Story & Photos by Amy G. Hadachek | Cuba, Kan.

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January 28, 2013
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Developing agricultural leases

Farm-savvy Margaret Nobert of Clyde, Kan., is a landowner and active senior citizen, who has more than one agricultural land tenant, and wanted a broad idea of different cash rents. Her blond hair elegantly coiffed and dressed in a lavender suit, Nobert was one of several women joining three dozen farm landowners and tenants at a Kansas workshop on developing agricultural leases, in mid-January. She listened intently and took copious notes.

“I want to know how the local area is determining their cash rents, or cost shares. The quality of land is different. Also, who is responsible for what, whether it’s a fence on pastureland, or the liability of an old well on crop ground where a custom combiner was combining,” Nobert shared.

Jerry Stump, a dryland farmer and landowner from Belleville, also appreciated the workshop January 15th, given by the River Valley District of Kansas State University Research and Extension Service in North Central Kansas.

“I came mainly to learn what others are doing,” he said, looking up from under his hunter-green ballcap.

While many attending the seminar were landowners, Galen Deneault of Concordia, Kan., was one of the handful of tenants at the seminar.

“It was educational. I learned a lot about what my landlords can tell me,” Deneault grinned.

With lease publications one of the most requested materials at Kansas County Extension offices, the two-hour informative free session was held for the public in Concordia, Kan.

“We get so many questions on ‘how to get an equitable rate for cropland and pastureland leasing’ so we wanted to provide good data and sound decision-making tools to producers and landowners,” said John Forshee, District Director for the River Valley Extension District.

It’s estimated that more than 50 percent of Kansas farmland and pastureland is rented. Forshee recommends producers transition from oral agreements, to a written lease, which is a contract for the exclusive use of land for a specific period.

“Oral leases are not enforceable for more than one year. Kansas law states that oral leases end March 1, however written leases terminate as specified,” stated Forshee.

Some agribusinesses use basic cash leases, which set a flat rental fee for the use of the land, while other farmers and ranchers in Kansas prefer a crop-share or flexible rent lease. Ranchers raising livestock may choose a per acre cash rate, per head cash rate, per pound of gain rate, or a number of other agreements.

Not only does a written contract protect both parties to the agreed-upon terms in it, but Forshee advises, that if a farm or pasture lease is not in writing, then certain provisions in Kansas statutes automatically then become part of the lease.

“We also suggest putting long-term investments, like fencing ponds, terraces and perennial crops into the written lease,” added Forshee. He notes for example, that a farmer who established a stand of alfalfa on rented acreage, needs to be guaranteed to have the lease for a number of years to insure he´d get a return on his investment.

With the number of absentee landlords growing, since some live out-of-town, subsequently one or two generations of the farm family are removed.

“So now this next generation, who may have inherited the land, wants to be knowledgeable when negotiating with their tenants. Also, investors are buying farm ground as an investment, and these are also reasons that a written agreement is needed,” noted Forshee.

Since, in some agreements, rental rates may not have changed in several decades, Forshee recommends both sides discussing these rates, yearly.

He also said families working together, benefit from written agreements.

“Too often, we assume too much. To avoid misunderstandings, it’s important to communicate so that each person feels they’re treated fairly,” said Forshee.

Landowners should also be aware Kansas statute says, that in order to terminate a lease, it must be in writing, and delivered to the tenant at least 30 days prior to March 1.

“Be especially careful to count the actual days, and not make the mistake of giving notice February 1, since February does not have 30 full calendar days,” advised Forshee, noting in that case, it would then allow the contract to cycle around to the next March, the following year.

“Previously, this applied to cropland, but now it also includes pastureland; land used for haying and grazing,” said Forshee.

There are two exceptions. The first would be if the land has already been planted to a fall-seeded crop, which instead would result in the official end date after harvest or August 1, whatever comes first. Another exception is a year in which fall-seeded crop has been, or will be harvested. In that case, Forshee says written notice can be given after 30 days prior to March 1, but before a new fall-planted crop is sowed. If that crop ground has already been prepared for the fall sowing, then termination would be the following year, either the day after that crop is actually harvested or August 1, whatever comes first.

The Kansas Legislature also has statutes regarding certain noxious weeds, which state it’s the responsibility of all landowners and tenants to control and eradicate the spread of those weeds on their land. The most problematic weed issue in North Central Kansas is musk thistle.

As landowners and tenants review leases, it’s recommended they also hone in on other provisions which have specific language, such as the words: life estate, which mandates that a lease cannot extend longer than that person lives.

Also recommended, are shorter leases.

“If both the landowner and the tenant feel they’re fairly treated, they’ll have a better long-term relationship,” said Todd Whitney, River Valley Extension District-Crops Agent. “Where we’re having rapid change in commodity prices, volatility and risk, we suggest writing just a one or two-year lease.”

As Whitney delved into his slide presentation, he pointed out the vast difference between the range of cash rates for dryland versus irrigated land in North Central Kansas, noting irrigated land typically has resulted in double the price.

“Markets can go up or down, so cash leases, particularly flexible cash agreements establish a guarantee, in which both sides benefit,” said Whitney, adding, “In the next couple of weeks, be thinking about your decisions.”

Newly available, is the wheat cost-return budget, in the region, for farmers and ranchers.

Addressing new technology, is another recommendation from Whitney. Some of the newer systems make available additional information about soil fertility and PH management.

“Consider how you can incorporate newer technology like Precision Agriculture’s yield monitor and digital information,” said Whitney.

Due to the drought last year and a deficit of rain, one of the latest buzzwords is the 2013 stocking rate, and the need to decrease it. The stocking rate is the amount of cattle that can be put on a piece of land for a certain amount of time.

“The landlord and tenant should talk about water and stocking rates,” suggested Robin Slattery, River Valley Extension District-Livestock Agent, during her presentation at the Cash Lease workshop. “Leases need to include flexibility for drought conditions that could persist this year,” Slattery told the crowd.

Water sources could be a problem this year.

“That’s because ponds that we’ve relied upon in the past, are starting the year with a deficit,” Slattery cautions. If you have a pasture lease, it may be wise to talk to the landlord ahead of time about options, such as hauling water or using a well.

“Have a drought management plan in writing, and include trigger dates to evaluate grass production and rainfall totals,” Slattery said. “Consider early weaning, selling yearlings and replacement heifers, or cull mature cows, if the stocking rate needs to be reduced during the grazing season.” She acknowledged the last resort is complete liquidation.

And then, there’s the Kansas Fence Law. Kansas is a “Fence-In” jurisdiction.

“Adjoining landowners should reach an agreement on how fencing can be built or maintained equally, even if one of the landowners does not own livestock,” Slattery added.

Also, there is no ‘going rate’ for leases since there are many differences in types of pasture, and arrangements for water, fencing, weed control and other factors.

“They all need to be individually negotiated so they’re equitable for both the landowner and tenant,” Slattery advised.

Finally, leases need to follow ethical practices.

“It’s not about who needs the income. That is irrelevant. A written contract is the right thing to do. It fosters good communication, so that nobody is taken advantage of,” recommended Forshee. “Failing to plan ... results in planning to fail.” ❖

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The Fence Post Updated Oct 16, 2013 02:50PM Published Mar 18, 2013 12:36PM Copyright 2013 The Fence Post. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.