Farmers can choose from a variety of rental agreements
By Kaitlynn Anderson
As the demand for Canadian farmland continues to grow, producers may be looking for unique agreements to obtain access to more land for their operations.
Currently, the market is shifting toward cash rental agreements, which involve payment for a fixed term.
“Some possible reasons why we are seeing a shift toward cash rental agreements include: easier management of crop inventory, shift in risk tolerance for both for the land owner and the renter, and ease of contract,” said Craig Klemmer, a principal agricultural economist with Farm Credit Canada.
However, another form of agreements that producers may consider is the crop share lease.
These leases, although not as common as cash leases, allow tenants and landlords to share input costs in return for a pre-determined share of the harvested crop, according to OMAFRA.
Typically, the involved parties determine the rate of this share with the contribution approach, which “uses the estimated costs or contributions of the tenant and landlord to determine the crop share ratio,” OMAFRA says.
The parties’ shares in the total return (i.e. harvested crop) is usually in proportion with their contributions. Common divisions include a one-third share for landowners and a two-thirds share for operators, or a one-quarter/three-quarters share.
Producers may choose to engage in a crop share lease if they want to share management decisions or any risk associated with growing crops, according to OMAFRA.
Regardless of which rental structure producers choose, the market for farmland continues to thrive.
“When we think about Canadian agriculture, overall, the industry remains healthy,” said Klemmer.
“As a result, demand for farmland — either for purchase or for rent — remains strong across Canada. There are going to be pockets that are influenced by local trends but, at the aggregate, the market remains well supported.”
Strong and stable farm revenues and historically-low interest rates contribute to the strength of the market, he said.
For more information on the different types of lease agreements, visit the OMAFRA website.