Why plant a hay crop on your farm?
Every piece of farmland can have a specific use; some of these uses may be to grow perennial crops. In many cases, it is because the terrain is such that will prevent it from being used for a more typical annual cash crop in the area. In other cases, the farmer or the landlord chooses to plant and grow a crop that is of high value to them. Or the growing season just fits the perennial crop that is able to be grown and the markets deem this crop as valuable. Regardless of the situation, just make sure the farm lease agreement works for both parties.
I will not cover all the perennial possibilities today, but the one I do want to focus on is a hay crop. Hay is a very valuable crop in today’s market. With the demand for beef and dairy, growing a high quality forage can be very profitable. Hay is also a great crop to expand your crop rotation or even transition into organic. The reason you as a landowner must be sure you have the right tenant before that tenant plants a perennial crop is because it will take some time to establish and see profit.
New hay establishment and cost building it into your farmland lease.
The average duration for a hay crop from plant to termination is roughly eight years. It is not until the second year after establishment that the farmer starts to get a consistent yield. So as the farmer, making sure the farm lease agreement is long enough to see the amortization of your seeding cost is very important. Below is an example of hay seeding cost.
|Product||Rate in #/A||$/Pound||$/Acre|
|Seed Planting Cost||$15.00|
|Fertilizer-this is a rough estimate and great depends on soil quality||$130.00|
If you total this cost, you are looking at $314/A that needs to be amortized of five years. So the per year expense of seeding a new stand is $62.80/year. It is important that the farmer receives the number of years they need to cover these seeding cost. If not, then there is a reimbursement for the years he or she didn’t benefit from the expense. Make sure as you write the farm lease agreement that you include the buyout as a possibility when the relationship doesn’t go as planned.
Farmland is an investment
In some ways hay is not much different than any other crop on your farm, such as in land investments. What you do today, how you amend the soil, improve drainage, invest in irrigation, or add soil conservation tools, will all have effects long after the year of the investment. The difference between hay and an annual crop is with the annual crop, the farmer reaps the rewards in that growing season. The hay will be of value for many years to come. So when writing a lease agreement with a farmer who is want to grow hay, make sure you are working with the right person for a long-term commitment.