March 9, 2026 • 8 mins
Graham Butcher looks at some figures to keep in mind around farm leasing.
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Speaker 1 (00:02):
This interview is brought to you by Agricenter South Branches
in Lawnville, Gore, Cromwell, Milton, and Ranfurly.
Speaker 2 (00:09):
Drop by your local agri Center South Brunch.
Speaker 3 (00:11):
Today Graham Butcher Farm Consultant joins us once again in studio.
Speaker 2 (00:19):
How are you. I'm very well, indeed got your jersey
on today.
Speaker 1 (00:22):
I have had to dig it out at the bottom
of the coboard.
Speaker 2 (00:25):
Leasing. Talking about leasing today quite a bit to entail.
Speaker 1 (00:29):
Oh, Leasing's always a topic that comes up. I get
frequent calls from people saying what's the leaseworth? And basically
you say, how long have you got to discuss that?
So I just thought i'd talk briefly about leasing, about
how you should go about doing things. So what I
(00:49):
did is top the beef and lamb Class six and seven,
and U said, as a base for what production levels
are like and all that sort of thing and gross
incomes and what have you, because it's been rend now
for quite a while, that leasing probably should be around
twenty to twenty five percent of your gross farm income, right,
So that's a base that's been there for a number
(01:11):
of years, and as we know, gross income's are gone
up quite a bit, so got hold of the Class
six and Class seven latest report, and they have Lambs
still at one eighty one fifty six stores at one
hundred and twenty six, use a one hundred and five
well at two thirty or two dollars thirty three, quite
a bit below where they actually are at the moment,
(01:32):
but that's not unusual for the beef and Lab seven.
They take a wee while to catch up with what's
actually happening because they're not there every day doing stuff.
So I looked at it, and I said, they're probably
twenty percent below where they actually out right now. So
we're a Class six farm and that's the bigger Hill
country farm. Your stock unit income, according to Beef and
(01:52):
Lambs one hundred and sixty four a stock unit. This
is your gross farm income, but really it's probably closer
to one hundred and ninety six. So take that, take
that as a figure and apply you twenty to twenty
five percent of your gross farm income. So we actually
need to think about what stock units are running on
the farm to do that. So at ten to the
HEC dere at to twenty percent mark, it's three ninety two.
(02:15):
The HEC there well, if you're thinking acres, that's one
hundred and fifty eight an acre. If you go to
twenty five, it's four ninety and that's one hundred ninety
eight an acre.
Speaker 2 (02:25):
How many people still work in acres?
Speaker 1 (02:28):
Well, well I can count one. I still think better
in acres and.
Speaker 3 (02:31):
He oh, we just a default mechanism almost although Greg
Erickson now correspondent in Canada from my movement, they work
in bushels over there for measurement.
Speaker 2 (02:39):
Well there you go anyway.
Speaker 1 (02:40):
So well, if we take that class six farm and
go up to eleven stock units, we range from four
thirty eight to five thirty nine a hec there. If
we go to twelve stock units, it was probably a
bit unusual for a class six it's four sixty eight
to five eighty eight. So on that particular class six
farm we have, depending on what stock units you're caring,
and depending on whether you use twenty to twenty five percent,
(03:02):
could be anywhere between one hundred and fifty eight and
two thirty eight an acre. If we go to a
class seven farm, the gross farm incomber stock units one
hundred and eighty eight eighty I reckon it's closer to
two twenty six for that class seven farms, And if
we go through that whole drama again, going from ten
to twelve stock units in twenty to twenty five percent,
(03:22):
it could be anywhere between one hundred or four fifty
two a hectre and six hundred and seventy eight a hectare. So,
when we look at the class six and seven farms,
and sometimes they overlap, but it's a bit hard to
decide which is which. The range we get for our
twenty to twenty five percent gross income could be anywhere
between three ninety two a hectare and six seventy eight
(03:44):
a hectare, right, and that depends entirely on the stocking rate.
If you think an acre is better, it's one hundred
and sixty to two seventy five and acre. So if
people bring me up, that's probably going to be my
standard response is what's the least worth? I'll say anywhere
between one hundred and sixty and two seventy five and acre.
