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2003
Table of Contents |
When a farm changes cropping practice from a two or three year rotation utilizing summer-fallow, to a annual cropping practice, dramatic changes take place in the cost of production percentage relationships between the landowner and the renter. The farm operator will incur more total variable expense because of the fact he will apply fertilizer, chemical, and seed every year rather than one out of two, or two out of three years. If the farm operator is successful and grows more total production in three years than he can utilizing summer-fallow, he will be able to recover the additional input costs. The fact that he will also be able to divide his fixed and overhead cost by more production will also help cover the additional variable input costs. The bottom line for the operator is that he must grow more total crop on a yearly average to cover the additional costs.
When land is changed to annual cropping the landowner will have a different experience. The owner will incur the same increase in fertilizer costs on a proportional basis, but will not share in the additional chemical, seed, or harvest costs. The owners fixed cost, (property taxes) stays the same. The bottom line for the owner is that it takes far less additional production to cover his additional costs than it does the operator.
The change in cost relationships mentioned above is the reason Sheffels Co. has changed it rental percentages this past year. On all annually cropped ground owned by the immediate families of Bob & Gil Sheffels the crop shares have been changed to effectively represent a 72% operator share, and a 28% ownership share. Our ownership also shares 28% of the fertilizer costs.
We make these percentage changes realizing that the additional production needed to be successful as a landowner will be far less than the additional production needed to be successful as a farm operator. Poor prices the past several years have masked the tremendous success we have had on a bushel basis. We realize this past success has been good for us as a operator, but it has been a windfall for us as a landowner. It is our intention to make our ownership more profitable as well as our operation. We believe the new percentages do this equitably.
The business side of direct seeding and annual cropping deserves discussion, but the conservation side of this practice is the part that I prefer to talk about. Your land will be better as time passes. Not just undamaged, actually better. Organic matter is on the increase, and erosion has been nearly non existent. I find great satisfaction in our change of cropping practice.
The following tables are intended to serve as a numerical illustration to quantify the points made in the above paragraphs. The numbers in these tables will obviously vary from farm to farm and from year to year. Although the actual numbers can, and will vary, the conclusion they show will not change. Annual cropping versus fallowing will benefit the landowner more than tenant under traditional lease shares as long as more total crop is produced over a full rotation period.
Table 1.
Overly simplified illustration of how annual direct seeding in a low-medium
rainfall zone, can change the economic experience of both the landowner and
renter when compared to a two year wheat fallow rotation.
Annual Direct Seed Crop-Fallow
Table 2. Comparison of tenant and owner shares of gross income, expenses and annual returns between a two-year rotation and annual crop direct seeding.
 Contact
us: Hans Kok, (208)885-5971
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