Crop Share Agreements Make Great Use of Farm Land
From medieval times, the concept of a tenant farming for a land owning lord has been a popular arrangement. People are almost like rental tenants upon the land they are working. Tenant farming is also known as sharecropping or crop sharing. The exact naming depends on whether the person moving onto the land has their own equipment or not. With crop sharing agreements, the land owner usually provides all the equipment.
Sharecropping is becoming a more exciting option for many people. The push to get away from urban areas and to learn more about nature has led to more sharecropping agreements. It gives people an opportunity to learn the farming trade without having to invest in the land. For the land owners, it allows them to have a revenue stream from land they might not otherwise have the time or manpower to work.
What is Crop Sharing?
The concept behind crop sharing is really quite easy. The owner of the land doesn’t actually spend their time farming it. Instead, their land is worked by a tenant. The tenant spends the time farming, often living on the land as they do it. From there, the land owner receives a share of the crops as payment for the use of the land. In many cases, the land owner will also provide seed, livestock, buildings and equipment with which the farming will take place. It depends on the agreement though. Some crop sharing agreements can differ. People who enter into crop sharing agreements need to consider the risks. Payment is completely coming from the harvest of the crop. This means that situations like droughts can lead to potential losses. Farming can be a risky proposition. A crop sharing agreement can spread the risk around a bit.
Setting Up an Agreement
It’s important to note that people who rent the land they are working on are not entering into a crop share agreement. They are just renters using cash. Crop sharing specifically needs to be completed and paid through a share of the crops that are grown. There are many factors that should be considered when setting up the agreement. Some of these include:
- Equitable Remuneration - Rewards from the harvest should be distributed based on the contributions of labor, capital and management that is provided. If the land owner is giving every piece of equipment, buildings and seed, then they should receive a higher, equitable share of profits.
- Unexpected Expense Planning - Typically, unexpected or variable expenses will occur. They should usually be shared between the two parties at the same rate that the crop share was agreed to.
- Long Term Planning - If a tenant provides payment for use of something extending beyond their lease of the property, they need to be paid for it. Lime for example lasts several years. If the tenant pays for it entirely, then the lease is terminated, they need to be repaid for the expected value.
- Flexibility - Quite simply, farming techniques are constantly evolving and need to be reevaluated. Crop share agreements should consistently be looked at to determine if it is making note of modern technologies or changes to agriculture. It’s possible that a standard agreement used a decade earlier may no longer be relevant.
A proper crop share agreement will make both the tenant and the land owner very happy and hopefully provide them with a nice profit!