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Making Hay on Shares: What is a Fair Division of the Crop?

Authors as Published

Tom Stanley (stanleyt@vt.edu) Extension Agent, Farm Business Management, Northern District

Hay making is at its peak as this newsletter goes out and many Virginia farmers are contending with the annual ritual of monitoring weather forecasts, making hay, and rushing to get bales removed from the fields.  While many folks choose to keep their own equipment and deal with the challenges and benefits of making their own hay, others look to their neighbors to provide the equipment and labor to get a hay crop made. Often, the question arises: What is a fair division of the hay crop?  This article attempts to identify the primary costs of producing the hay and thus illustrate how two parties can arrive at their own equitable share agreement. 

The orchardgrass and red clover hay budget featured in this article can be found at:  http://pubs.ext.vt.edu/category/enterprise-budgets.html. It is representative of several hay budgets available from Virginia Cooperative Extension.  The table below summarizes the itemized costs featured in the detailed hay budget.  The blank column provides the opportunity for the reader to insert their own cost assignments to arrive at an appropriate crop share arrangement.

Orchardgrass / Red Clover Hay (costs on a per acre basis)

Expense Item

Cost (per acre)

Landowner

Hay Maker

Your Landowner Estimates

Your Hay Maker Estimates

Seed and Establishment1

$43.39

 

 

 

Fertilizer

$169.01

 

 

 

Lime

 $10.73

 

 

 

Chemicals

$0.00

 

 

 

Land Ownership Costs2

$26.90

 

 

 

Harvest Variable Expense3

$57.73

 

 

 

Harvest Fixed Expense3

$36.46

 

 

 

Total Cost

$344.22

$81.02

$263.20

 

 

% Share

 

24.00%

76.00%

 

 

1Assumes improved stand with a 7-year life. 


2Land Ownership Costs per acre here are: Opportunity Cost of foregoing land rent = $18, Taxes under land use assessment & Insurance = $4, Interest expense at 4% for 6 months = $4.90. 

3Equipment Expenses assume fuel costs at $2.50 / gallon, new equipment with a life of 8 – 10 years for hay implements and 12 – 16 years for tractors and harvesting over 350 acres of hay annually.

It is essential to note that this table represents just one of many ways the costs of hay production can be shared and it is not intended as a recommendation.  In my years of work, I encountered a common hay-share among many farmers where the landowner receives one third of the hay crop and two thirds to the hay-maker.  This division is coming into question as expenses for fertilizer, fuel, and equipment parts and maintenance have significant increases.

The key point is that hay production represents a significant expense to the livestock or dairy producer. Crop sharing can be an excellent means by which resources are shared and efficiencies are gained. An examination of itemized costs can insure fair treatment of both parities and success for both farming operations.

Rights


Virginia Cooperative Extension materials are available for public use, re-print, or citation without further permission, provided the use includes credit to the author and to Virginia Cooperative Extension, Virginia Tech, and Virginia State University.

Publisher

Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Alan L. Grant, Dean, College of Agriculture and Life Sciences; Edwin J. Jones, Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; Jewel E. Hairston, Administrator, 1890 Extension Program, Virginia State, Petersburg.

Date

June 8, 2010