source: Farm and Food Report
In today’s agricultural practices, a spirit of collaboration is sometimes what most increases efficiencies and contributes to mutual prosperity.
Established hay shares and the process that leads to them perhaps best illustrates this overarching principle.
Farmers often purchase standing hay from landowners because they need hay and have the equipment to cut it, while a landowner may have the standing hay but not the resources to bring it in.
The settlement may be made to the landowner as rent per acre or per ton, or the landlord may receive a share of the hay harvested. The settlement should relate to the quality of the hay, size of fields, yield per acre and condition of the field. Local market conditions are a primary factor in determining values.
The contributions approach, the cost approach and the income approach are procedures that can be used as guidelines to determine shares or a value for standing hay.
“The contributions approach recognizes the value that each participant provides,” says Richard Wharton, Production Economics Specialist with Saskatchewan Agriculture and Food. “The land owner covers investment cost and taxes, and usually the reseeding and maybe the fertilizer. The operator provides the machinery, fuel, labour, repairs, etc. The hay produced is then divided in the same proportion as the contribution.
“In the case of the purchaser, this might mean things like the fuel costs, the use and maintenance of the machinery,” says Wharton. “From that list, a total percentage of respective contributions is established and used in determining shares or a value for standing hay.”
For instance, with a calculated contributions ratio of 35:65, the hay purchaser could supply 35 per cent of the hay to the landlord.
“These arrangements are fairly common and can range from 1/3 to1/2 going to the landlord.” explains Wharton, “and they should already be in place as the time for the first cut nears.”
Hay share partners are encouraged to put their agreement on paper in detail and to specify things like dates by which hay should be taken off the field in order to avoid interpretive differences on both sides.
“If the landowner wishes to be paid out for his share of the deal, the date of payment should also be specified in this document,” adds Wharton.
“If it is later in the season and the price of hay becomes known, cost can also be used to set up hay shares,” adds André Bonneau, Forage Conversion Specialist with SAF. “For example, if hay is valued at $60.00 per ton, the landlord would receive $21.00 per ton, which represents 35 per cent of $60.00. The two parties should also work in some kind of risk adjustment, and factor in perhaps five per cent to compensate in case it rains considerably on the swath.”
A sense of fairness and partnership should govern any hay shares arrangement. According to Richard Wharton, that is not always the case.
“If a landlord should get a share of the hay, both parties should ensure that quality of the hay is taken into account in order to avoid the landlord getting the hay that has been laying under rain after the operator has picked up and stacked his share. In principle, this might mean that every third bale goes out to the landowner. In practice, it might translate into a gentleman’s agreement to allocate hay fairly, which might also be stipulated in the agreement on paper.”
There are always lessons to learn when crafting agreements and entering into partnerships like the establishment of hay shares. Laying out clearly the respective contributions of both parties and the terms of the agreement is the best way to ensure their longevity.
For more information about hay shares, contact the Agriculture Knowledge Centre at 1-866-457-2377.
For more information, contact:
Richard Wharton
Production Economics Specialist
Saskatchewan Agriculture and Food
(306) 694-3482
André Bonneau
Forage Conversion Specialist
Saskatchewan Agriculture and Food
(306) 694-3721
In today’s agricultural practices, a spirit of collaboration is sometimes what most increases efficiencies and contributes to mutual prosperity.
Established hay shares and the process that leads to them perhaps best illustrates this overarching principle.
Farmers often purchase standing hay from landowners because they need hay and have the equipment to cut it, while a landowner may have the standing hay but not the resources to bring it in.
The settlement may be made to the landowner as rent per acre or per ton, or the landlord may receive a share of the hay harvested. The settlement should relate to the quality of the hay, size of fields, yield per acre and condition of the field. Local market conditions are a primary factor in determining values.
The contributions approach, the cost approach and the income approach are procedures that can be used as guidelines to determine shares or a value for standing hay.
“The contributions approach recognizes the value that each participant provides,” says Richard Wharton, Production Economics Specialist with Saskatchewan Agriculture and Food. “The land owner covers investment cost and taxes, and usually the reseeding and maybe the fertilizer. The operator provides the machinery, fuel, labour, repairs, etc. The hay produced is then divided in the same proportion as the contribution.
“In the case of the purchaser, this might mean things like the fuel costs, the use and maintenance of the machinery,” says Wharton. “From that list, a total percentage of respective contributions is established and used in determining shares or a value for standing hay.”
For instance, with a calculated contributions ratio of 35:65, the hay purchaser could supply 35 per cent of the hay to the landlord.
“These arrangements are fairly common and can range from 1/3 to1/2 going to the landlord.” explains Wharton, “and they should already be in place as the time for the first cut nears.”
Hay share partners are encouraged to put their agreement on paper in detail and to specify things like dates by which hay should be taken off the field in order to avoid interpretive differences on both sides.
“If the landowner wishes to be paid out for his share of the deal, the date of payment should also be specified in this document,” adds Wharton.
“If it is later in the season and the price of hay becomes known, cost can also be used to set up hay shares,” adds André Bonneau, Forage Conversion Specialist with SAF. “For example, if hay is valued at $60.00 per ton, the landlord would receive $21.00 per ton, which represents 35 per cent of $60.00. The two parties should also work in some kind of risk adjustment, and factor in perhaps five per cent to compensate in case it rains considerably on the swath.”
A sense of fairness and partnership should govern any hay shares arrangement. According to Richard Wharton, that is not always the case.
“If a landlord should get a share of the hay, both parties should ensure that quality of the hay is taken into account in order to avoid the landlord getting the hay that has been laying under rain after the operator has picked up and stacked his share. In principle, this might mean that every third bale goes out to the landowner. In practice, it might translate into a gentleman’s agreement to allocate hay fairly, which might also be stipulated in the agreement on paper.”
There are always lessons to learn when crafting agreements and entering into partnerships like the establishment of hay shares. Laying out clearly the respective contributions of both parties and the terms of the agreement is the best way to ensure their longevity.
For more information about hay shares, contact the Agriculture Knowledge Centre at 1-866-457-2377.
For more information, contact:
Richard Wharton
Production Economics Specialist
Saskatchewan Agriculture and Food
(306) 694-3482
André Bonneau
Forage Conversion Specialist
Saskatchewan Agriculture and Food
(306) 694-3721
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