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RSS By: Chris Barron

Chris BarronHave a margins question? Through this blog, you will gain insight into improving your bottom line, as a margins expert answers questions and provides farm business advice.

 

Crop Share Analysis Tools

Feb 15, 2012

 

Crop share arrangements are becoming more popular, as cash rental prices for land continue to climb. Over the course of the next several blogs, I'll address a number of different situations where producers have asked about tools designed to analyze different types of sharing situations.
 High commodity prices over the past several years have obviously increased profitability. Many landowners are looking for creative ways to participate in the profits including, custom farming, shared percentages, variable leases, and other kinds of unique arrangements.
Another scenario I see developing among producers and/or landowners is where each individual takes a percentage of the farm in order to share equipment, management skills, and reduce their overall risk.
The first example we’ll review in this blog is of three producers sharing percentages on one farm. I was asked; “Is there a tool which could calculate different percentages for a grandfather, father, and son.” This producer didn't have any way to analyze their situation, but he knew it was critical to accurately document the process.
There is a fair amount of “production partnering/crop sharing” occurring and/or being considered. This process requires specialized analysis tools. These tools can be built simple, yet comprehensive. A clear understanding of cost of production, yield prospects, pricing opportunity, and ultimately the bottom line, provides tremendous value when multiple people are involved.
Here is an example of the tool I built for three farmers partnering on the same farm with different percentages of ownership. This tool will accommodate any percentage for each individual, along with each person’s different market price.

Price/Bu. Avg.
$6.03
 
Complete the Yellow Boxes
Yield
180
Total Bu.
36000
 
Acres Total
200
Corn
Crop Type
 
Drier/Bu.
$0.24
Drier/Ac.
$43.20
 
Hauling/Bu.
$0.23
Hauling/Ac.
$41.40
 
Storage
$0.05
Storage/Ac..
$9.00
 
Total Bu.
36,000
14,400
14,400
7,200
Acres
200.00
80.00
80.00
40.00
Name
Farm Total
Grandpa
Dad
Son
Price/Bu.
$6.03
$6.23
$6.02
$5.85
% Share
100.0%
40.0%
40.0%
20.0%
Land
$300.00
$120.00
$120.00
$60.00
Tax
$0.00
$0.00
$0.00
$0.00
mgt.
$50.00
$20.00
$20.00
$10.00
Int.
$15.00
$6.00
$6.00
$3.00
Ins.
$25.00
$10.00
$10.00
$5.00
Seeds
$110.00
$44.00
$44.00
$22.00
Fert. Lime
$95.00
$38.00
$38.00
$19.00
NH3
$115.00
$46.00
$46.00
$23.00
Herb.
$25.00
$10.00
$10.00
$5.00
Insect.
$14.00
$5.60
$5.60
$2.80
Mach.
$135.00
$54.00
$54.00
$27.00
Dry
$43.20
$17.28
$17.28
$8.64
Haul
$41.40
$16.56
$16.56
$8.28
Stor.
$9.00
$3.60
$3.60
$1.80
Expense / Ac.
$977.60
$391.04
$391.04
$195.52
Expense Totals
$195,520.00
$78,208.00
$78,208.00
$39,104.00
Income / Ac.
$1,086.00
$1,121.40
$1,083.60
$1,053.00
Income Total
$217,200.00
$89,712.00
$86,688.00
$42,120.00
Margin / per/ac.
$108.40
$143.80
$106.00
$75.40
Margin    ROI
11.1%
14.7%
10.8%
7.7%

If you're interested in a copy of this spreadsheet send me your request.
In the next blog I'll feature a spreadsheet designed for two partners which would be adaptable for landlords and tenants both.
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