So I suppose the most important thing about tendering for
(04:05):
release is not to think about what other people are bidding.
You're not trying to outbid a neighbor who's got perhapss
to fill up a labor unit from point eight to
one and all that sort of stuff. We need to
sit down and do a very serious budget on what
you can do. You've got to work out what stock
you can carry, what it's going to cost you to
(04:26):
run it, what your necessary profit is, and that's left
over as the lease and it'll probably forward between our
somewhere between one's sixty and two seventy five and acre.
But you can't tender for a lease on the basis
that you need to outbid someone else to get it.
Very dangerous ground.
Speaker 2 (04:46):
To start on Dutch oction.
Speaker 1 (04:48):
Well, well, it is because you take a case of
a neighboring farmer, it's on the boundary of the lease.
He might have two stock units on the farm at
work for one point eight He can run that farm
a lot more efficiently than you can if you're fifty
k's away or have to shift or have to align
an income from that farm for drawings. So don't out bid,
(05:12):
be very serious about how you do your budget, and
a few other things are taken into account too. If
you're leasing, it's a bit of a risk when you
have to buy stock and sell stock at the end
of a lease, if you buy them, if you have
to go in and buy stock now to do a lease,
what's the price going to be when you need to
sell or can't do anything else with them, but sell
(05:34):
at the end of say five years, you could take
a bit of a hiding. In other cases, if you
were if you leased five years ago, I bought stock
and selling them now great, Probably the money in the bank.
So that's always a fact you to consider. So the
key point is do your own budget. Make sure you
allow for a profit, because the only point about having
(05:56):
a lease is having more cash at the end of
the day than when the lease started. So be very critical.
See if you can get stockholding capacities of farm. Look
at the farm, what are the sal tests like, what
are the pastures like? What can I reasonably do on
this farm and make a profit. Don't think about what
someone else can do on the farm, because it won't work.
Speaker 2 (06:16):
And the opportunity may arise least to buy down the line.
Speaker 1 (06:19):
Well, yeah, that can be cased. Often lisas have right
a first option to purchase at the end. Yeah, on
two minds about that. From the less o's point of view,
it's probably a bit of a hindrance having something like
that in there, But from the less e's point of view,
it's probably quite good.
Speaker 2 (06:35):
Well, lease thinking benefit both parties as well.
Speaker 1 (06:37):
Well, it's got to be a win win, that's what. Well,
that's my other comment about leasing. It's got to be
a win win. The less has got to make he's
got to achieve his objectives and so to the less see. So, yeah,
it's quite interesting to look at the option of leasing
and to purchase. Got some figures here somewhere. If we
(06:58):
say lands worth fifteen hundred hectare about thirteen to fifty
a stock unit or about eleven fifty or thirteen sixty
three yere stock unit, there's a hectory of land to
lease that. Let's say it's five to fifty year stock unit.
There's your annual cost of the of cost of your
ability to farm that land. If we go and buy it,
(07:18):
and we have sixty percent equity, so we've got nine
thousand we can put in, and we borrow six thousand
to buy it five and a half percent on the
six thousand you buys three hundred and thirty and there's
an opportunity cost of that cash you're putting into it.
You're sixty percent, you're nine thousand a hectre, and it's
probably around about three percent, which is two twenty a hectare,
which is five fifty a hectare, which is exactly the
(07:40):
same as annual running cost of leasing. So if you
only got forty percent equity in the cost of owning
that land and the ability to farmer is six seventy
five a hectare, which is more than the cost of leasing.
So leasing is a pretty serious option for a farm
that wants to expand that hasn't got capital. It's also
(08:04):
a very good vehicle for young people who haven't got
haven't got a lot of capital, but want to get
into farming. But it all comes down to doing your budgets.
Speaker 2 (08:12):
Properly, due diligence.
Speaker 3 (08:15):
Absolutely, get on your gram, always relevant, good times, totally good.
