But how do you do that?
Buying insurance for enterprise units—insurance all of the acreage in a given county—has become a popular choice for many operators. However its simplicity and efficiency would be lost if an operator had to buy insurance based on individual owners, and would increase the cost to the operator. Subsequently, Schnitkey suggests a two-step arrangement with the owner and operator:
- First, a crop insurance product could be simulated for inclusion in variable cash rent arrangements. Historical yields and projected prices could be used to set guarantees and actual yields and harvest prices could be used to establish revenue. The simulated crop insurance proceeds could then be used in calculating bonuses.
- Second, the minimum cash rents should be lowered in recognition that the farmer is now providing the landlord crop insurance, and the farmer should be compensated for providing this insurance.
Share rent land owners have likely not benefitted from crop insurance, as have operators, but operators who suggest such a program may be doing themselves a favor with longer tenure, or avoiding a switch to cash rent. There are creative ways to structure share rent leases to include either a simulated crop insurance payment, or assisting the owner in obtaining their own crop insurance policy.
Source: FarmGate blog