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Nevada, Iowa | OK, I am just thinking out loud here, so if my stupidity shows through more than usual, there may be a reason (as if I need an excuse).
After reading your reply to my reply one thing stood out to me. I was thinking yield (although I didn't say that) and you were thinking price. Perhaps both have to enter into the equation. I read an article a few years back that was rather enligtening to me, if anyone is familiar with it, excuse me if I misspeak about it, I can't remember the author but I seem to recall that he actively farmed. Basically it outlined farm income as a rather constant figure in regards to having just so much net return every year. While the figure would change gradually over time and may have wild fluctuations, like the energy cost squeeze we are seeing now or price swings like '96, but there was usually just so much return every year on the average. In other words, short crop, higher prices-large crop, lower prices. While this doesn't always work this way it does seem to trend in that direction, at least I think it does "here" and apparently it did for the author.
Having said that, maybe the lease needs to tailored to the rare occasions when the tenant has large crop, higher prices-short crop, lower prices. How to achieve this is beyond me but maybe the same formula that determines crop revenue coverage for insurance purposes could enter into it. Doing this and keeping it simple and keeping the peace will be a monumental task. I really don't envy you but keep us posted if you can. | |
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Variable cash rent
