Why Have Grain Bins in Your Farmland Lease?

There are many things to consider when arranging a farmland lease. First, both parties must agree on which type of lease to use, whether that is a cash rental agreement, a flexible lease agreement, or some other arrangement. Then, other considerations come into play: farmland location, soil quality, land values, crop yields, personal goals, and the relationship between owner and tenant all factor into negotiating a successful leasing arrangement.

After all these factors are addressed, both landlords and tenants often overlook the issue of grain storage, and tack on grain bin rental as an afterthought. It’s important to remember to address this issue clearly up front, especially during bumper crop years, when grain storage needs suddenly loom large. The immediate need to address a shortage of storage can be stressful; it is beneficial for all parties to have a clear arrangement set ahead of time in order to avoid confusion.

Grain bin rental may either be a part of the farm lease or separate, and may even be leased to a different individual than the one renting the land.

Commercial grain storage rates generally run from 2-3cents per bushel per month, not including handling and managing fees, and bearing risk for storage losses. Since farm storage excludes those services, rates are generally lower, and may become a far more attractive option for growers during times of extra grain storage needs.

Determining a fair grain bin rental rate can be difficult, since it varies so much. Generally, the lease is written on a cash rent basis for a specific time frame on a per bushel basis. The size of the bin, convenience for loading/unloading, and the availability of heat, stirrers, and drying capabilities are obvious factors to take into account when determining a rental rate. When arranging grain bin rental leasing agreements, it is important to address insurance and utility responsibilities as well.

After these aspects are addressed, there are other things to consider, such as determining who is responsible for checking the condition of the grain being stored. Usually, it is the renter who carries out this task, but it is best decided when negotiating the lease. Access to the storage site is also an important consideration. Determine who will be responsible for snow removal and/or moving machinery?

When it comes to the electricity costs associated with aeration, the renter usually pays. The kilowatt-hours of electrical use may be estimated and found on the farm utility bill. If there is a separate meter for the bins, the cost may be observed directly.

Finally, the date and manner of payment for grain storage should be specified when negotiating the rental agreement. It’s also a good idea to agree on a date by which the grain is to be removed from the structure. Careful evaluation of the soundness of the storage structure should take place before it is filled, should any repairs or modifications be needed.

When it comes to leasing agreements, don’t forget about grain bin rental. Should you have any questions, feel free to contact a UFARM representative—we are happy to answer your questions.

UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s. Contact us today!

Sources consulted: Edwards, William. “Renting Extra Grain Storage.” Iowa State University Extension and Outreach. Iowa State University Extension. Aug. 2014. Web. 15 Jul. 2015.

“Lease Options for Rural Property.” FCS Financial. FCS Financial. Web. 15 Jul. 2015.