Analysis of Operating Alternatives
Leasing or operating alternatives are tailored to fit the farm and match your income, risk tolerance, and farm involvement goals. The basic leases we use are cash rent, modified 50-50 crop share, 75-25 crop share and custom farming.
- Leasing has become more popular recently as farming has grown more complicated and farm operators push to expand their acreage base. Most cash rent leases call for two payments per year. The only expenses paid by the owner are real estate taxes, land improvements, and repairs. Setting the rent and finding a financially capable tenant who employs good land stewardship techniques are major concerns when cash renting a farm.
50-50 Crop Share
- Is a long standing lease method where both the tenant and landowner share income and expense 50-50. This type of lease is declining in popularity because of relatively low income potential or is being modified to meet current economic considerations.
The Custom Share
- Provides returns similar to custom farming. The owner pays 100% of the crop expenses and receives 75% to 85% of the crop depending on the yield potential of the farm and operator interest in this type of lease. The operator receives 20% to 30% of the crop for his equipment and labor. This is a relatively new lease and is an attractive leasing alternative.
- Many of Stalcup Ag Service clients have switched to operating their land on a Custom Farming basis, which provides maximum control. The landowner pays all input and crop production machinery costs and receives 100% of the crop. Custom farming requires intensive on-site management and thorough knowledge of farming practices which a professional farm manager can provide. Custom farming usually provides the best return to landowners for their investment in farm management.
- Our services include consulting on management problems. We have completed various assignments in the consulting field; however, most involve review and recommendation of an operating plan for an individual farm. These may vary from lease analysis to a complete farm management plan for crop or livestock operations. A complete farm management plan includes a crop production plan, income and expense budgets, marketing plan, cash flow, and enterprise analysis. These are detailed reports covering the entire operation including utilization of existing buildings and/or recommendations for the addition of new buildings to make an efficient economical operation.
Unique Management Fee System
Fees for crop share and custom operation are based on adjusted net crop income, a fee system offered by very few farm management firms. This arrangement has a basic fee of $2.00 per acre plus a percent of the net crop income based on the size of the farm. Net income is derived by subtracting seed, fertilizer, insecticide, herbicide, crop drying, storage, crop insurance, and trucking costs.
This is a more equitable method than the gross income fees most firms use.
- No management fee other than the basic fee is due until crop income exceeds crop expenses.
- It provides incentive for your manager to control costs while maximizing income for you.
- Crop input costs continue to rise each year resulting in silent fee increases under gross fee systems as expenses become a larger percentage of farm income.
- Our net fee system reduces fees 15% to 20% for our clients over common gross fee rates.
Realistic Cash Rent Management Fees
Although there are many important issues for a manager to handle with a cash rent lease, our time requirements are less without the day to day responsibilities of growing and marketing crops. To fairly reflect our reduced time input, our cash rent management fee schedule is approximately one third less than other lease arrangements.
We believe you will find a favorable advantage if you compare our fee schedule to other farm management companies.
Financial Reports & Cash Flow Budgets
A farm checking account is established in a bank as directed by the client or your farm manager can arrange for a farm account set up at a bank in Storm Lake.
Quarterly operating statements and inventory reports document all income and expenses.
Year end reports provide complete financial accounting, inventory, marketing intentions, proposed changes in the operation, plans for next year and other pertinent information. This will give you complete information for tax preparation and also keeps you informed of your farm’s business affairs.
An annual cash flow budget is prepared for each farm in January. This allows the manager to analyze profitability of the planned operation and project cash flow. By analyzing projected cash flow, we can inform our clients when to expect profit distributions or when additional capital will be needed to finance the farm operation or planned improvements.
Progress reports are provided quarterly updating you on crop conditions and other projects taking place on your farm. Our goal is to keep our clients fully informed and involved in their farm investments.
Crop production and agriculture is a constantly changing business that requires constant attention to ensure success.