Fair hay lease deal?

[Trainwrek]

We are currently negotiating to buy a hay field that is currently being leased to a neighboring dairy farmer. I'm not sure what the deal they have right now with the current owner is. It's very good quality grass/clover hay, about 70 acres nice and level.

I would like to make an arrangement with the same farmer but not sure what to ask for. I'm guessing ( based on our other hay field in the same area ) that he is getting between 8-12K hay bales off that field in a season ( 2 cuts ). That is based on small squares of course, I would guess that he is probably cutting large rounds. We need about 2k small squares ourselves. Thinking about asking for $1,500 plus 2k hay bales. Wondering if that seems fair. I can also cut the whole thing myself but really have no use for all that hay.

[DaleK]

Too much guesswork for a good answer however based on what things are woth here you're asking for about $7000 worth of rent, that's about double what grass/clover is worth here. Talk to him and see.

[Trainwrek]

Originally Posted by DaleK

Too much guesswork for a good answer however based on what things are woth here you're asking for about $7000 worth of rent, that's about double what grass/clover is worth here. Talk to him and see.

7k worth of rent, that assumes full retail value for the hay. In that case he is getting 30K worth of hay ( 10 thousand bales at $3 each ) so 7K rent doesn't seem so steep.

[Trainwrek]

If we cut the hay on a pure split with no money involved, what percentage of hay should the owner get?

[ksfarmer]

If he has all the expense and does all the work, typical around here is he gives you 30 to 40 % of the hay.

[CIW]

#'s of bales is a decieving value. My 2 strings of alfalfa weigh about 96 lbs. each. My grass will weigh 87#. A kicker will only weigh about 40#. So # of bales says nothing tangeable.
If it were me, I would do all my own work or pay outright to have it done for a few years. See just how the field performs. Take off what you need and sell whats left at market prices. If he wants to bale his own rolls. A role costs about $13 to roll up around here.
Who would fertilize? Who irrigates? (Assuming that it isn't dryland ground) Who pays the taxes? Who fixes the fences? Who gets the fall grazing? Is there one side of the field that is thicker than the other? (With thicker hay I use less diesel per bale.)
If I was selling hay by the bale, I would want to bale light. If I was buying I would want to buy by the ton and weigh each load. That way I pay for what I get.
Theres alot more information needed.

[Trainwrek]

Originally Posted by ksfarmer

If he has all the expense and does all the work, typical around here is he gives you 30 to 40 % of the hay.

OK thats about what I thought, that would be about 3000-4000 hay bales. I only need 2000 bales, so I would like to arrange for him to give me the remainder in cash. So what's fair to ask for? 1,500-ish?

[ksfarmer]

Originally Posted by Trainwrek

OK thats about what I thought, that would be about 3000-4000 hay bales. I only need 2000 bales, so I would like to arrange for him to give me the remainder in cash. So what's fair to ask for? 1,500-ish?

My thoughts would be to take the 2000 bales and then sell the remainder of your share to him at whatever the going rate for your area is.

[Michael W. Smith]

Originally Posted by Trainwrek

In that case he is getting 30K worth of hay ( 10 thousand bales at $3 each ) so 7K rent doesn't seem so steep.

And his tractor cost how much? And his baler cost how much? And his tedder cost how much? And his diesel fuel cost how much? And that isn't even saying anything about labor. If you think he is making that $30,000. bale it yourself and sell the extra and reap in the profits.

You first have to OWN the property before you can start deciding what you are going to get from the renter.

I would say your best bet would be to find out what the current deal is, and then go from there.

[Trainwrek]

Originally Posted by Michael W. Smith

And his tractor cost how much? And his baler cost how much? And his tedder cost how much? And his diesel fuel cost how much? And that isn't even saying anything about labor. If you think he is making that $30,000. bale it yourself and sell the extra and reap in the profits.

You first have to OWN the property before you can start deciding what you are going to get from the renter.

I would say your best bet would be to find out what the current deal is, and then go from there.

I'm not paying for his tractor and equipment. And my property cost ALOT more than his equipment, so I think I am entitled to a fair split.

[ksfarmer]

Originally Posted by Trainwrek

I'm not paying for his tractor and equipment. And my property cost ALOT more than his equipment, so I think I am entitled to a fair split.

Yep. I'm fairly sure yours isn't the only hay he uses his equipment on. You have property costs and taxes. Most renters don't have any problem with share rent, typically 70-30 or 60-40. May vary in different parts of the country. I rent out ground for 60-40, this means I also pay 40% of fertilizer and spray costs. Any labor, equip, and fuel expenses are his. I usually keep my share of the hay, although, he offers to buy my share if I don't need it. I'm responsible for hauling in my hay (Big Bales) but he will line them up at the edge of the field.
The other common method is cash rent, $'s per acre. But, in your case , you need a share of the hay. Your renter shouldn't have any problem with it.

[jbo9]

Do you have the need for dairy quality hay? Do you have the experience or equipment to put up top quality hay? Dairies can't mess around with quality. If the hay is off, production drops quickly, sometimes within 12-24 hours. And the difference between dairy quality and really good hay can be a rain shower, an overly hot day or a mechanical breakdown. Dairies pay a premium price for hay for a reason.

Unless you have a use for dairy hay, for the first year, I would look to continue the existing agreement, and use the income from that field to purchase the kind of hay you want.

[rambler]

Who reseeds, maintains, and fertilizes the hay field? That is a big big part of all this.

If you are keeping your land fertilized and up to snuff, then you are eh tilted to a bigger share of a more abundant hay crop.

If you just own the land and don't do a thing to keep it up and want to keep getting both money and hay from the neighbor, that deal will go sour in about 3 years....

One consideration is what happens in a year of crop failure hail, insects, and drought makes the crop a loss, you still expect to get 1500 bales while the fella gets nothing? While rare, how is that situation handled?

I'd be more comfortable with a regular split of the hay, and then sell back to him or others the hay you don't want. Those written in stone, "I get 1500 bales off the top and then we split the rest" deals often don't go well...... You are not really being fair with such a plan, or at least since you are garenteed your bales, you should get a smaller share of the rest of the bales because the farmer is taking a greater risk of getting any bales......

I'd say talk to the land seller after you buy it, see if you can find out the previous deal they had.

Years ago it used to be 50-50, but the cost of fuel, labor, and machinery has gone up quicker than land prices, so the 60-40 or 70-30 splits are more common now.

A better or worse deal will depend upon who is taking care of the soil with fertilizer, are you also splitting that 40-60, and who pays for weed and insect control, also 40-60? Otherwise you don't pay for anything, and you get more of a 30-70 split.

Another way of doing it is rent the ground to him by the acre, cash rent, and go from there.

Paul