A lot of knowledge can help you. It’s when you don’t know the whole story that you can get shorted by someone, something, or a policy. The same goes for the land leases on the Nez Perce Indian Reservation. There are a lot of things that you need to consider before signing on the dotted line.
Gross Revenue Crop Share Leases:
In a typical Gross Revenue Crop Share Lease, you take a cut of the profits, and because it’s a Gross revenue crop Share; the total cost of farming expenses is covered by the operator-farmer. The original way this lease was set up back in the 30s-1950s was for 1/3 to go the Tribal land owner, 1/3 to go to the farmer-operator, and 1/3 to the maintenance and upkeep involved with farming; basically the expenses related to farming such as fuel, chemicals (fertilizer, pesticide), seeds and maintenance of farming equipment. The fight for 1/3-2/3 Crop Share Leases has been an issue since the 1950s when advocates argued that it was a fair deal for everyone involved in reservation farming.
So in a gross revenue crop share lease, your farmer should justify if they need more money for drainage or other requirements. If you don’t agree with your farmer but you want to be fair, you might ask for the farmer to open his books to you; you may ask him to show you his farm’s accounting books and show you where his expenses have gone before you sign any lease papers. A Gross Revenue Crop Share Lease is reflective of the profit available in that year’s market. Whatever the farmer can potentially make off his 1/3 crop share is exactly what the tribal landowner can make off his 1/3 crop share. For a Gross Revenue Crop Share Lease, in a bad year, we all suffer diminished returns on our crops. In a good year, for a Gross Revenue Crop Share Lease, we all share in the increased profit returns on our crops.
Cash Rent Leases:
If you make a Cash-Rent Lease you agree to a certain amount of money each year. That’s it. You simply make a minor profit. It is not based on any market. It does not fluctuate.
In a bad crop year, the farmer’s returns are not drastically affected by our cash rent. In a good crop price year, however, the large returns are not shared by everyone. In a really good year, if you have a Cash Rent Lease, you get your cash rent. That’s it. The profits are not shared equally when you have a simple cash rent lease.
You do not get to share in the amazing market prices. So if the price of wheat goes above $10 dollars a bushel like it did this year, if you have a Cash Rent lease, all you get is your cash rent. On the other end of your crops, however, your farmer can get a huge return because he paid you your cash rent, and now he can potentially go and market your crops at the $10 dollar per bushel rate. And if he had to pay on loans as we’ll see later, then the bank is making money off the crop by holding shares of wheat until the market is beneficial to them. In that case the crop just left the reservation along with all the profits.
Feeling like you missed out? Well, if you had a cash rent crop in effect this year, you did miss out on a potential gain. This year the price of wheat went over $10 dollars per bushel. What does this all mean?
It means that just this year alone you lost money in the above scenario on the table. Even if you got an up front cash signing bonus, is that just for this year? If it is then you lose money on every succeeding year. If your signing bonus is for every year, it better be for more than what you would make off a 1/3-2/3 crop revenue share lease. In the scenario in this table that means that your signing bonus on a Cash Rent Lease for everyone on the lease better make up $15, 166.67 dollars every year (or the amount you would receive at 1/3 of the total crop value).
The numbers are random in this table, but the formula is correct, and reflects a true return for 50 bushels per acre harvest on 100 acres when wheat was 10 dollars per bushel in 2007. The numbers are also only for a single tribal land owner. To be fair if you had five tribal owners then you would divide the “OWNER” amounts by five, or the total number of land owners. It is just meant in this form to magnify the division of profit going to the farmer-operator.
According to a United States Department of Agriculture publication released July 12, 2007 at http://www.nass.usda.gov/Statistics_by_State/Idaho/Publications/Producers_News/pdf/Crop%20Prod%200707.pdf Idaho’s expected winter wheat production for this year was up 59.9 million bushels, up 10 percent from last year. Harvested acreage of winter wheat yields, as of July 1, is expected to be 81.0 bushels per acre, up from last year's 77.0 bushels per acre. Producers with spring wheat are expected to yield an estimated at 68.0 bushels per acre, 5.0 bushels less than 2006.
So the estimation in the above table (at 50 bushels per acre) was obviously a conservative one. If you had a Cash Rent Lease, it should have considered the higher yields per acre that you would lose according to these more accurate statistics.
Summary
The main difference between Gross Revenue Crop Share and Cash Rent Leases:
Gross Revenue Crop Share Leases
· Full crop sales prices in good years are shared by everyone. (Good for Farmer and Owner)
· Bad years are shared by everyone, but impact of Tribal members is only 1/3 of the
total payout. (Good for farmer, and also guarantees tribal member 1/3 of any small profit made.)
