CONSIDERATIONS BEFORE

SIGNING A CASH LEASE

PRESENTED BY:

ALLEN LASH

agrisolutions.com

877-372-3003

Agenda

• Before even talking with landowners

• Can you handle more acres?

• What crops will you grow?

• Lease type

• Determining rent amount

• Key non-price components

BEFORE TALKING TO

LANDOWNERS

It’s All About Knowledge

“If you can’t measure the desired result, you can’t manage to the desired result”

Managing to targeted profit levels

Management of personnel and area performance

Enhancing asset performance

Controlling costs

Change Behavior

Achieve Goals!

Participation (Corn, Beans, Wheat)

AgIQ® 2011 (All States)

Profit Center Revenue Acres Total Bushels Yield Average Yield

CORN

183,253

28,113,817 153.4

BEANS

109,602

4,875,793 44.5

WHEAT

26,825

1,616,629 60.3

Grand Total 319,679 34,606,239

Graphic

AgManager Data Compliance

AgIQ® has strict guidelines for

managerial data to be in compliance with Industry Standards

Data Quality safeguards

Accounting processes

Data Review process

Data Review filters

Final Review process

Can You Handle More Acres?

Topic (Consideration in parentheses)

Equipment (Usually yes)

Labor (Hopefully yes)

Financially – working capital (Need 25% of revenue or

assured risk management plan)

Managerially (Glass ceiling issue)

Control systems

5 Year Plan Number of Acres

Close in/Pods/Distance

Who is Responsible

Management

Dashboard

WHAT CROPS

WILL YOU GROW?

Corn

Financing CORN - Net Margin Before Taxes

99.90/Acre

Soybeans

Financing SOYBEANS – Net Margin Before Taxes

$56.08/acre

$43.82/acre less than corn

Wheat

Financing WHEAT – Net Margin Before Taxes

<$1.70>

Wheat's Long Losing Streak Monday 06/04/12

Key Non-Price Components

Terms (100% spring, 50/50 Spring &

Fall)

Multi-year contract

First/Last right of refusal

Ability to assign or sub-lease

Automatically renewable

Lease Type

Flat cash lease

Flex lease – base plus bonus based on:

FSA Issues

Yield

Market price

Revenue/Profit

Determining Cash Rent Amount

1. “Going rate” – This is worthless

2. Competitiveness determined by crop

3. Financial objectives

4. Costs - Critical

Important Variable-Fixed

Variety of tools available for this

5. Risk management – protect revenue

Land Characteristics

What is important to you?

APH – Very important in current environment

Soil quality (CSR, PI)

Size/Acreage

Location (how far is “too far?”)

Tiled/Irrigated

Shape

Land Characteristics

Grain storage available

Improvements to the parcel (fence rows, culverts,

access, etc.) if needed

Cropping/Tillage requirements of landowner

Landowner themselves

Indirect Expenses

Indirect Expenses

2011 Corn Sales – Profit Center

Managerial Report to date by Revenue Acre

Financing – Net Margin Before Taxes, Best to Worst

Average: Mean States: AR, CA, GA, ID, IL, IN, IA, KS, KY, LA, MI, MN, MS, MO, MT, NE, NY, ND, OH, PA, SD, TN, TX, WI, WY

All Sizes – All Farm Types

1. Comparison of direct costs less land rent by size

2. Comparison of indirect costs less land rent by size

3. Comparison of S, G & A costs less land rent by size

4. Comparison of __________

5. Total costs less land rent

Acre Size Group Entity Count by

Acre Size

Total Acres by

Acre Size

Average

# of Acres

0 to 500 29 27% 7,992 5% 276

500 to 1,000 22 21% 15,857 9% 721

1,000 to 1,500 21 19% 25,206 14% 1,200

>1,500 34 34% 125,295 72% 3,685

Grand Total 106 174,350 1,645

Corn 2011 Rankings by Net Margin before Taxes

0-500 500-1,000 1,000-1,500 1,500+

1-10 28% 45% 33% 15%

11-20 8% 10% 7% 5%

21-30

31-40 24% 32% 19% 35%

41-50 7% 4% 12%

51-60

61-70

71-80 52% 24% 53% 50%

81-90 14% 10% 1%

91-100

101-105

29%

22%

21%

32%

Best

Ave.

Poor

Thank You!

Questions?