Graham Butcher, Farm Consultant. You're listening to the muster right
next Andrew Welsh twin Farm Genetics, the home of Tephron
This interview is brought to you by Agricenter South Branches
in Lawnville, Gore, Cromwell, Milton, and Ranfurly.
Speaker 2 (00:09):
Drop by your local agri Center South Brunch.
Speaker 3 (00:11):
Today Graham Butcher Farm Consultant joins us once again in studio.
Speaker 2 (00:19):
How are you. I'm very well, indeed got your jersey
on today.
Speaker 1 (00:22):
I have had to dig it out at the bottom
of the coboard.
Speaker 2 (00:25):
Leasing. Talking about leasing today quite a bit to entail.
Speaker 1 (00:29):
Oh, Leasing's always a topic that comes up. I get
frequent calls from people saying what's the leaseworth? And basically
you say, how long have you got to discuss that?
So I just thought i'd talk briefly about leasing, about
how you should go about doing things. So what I
(00:49):
did is top the beef and lamb Class six and seven,
and U said, as a base for what production levels
are like and all that sort of thing and gross
incomes and what have you, because it's been rend now
for quite a while, that leasing probably should be around
twenty to twenty five percent of your gross farm income, right,
So that's a base that's been there for a number
(01:11):
of years, and as we know, gross income's are gone
up quite a bit, so got hold of the Class
six and Class seven latest report, and they have Lambs
still at one eighty one fifty six stores at one
hundred and twenty six, use a one hundred and five
well at two thirty or two dollars thirty three, quite
a bit below where they actually are at the moment,
(01:32):
but that's not unusual for the beef and Lab seven.
They take a wee while to catch up with what's
actually happening because they're not there every day doing stuff.
So I looked at it, and I said, they're probably
twenty percent below where they actually out right now. So
we're a Class six farm and that's the bigger Hill
country farm. Your stock unit income, according to Beef and
(01:52):
Lambs one hundred and sixty four a stock unit. This
is your gross farm income, but really it's probably closer
to one hundred and ninety six. So take that, take
that as a figure and apply you twenty to twenty
five percent of your gross farm income. So we actually
need to think about what stock units are running on
the farm to do that. So at ten to the
HEC dere at to twenty percent mark, it's three ninety two.
(02:15):
The HEC there well, if you're thinking acres, that's one
hundred and fifty eight an acre. If you go to
twenty five, it's four ninety and that's one hundred ninety
eight an acre.
Speaker 2 (02:25):
How many people still work in acres?
Speaker 1 (02:28):
Well, well I can count one. I still think better
in acres and.
Speaker 3 (02:31):
He oh, we just a default mechanism almost although Greg
Erickson now correspondent in Canada from my movement, they work
in bushels over there for measurement.
Speaker 2 (02:39):
Well there you go anyway.
Speaker 1 (02:40):
So well, if we take that class six farm and
go up to eleven stock units, we range from four
thirty eight to five thirty nine a hec there. If
we go to twelve stock units, it was probably a
bit unusual for a class six it's four sixty eight
to five eighty eight. So on that particular class six
farm we have, depending on what stock units you're caring,
and depending on whether you use twenty to twenty five percent,
(03:02):
could be anywhere between one hundred and fifty eight and
two thirty eight an acre. If we go to a
class seven farm, the gross farm incomber stock units one
hundred and eighty eight eighty I reckon it's closer to
two twenty six for that class seven farms, And if
we go through that whole drama again, going from ten
to twelve stock units in twenty to twenty five percent,
(03:22):
it could be anywhere between one hundred or four fifty
two a hectre and six hundred and seventy eight a hectare. So,
when we look at the class six and seven farms,
and sometimes they overlap, but it's a bit hard to
decide which is which. The range we get for our
twenty to twenty five percent gross income could be anywhere
between three ninety two a hectare and six seventy eight
(03:44):
a hectare, right, and that depends entirely on the stocking rate.
If you think an acre is better, it's one hundred
and sixty to two seventy five and acre. So if
people bring me up, that's probably going to be my
standard response is what's the least worth? I'll say anywhere
between one hundred and sixty and two seventy five and acre.