Cash Rent Leases
· Full crop sales prices in good years are NOT shared by everyone. (Extremely good for farmer, bad for owner)
· Bad years are not shared by everyone, but impact of Tribal members’ cash rent is minimal (Fairly Good for farmer, and the Owner still ONLY gets their tiny cash rent payment)
So if you think about it, what’s the point of having a Cash Rent Lease when the good years’ profits are not shared by the Tribal Members?
In any year, farmers, without knowledge of the tribal member owners, may apply for Environmental Quality Incentives Program funding or technical assistance. This information can be found at http://www.id.nrcs.usda.gov/programs/eqip/eqip_how_08.html. Farmers make efforts at meeting the requirements for this program and they could get money for it. The checks from the Natural Resources Conservation Service under the United States Department of Agriculture go directly to the farmer. Now his costs of farming have been offset and you didn’t even know about it. His 1/3 for the costs of farming has just been partially funded by the Federal government. Does your lease stipulate that any and all federal program offsets be reported to all the land owners and divided up at 1/3-2/3 share?
When fields are burned, you save the farmer up to three passes over a field depending on the situation. So, now the farmer is saving gas he would have spent tilling and preparing fields. His cost has just gone down again. This is even more reason to pass on the savings under other programs, and another reason to stick to a 1/3-2/3 Gross Revenue Crop Share Lease.
Did all the crop get sent to the nearest licensed elevator? If it says so in your lease, the entire crop should be sent to the nearest elevator. That ensures accountability. How? Well, then no “estimates of total yield” are used to figure out what your 1/3 share is. If it all gets sent to the nearest licensed elevator, then the total yield is there to divide up.
If farmers “estimate” how much your 1/3 of the crop in the field should be and then send the rest (an "estimated" 2/3) to their own personal storage bins, true accountability cannot be attained. In other words, we’ll never really know if the tribal owners got an actual 1/3 of the total crop. This merely keeps honest farmers honest, and identifies questionable procedures on the part of others, like “accidentally” sending a truck from one “lot” (field) to the elevator and accounting for it under the wrong “lot,” which is how elevators account for crops since they don’t physically see the fields and the crops cut on different fields. Even if the farmer is farming honestly, if the lease says the entire crop goes to the nearest licensed elevator, then, in all honesty, that’s what should happen. Any land owner can call the elevators and ask for the total amount of the crop sent to the elevator labeled under their lot. That will tell you if the entire crop was sent there.
Don’t feel like you’re the only one who missed out though. If a farmer requested a loan from the bank last year and did not allow time for the crop to be marketed, then as soon as the grain was cut, the banks were right there demanding money. As a result some farmers were forced to sell their grain at $6.00 per bushel before the full market potential was realized.
Agriculture is an extremely volatile market with a lot of pitfalls. Everyone needs to be market savvy and stay on top of the prices, leasing and loan provisions, and your rights as a land owner.
Another very important thing to remember when signing your lease is to either check yes or no to the question on the lease of whether the farmer can market your crop for you, if it’s on your lease. If you check yes, your farmer could sell your grain as soon as he cuts it (when prices are low because supply is high).
If you check no, then you could get a receipt for your crop at the elevator, watch the market for better prices, and sell your crops when you think the prices are better (when prices are higher because the supply is lower). Other countries’ crops are under drought conditions, so orders from overseas have had positive effects on the prices of grains for land owners this year. But if your farmer sold the crop for you the day after it went to the elevator, you lost your ability to market your crop. So read your lease carefully.
Remember through all of this, farming on the reservation is a privilege for non tribal members, not a right.
There is nothing written into the Code of Federal Regulations which gives farmers a right to farm Indian land.
The fact that they are farming here is a privilege, granted by the owners, and when we all profit equally, we all make best use of the land.
Don't let this kind of article fool you or your farmer at: http://ohioline.osu.edu/fr-fact/0002.html It has no basis for being used in Tribal land issues. And they seem to advocate for farmers, which isn't bad. But if you're a land owner or co-land owner, you need to advocate for yourself. I could elaborate on this article from Ohio State, but I'll leave it alone for now. Just know that there are a multitude of issues in this Ohio State article which do not apply to Indian Land, and they only seem to give one side of the story. There are other articles just like this one so be aware of them. They're out there, and some people would like to use articles like it to justify cash rent leases on Indian land.
Know the facts, know the history, fulfill the prayers of our ancestors who prayed for us to use wisdom to take care of the land.
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