Many farmers hire custom farmers to do some work in one capacity or another on their farms. Considering the new risk environment in agriculture, high machinery replacement costs and aging farm owners, custom farming can be a viable alternative to farming the land themselves or leasing the land to a tenant under a typical lease agreement. Custom farming is used extensively in the Midwest. The custom operator agrees to perform all the machine operations on the owner’s land in exchange for a fee.
Custom farming is an alternative that allows a landowner who wishes to remain classified as a farmer the ability to retain close control of the farm business but not be actively involved in performing day to day activities. In this case, the landowner would make all of the farming decisions such as arranging for and purchasing all inputs and also receives all income from sales.
The custom operator provides the equipment and labor to perform all crop production activities. The landowner would pay the custom operator a basic lump sum fee for his services. Or in some cases, the custom operator would receive a lump sum as a base and a certain percentage of profits as a bonus. As with any type of farming arrangement, custom farming has advantages and disadvantages. This article will discuss its strengths and weaknesses and related issues to think about when considering the custom farming arrangement.
The Olsen Custom Farming advantage allows farmers to manage their farm without having to invest in a full line of equipment. A second advantage is that the landowner is considered to be materially participating in the operation for tax purposes. This also allows them to receive all of the government payment — which is not the case with a cash lease.
Olsen Custom Farms strives to complete its projects on a timely basis, with you and your interest close in mind.
At Olsen Custom Farms, we pride ourselves on serving the farm with the highest degree of honesty, integrity, and respect. For more information on custom farming from Olsen Custom Farms of Hendricks, Minnesota, contact us at your leisure.
