COLUMBIA, Mo. – With harvest wrapping up, it is the time for producers to review their farm’s current net income and look to next year’s projections. This is also a time to explore new ways to increase on-farm revenue and evaluate new or existing lease agreements. Learn more about these topics from this month’s news and notes from University of Missouri Extension.
Net farm income outlook
Net farm income for the state of Missouri rises to a new record, but the cost of farming continues to increase as well.
Bob Maltsbarger, senior research associate with University of Missouri Extension, says receipts for agricultural commodities have risen by nearly $2 billion in 2022. However, this increase in receipts is largely offset by expenses, which rose $1.8 billion. Examples of these elevated costs include feed, nitrogen, natural gas and diesel.
Once the receipts and expenses are considered, Missouri’s net farm income will increase 5% in 2022, slightly lower than the national net farm income increase of 6%.
Input prices are projected to remain high, but commodity prices are projected to decrease. This forecasts a tighter net farm income in the near future.
For more on Missouri farm income estimates, go to mizzou.us/StateFarmIncome.
Wind and solar energy leases
In Missouri’s northern and western regions, windmills for producing electricity are common sights. Developers also are increasingly installing windmills in other windy areas of Missouri. Similarly, utility-scale solar energy developers are increasingly leasing land near select transmission lines and substations.
Because these leases often last for decades, landowners must carefully consider offers so they understand the legal, business and family impacts before agreeing, says Joe Horner, University of Missouri Extension agricultural economist.
These agreements may be financially attractive. They may fund farm business growth or landowners’ retirements. However, these agreements also typically include a combination of long-lasting leases and easements that will significantly impact surrounding land.
Landowners who lease property to solar energy developers should expect to sign as many as three documents. Developers typically request that landowners sign a letter of intent, an option to lease and the actual lease.
The letter of intent reserves land for a particular energy developer. The option to lease grants the developer the right to lease land within a specified time. The lease itself is the long-term agreement. Horner goes on to explain that it is important that landowners only sign these documents if they understand all the terms and conditions.
Diversifying a livestock farm to co-graze multiple species can increase earnings. Co-grazing means raising two different livestock species on shared land.
A recent University of Missouri Extension analysis found that a farm co-grazing cattle and goats would earn more profit per acre than a farm raising only cattle or only goats.
Producers should choose two complementary species that don’t compete for the same resources, explains Jennifer Lutes, University of Missouri Extension agricultural business specialist.
She further noted that successful co-grazing requires the necessary skills to raise both species and that there be a market.
For more on co-grazing economics, go to mizzou.us/Cograzing.
Verbal farm leases
Verbal lease agreements make up roughly half of all Missouri farm leases and carry different responsibilities for landowners and tenants.
Landowners involved in verbal farm leases are obligated to not enter leased properties, even for hunting or other recreational purposes, unless their tenants have agreed, explains University of Missouri Extension agricultural business specialist Denice Ferguson. Landowners may not be required to make or pay for repairs.
Tenants have obligations such as avoiding gross negligence and returning properties with only reasonable wear and tear when their leases end. They are not responsible for securing property insurance unless that’s part of the agreement.
For more on verbal farm rental agreements, go to mizzou.us/VerbalLease.
— MU Extension