the landlord and tenant because
(34:01):
they have different expectations.
Maybe you understand the expense side,but you think the price of corn's gonna
be 5.46 a bushel or whatever the price is.
Who knows?
So this is one way to estimate cash rentsfor the upcoming 2026 planting season.
We wanna switch gears here alittle bit again, and we're, we've,
(34:21):
focused on, irrigation leases.
irrigated crop leases.
And then we, talked about pasture leases.
Now I wanna talk, briefly abouthay market, price or hay leases.
And one of the things that Irecommend using, is to have some
idea of what the hay yield is.
and also the hay market prices,and we can use that information
along with some typical shares, tocome up with some rental values.
(34:42):
I think that's a verylogical way, to do this.
So walk us through the exampleyou've got on your slides.
So the USDA has a divisionscalled AMS, Ag Marketing Services.
And the thing I'll point out on the USDAhay report for Indiana there, from what
I could see, there were two hay auctionsthat they reported on, and I think
they report every other week, or one'sone week and one's a following week.
(35:04):
Depending on where you're livingat in the state, you might
pull from a neighboring state.
If you're in southern Indiana,maybe you're gonna pull from, I
don't know, Tennessee or something.
just be aware that depending on whereyou're at in the state, you might
have to look at a neighboring statebecause the number of sales might be
low certain times throughout the year,and it's a resource that you can find
online that you don't have to payanything or have a subscription through.
(35:25):
The example report we pulledtogether here, we took a look at,
pulling together some price ranges.
And the one interesting thingthat stood out to me when I looked
through the prices of mixed, whatthey call mixed hay, grass hay.
Prices in Indiana this year are abouttwice what they are in Nebraska.
So obviously there's some, distance.
You can't move hay, unlimiteddistance like you can a grain.
(35:46):
It's not as compact, but we use theprice, based on the USDA report here.
Yes.
and so if you do have a cow herd, notonly you have to go further to probably
get some pasture for all your cows.
You probably have to go ways to gethay if you're not producing yourself.
And so it's a more challengingsituation when it comes to pasture
and hay, in Indiana for the cow capproducer than would be, in Nebraska.
Plus we actually got rain this year.
(36:07):
Yeah.
Two years that we've had in some areasfavor very favorable rainfall amounts.
So in this example, we take that cashequivalent from crop share and we apply
it to cash equivalent from hay share.
We know we wanna work together,we just don't know what we
should charge for cash rent.
Maybe it's an odd shaped field.
Maybe it's on the side of a hill.
That's why we don't crop it.
(36:28):
So let's say this field yieldstwo and a half tons per acre.
Maybe you cut it once, maybeyou cut it twice, who knows?
But if you get two and a half tonsper acre, we have two situations.
We could do a one third, two thirdsplit, or we could do a 50 50 split.
So the landowner's gonna get,a third in the, one example,
half the yield in the other.
And, based on the prices,you can't see this if you're
(36:48):
just listing the long today.
Well, we used a price of $190 a ton, solet's make the assumption it's pretty.
Fairly good quality hay.
And, under the one third, twothird expense or split crop share
or hay share, the landowner isnot paying for any expenses.
On the right hand side, let's saythey put down $50 worth of fertilizer
with the tenant and they also spent,$20 on sprained some noxious weeds or
(37:12):
something, so they invested $70 an acre.
Remember, we split half theseed fertilizer chemicals.
So the landowner's gonna take off $35under the 50 50 split because they have
to share in some of those expenses.
So the hay gets put up,you bail everything.
You count the number of bails, thelandowner gets a third, and the one case
(37:32):
they get half the bails then the tenantturns around and says, listen, why don't
we go weigh some of these and why don't Ijust haul these off and write you a check.
Cash equivalent from hay share.
We're taking the yield.
And depending on how much thelandowner invested, they are
getting an effective cash rent.
They get a gross check divided bythe number of acres, and that's
how we figure out the cash rent.
(37:53):
I'm using a very similarcalculation in my pasture and
hay ground leasing publication.
In fact, I use a onethird, two thirds in there.
very similar to the example,that you talk about here.