So I suppose the most important thing about tendering for
(04:05):
release is not to think about what other people are bidding.
You're not trying to outbid a neighbor who's got perhapss
to fill up a labor unit from point eight to
one and all that sort of stuff. We need to
sit down and do a very serious budget on what
you can do. You've got to work out what stock
you can carry, what it's going to cost you to
(04:26):
run it, what your necessary profit is, and that's left
over as the lease and it'll probably forward between our
somewhere between one's sixty and two seventy five and acre.
But you can't tender for a lease on the basis
that you need to outbid someone else to get it.
Very dangerous ground.
Speaker 2 (04:46):
To start on Dutch oction.
Speaker 1 (04:48):
Well, well, it is because you take a case of
a neighboring farmer, it's on the boundary of the lease.
He might have two stock units on the farm at
work for one point eight He can run that farm
a lot more efficiently than you can if you're fifty
k's away or have to shift or have to align
an income from that farm for drawings. So don't out bid,
(05:12):
be very serious about how you do your budget, and
a few other things are taken into account too. If
you're leasing, it's a bit of a risk when you
have to buy stock and sell stock at the end
of a lease, if you buy them, if you have
to go in and buy stock now to do a lease,
what's the price going to be when you need to
sell or can't do anything else with them, but sell
(05:34):
at the end of say five years, you could take
a bit of a hiding. In other cases, if you
were if you leased five years ago, I bought stock
and selling them now great, Probably the money in the bank.
So that's always a fact you to consider. So the
key point is do your own budget. Make sure you
allow for a profit, because the only point about having
(05:56):
a lease is having more cash at the end of
the day than when the lease started. So be very critical.
See if you can get stockholding capacities of farm. Look
at the farm, what are the sal tests like, what
are the pastures like? What can I reasonably do on
this farm and make a profit. Don't think about what
someone else can do on the farm, because it won't work.
Speaker 2 (06:16):
And the opportunity may arise least to buy down the line.
Speaker 1 (06:19):
Well, yeah, that can be cased. Often lisas have right
a first option to purchase at the end. Yeah, on
two minds about that. From the less o's point of view,
it's probably a bit of a hindrance having something like
that in there, But from the less e's point of view,
it's probably quite good.
Speaker 2 (06:35):
Well, lease thinking benefit both parties as well.
Speaker 1 (06:37):
Well, it's got to be a win win, that's what. Well,
that's my other comment about leasing. It's got to be
a win win. The less has got to make he's
got to achieve his objectives and so to the less see. So, yeah,
it's quite interesting to look at the option of leasing
and to purchase. Got some figures here somewhere. If we
(06:58):
say lands worth fifteen hundred hectare about thirteen to fifty
a stock unit or about eleven fifty or thirteen sixty
three yere stock unit, there's a hectory of land to
lease that. Let's say it's five to fifty year stock unit.
There's your annual cost of the of cost of your
ability to farm that land. If we go and buy it,
(07:18):
and we have sixty percent equity, so we've got nine
thousand we can put in, and we borrow six thousand
to buy it five and a half percent on the
six thousand you buys three hundred and thirty and there's
an opportunity cost of that cash you're putting into it.
You're sixty percent, you're nine thousand a hectre, and it's
probably around about three percent, which is two twenty a hectare,
which is five fifty a hectare, which is exactly the
(07:40):
same as annual running cost of leasing. So if you
only got forty percent equity in the cost of owning
that land and the ability to farmer is six seventy
five a hectare, which is more than the cost of leasing.
So leasing is a pretty serious option for a farm
that wants to expand that hasn't got capital. It's also
(08:04):
a very good vehicle for young people who haven't got
haven't got a lot of capital, but want to get
into farming. But it all comes down to doing your budgets.
Speaker 2 (08:12):
Properly, due diligence.
Speaker 3 (08:15):
Absolutely, get on your gram, always relevant, good times, totally good.
Graham Butcher, Farm Consultant. You're listening to the muster right
next Andrew Welsh twin Farm Genetics, the home of Tephron
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