Posted by MFPoor on January 17, 2013 at 06:29:04 from (72.4.0.230):
In Reply to: farming question posted by circleg on January 16, 2013 at 17:29:20:
Land represents (at least) 50% of the value in the equation. Equipment cost/depreciation, typically can represent 10 to 15%. Input cost (ie, seed, chemicals, fert, fuel etc) (at minimum) can represent 15% to 20%. Maybe more, maybe less, all depends on your buying strength. That leaves 15% to 20% labor/potential profit.
Those are all "ballpark" numbers and can swing wildly up or down, depending on a number of factors.
That said, with you owning land and equipment, providing half the labor, and assuming everything goes as planned, and your partner is trustworthy, If it were me, I'd let him handle the cost of ALL the inputs, his half of the labor, and in turn he gets no more than 1/5th the profits. (again, assuming there is a profit) If there is a 2nd year of partnership, use actuals as numbers for basis of next years agreement.
By his absorbing ALL the input cost, he assumes his share of the risk of actual loss should that be the case. You already have a sizable investment. Time for the partner to pony up and put his $$$ on the line too. I'd also have (on paper) terms of agreement as far as tax liability, etc. Partnerships are a slippery slope under the best of conditions.
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