I think it makes a lot of sense.
You know, what's theyield, what's the price?
How much income are we getting from that?
If we don't wanna share expenses, thatcan be difficult, to do in some Cases.
So we don't wanna share expensesthat one third, two thirds is a
(38:16):
good way to do it, and we can comeup with a net return, to the owner.
Now, when you're thinking aboutthe maximum amount of money.
That you'd be willing topay if you were an operator?
It should be obvious that, if you'relooking at the market rent for poor
quality land, hay should be under that.
Yeah.
And so if I'm in an area where mypoor quality land's getting $200 hay
should be something south of that.
(38:38):
And, it's not uncommon at all to see.
20, 30% discount, from hay groundcompared to crop land because
some hay ground's, hay groundbecause it's an odd shaped piece.
It's only a few acres.
It's just not suitable forcropping, for whatever reason.
So that's why it's hay ground.
Well, it shouldn't rentfor as much as crop land.
And so if you're landlord, just rememberthat you're not gonna get the same rent,
(39:00):
not even in some cases, not even closeto the same rent as you'd get if you
were, growing wheat, corn, or soybeans.
So just to summarize, we'vetalked today about irrigated
leases, irrigated crop leases.
pastor leases and hay leases.
before we leave this conversation,I think we'd be remiss if we
didn't mention Ag Lease 10 1.
This is an excellent, website.
(39:21):
The North Central Farm ManagementCommittee put this together years ago.
there's information in here aboutthe different types of leases,
vantages disadvantages of fixed,flexible, crop share leases.
It, there's, there's alsoinformation about pasture leases.
if you're thinking about leasingcows, there's a publication
on cow leasing in there.
some very useful general informationabout leases and probably of more
(39:43):
interest, to the listener hereis there's also some lease forms.
Now, don't use these blindly, but therecertainly gives you a place to start.
Yes.
And even if you trust your landlord.
Remember, you probably aren't gonna trusttheir probate judge if they're someone
that's in advanced age and they pass away.
That's why we always wanna get a lease.
And a good lease is just not forthe protection of the landowner.
(40:04):
It is for equally for theprotection of the tenant.
And if you sign a five year lease withsomeone that's in their nineties, that
lease is in effect until it is terminated.
So just make sure you get whateveryou wanna do, get it in writing.
You can go see a privateattorney, you can get, Ag Lease
101 is a good place to start.
I've seen it's a fairly, youknow, four or five pages long.
(40:25):
I've seen people cross out sections withtheir landowner and they both date it and
initial it when they sign the lease toacknowledge certain sections may not apply
to their situations, but it's a good startif you don't want to go see an attorney.
And we always recommend writtenleases, but in particular, a couple
different leases that I think it's soimportant that, that are written down.
(40:45):
One of those is flex leases.
if you have a flex crop lease, there'sso many different ways, to set the
trigger and to set the bonus paymentsthat you definitely want that in writing.
The other one is pasture.
Yes.
I think it's so important to havethese pasture leases in writing
because you need to know stocking rate.
You wanna make sure that they're notoverstocking or even under stocking,
(41:06):
properly stocking, that pasture,make sure that that's in there.
you wanna make sure that there's somethingin there about services, you know, who's
gonna provide the services, who's gonna.
Fix the fence, who's gonna payfor the repairs of the fence?
And so, pastor leases, eventhough there's not, it's not as
much money involved per acre.
it's so important that there's,some things written down.
and so thanks Jim for joiningus today and, this was a very
(41:29):
interesting conversation.
Hopefully our listeners will equallyfind it, interesting as we do, we,
of course, we, you do a lot of leasemeetings in Nebraska and I do a lot
of lease meetings, here in Indianaand so we've tried to cover some of
the things that come up, when we'retalking to landlords and operators.
So that concludes thispodcast focused on cash rents.
I encourage you to take a look at that.
(41:50):
Also, we're have a separate podcastrelated to land values, I encourage
you to also watch, listen, check outthe slides, check out the written
material, related to land values.
Thank you for joining us.
Alright, very good.
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