This series discusses the factors you should consider when renting your arable land. A flex lease is a way to share the risks and opportunities of a crop production system. Often, the formula can promise a basic cash rental price, often paid in advance, with a possible bonus at harvest, depending on the gross value (yield price) of the harvest rent. Flex tenants can receive much higher rents, perhaps better than some of the highest cash rents in the area. In the event of a revenue disaster, the tenant is only required to pay the basic interest rate. This option has become very popular in much of Michigan in recent years, as commodity prices have risen much more than most forecasts. The use of this type of agreement offered the landowner high bonuses. The rent for the bushel is delivered to the local elevator on behalf of the owner, which means that the landowner has the opportunity and responsibility to market the grain. When the selling price of corn is high, rental income to the landowner increases, while rental income decreases in lower price years. The landowner`s marketing capacity could significantly affect his income. The tenant and landowner must establish a schedule for the crops to be built and the bushels considered as rent for each of these crops.
In this agreement, the landowner does not have a production risk, but he presents a marketing risk. The most popular and widely used rental of arable land is the firm cash lease agreement. The landowner receives a fee set in advance, which must be paid by the tenant, regardless of the price of the harvest or yield. As a rule, the landowner is not involved in any of the management decisions and does not pay for any of the contributions. .