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| Reward brings risk. If he wants a bonus, base rate should be lower. There's no reason for you to have same amount of risk in putting in a crop, but your reward be split with him. I'm always very blunt with landlords about that. If they want top dollar, we can work that out but that's all it is. If they will back off a little on their base rate, I will work a bonus structure with them.
My bonus structure is based on making as much money as them. If I'm paying a base of $175, I split everything with them after I make $175. Final yield times insurance price. If the Feb price is higher use that, if higher during "HPO" time, use that. Yield times insurance price less rent, seed, chemical, fertilizer, fungicide, and a flat $80 for labor/overhead. Example (rough numbers)....
200 bushel
$4 insurance guarantee
-.20 basis (pre-negotiated)
=$760 gross
175 rent
100 seed
40 chemical
120 fert
80 labor
25 fungicide
=$540 expenses
760-540= $220, I get my $175 to equal his return so $45 left. He gets 1/2, $22.50/acre
I have 2 landlords who are on this program. They got a bonus this year, didn't last year. Both were happy both times.
I figure the expenses as best I can, it's not always perfect.
Edited by kst1 1/4/2019 12:59
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cash rent with a little extra
