Land leasing for market gardening is a tricky proposition. You are leasing someone elses land, endeavouring to improve it beyond the condition you took it over in by adding fertiliser and treating it with sprays to drive out pests and disease. You are paying for the privilege of doing this, on the intention to turn a profit from the crop you will hopefully extract at some stage (weather and crop dependent) in the future.
Rotation and rest mean the appropriate properties to lease can be difficult to come by, and some of us may jump in before doing a full due diligence on the property in question. As an Accountant I can’t give you the detailed critique around soil acidity, nitrogen levels, disease presence. But something I can talk about is the average spend per effective acre.
True Acreage
Typical lease agreements specify an acreage for the calculation of the total lease to pay. What I sometimes see with my clients is that the acres leased can differ to the acres planted. While we always expect parking bays, sheds and access tracks to reduce the plantable area somewhat, if the unplanted area includes banks, gullies or bush that are not feasible we should be negotiating around these areas. If you are paying $1,000 an acre for a 100 acre block ($100,000), but are hampered by a stand of trees that diminish the planting area by 10 acres, you are in fact paying $1,111 an acre.
Use
The use of land can have a drastic impact on the rate you will pay to lease a block. Dairy/Stock Farmers will pay anywhere from $300 to $400 an acre for grazing (locally). Growers will pay $600 to $800 an acre, depending on existing soil quality and locality. This often pits Dairy/Stock Farmers against Growers in obtaining additional acreage, as landlords seek to maximise the return on their investment.
Break-in Costs
If you are leasing new acreage that is a bit run down and needs clearing, spraying and fertilising beyond a normal seasons requirement, this should be spread over the initial lease period to ascertain to the true acreage cost. An extra 3 tonnes of lime an acre is potentially another $150 an acre that could see a good deal become a so-so one.
Water
Access to water can be the decider between a quality crop being delivered to customers and a financial disaster. For this reason, Growers will often pay the higher side of $1,000 an acre for favourable land with access to water. This is especially relevant in places like Canterbury where water restrictions and rights are becoming increasingly more common. Ensuring the water you are paying the premium for will remain available for the whole season (the water table dropped below some bores in 2013 – leaving the bores sucking air) is part of the due diligence you will need to undertake.
Additionally, you will need to plan contingencies around maintaining or replacing the existing pump and irrigation system on the land you are leasing, in the event of emergencies.
Due Diligence
Doing the calculations and planning is vital when considering your leased acreage. It is important to understand the true cost, to better help you ensure you build value for you, not just the landlord.
Lincoln Sharp - Thinking Forward 