What are the most common rental arrangements for crop land?
What is an average price for a cash lease?
What is a reasonable crop share split?
Do I need a written agreement?
Where do I find more info?

What are the most common rental arrangements for crop land?

The two most common types of lease arrangements are the crop share and cash lease arrangements. There are many other options, such as formula or flexible cash leases, or combination cash and crop share.

In the last Census of Agriculture, 21 per cent of the rented land in Saskatchewan was under a crop share arrangement. As the name suggests, a crop share lease is where the landlord and tenant share the revenue from the land, with both parties sharing in the risk of production and price. With extended rotations and increasing costs of production, it is common for the landlord to share in the cost of some inputs, but if the landlord shares in the input costs, the landlord receives a higher share of the revenue. In many calculations, a 20:80 (landlord: tenant) share, with no sharing of inputs, is reasonably close to a 33:67, where the landlord pays for 33 per cent of the crop input costs. It is this sharing of risk that is the biggest advantage to the tenant. Another advantage of a crop share lease for the tenant is that the rent is usually not paid until the crop is sold, which may reduce cash flow problems. One of the difficulties is that administration is more complicated, as production needs to be accounted for separately.

A cash lease arrangement is the most popular arrangement in Saskatchewan. The advantage to the landlord is that the rent is fixed and will not decline in poor production years. The “fixed” rent is also an advantage to the tenant, as the rent is known before the season starts. This allows the tenant to do much more accurate income projections. The advantages to the tenant are that, typically, less rent is paid if high value crops are grown and production is normal, and there is less chance for conflicts with the landlord (timing of seeding, timing of harvest, etc). Lease administration is also simplified.

Other arrangements such as a flexible, or formula cash, lease try to make a compromise between the two most common systems. Both parties share the risk, and it is the degree of the shared risk that changes. With this method, the value of the grain or the yield or both can be fixed or left to “float” with actual production or prices. Other arrangements may have a portion of the rent being cash and a portion being crop share. Other leases may incorporate a cost of production formula, where the tenant receives, for example, the first $100/acre of income. If there is more revenue than this, the landlord receives the next $25/acre (or some set amount) of income and any balance to the tenant, or it may be split. If the arrangement is too complex, it becomes unworkable.

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What is an average price for a cash lease?

Markets and yields in the past years, as well as the upcoming year, local competition, land quality, and many other factors will greatly influence the bid price. As such, there is great variability from one location to another in what is paid. Based on a 2002 survey conducted by SAFRR, cash rents ranged from $4.29 to $51.30 per acre. An updated survey is being conducted at present.

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What is a reasonable crop share split?

 In the past, the traditional share was 1/3 of revenue to the landlord and 2/3 to the tenant, with no sharing of inputs. Today, it is much more common to see 25:75 or even 20:80 shares with no sharing of crop inputs, or 33:67 if crop inputs are shared. Extended rotations and high input costs are changing this relative share. The SAFRR publication Crop Share Lease Agreements explains how to determine a ratio that is fair to both parties.

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Do I need a written agreement?

Oral agreements are legal, but leave a lot of room for misunderstanding. It is strongly recommended that you put the agreement in writing and have it approved by your lawyer. Even within families, misunderstandings can arise. People sometimes forget details or assume that others know what they had in mind. Spelling out the details in a written agreement can prevent a lot of problems. Both the Cash Lease Agreements and the Crop Share Lease Agreements publications contain a sample lease agreement with alternative clauses, which can be used to customize your lease agreement. The more time you spend drafting a lease, the less time it takes your lawyer to prepare the final copy.

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Where do I find more info?

Agriculture Knowledge Centre at 1-866-457-2377 or on our website for the following publications:

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