Who Gets Payment For Corn Stover?

Who Gets Payment For Corn Stover?

On a cash rent lease, if corn stover is harvested and sold, who gets the payment—tenant or landowner?

With a market developing for corn stalks and cobs to be used for cellulosic ethanol production in Iowa, you are going to be hearing more questions like this one: On a farm with a cash rent lease, if the corn stover is harvested and sold, who gets the payment--the tenant or the landowner? Could those rights be sold to someone else?

The following answer is from William Edwards, Iowa State University Extension agricultural economist, and Melissa O'Rourke, ISU Extension farm and agribusiness management specialist in northwest Iowa. Wallaces Farmer consulted both of them on this question.

From a legal standpoint, Iowa Code 562.5A provides:  "Unless otherwise agreed to in writing by a lessor and farm tenant, a farm tenant may take any part of the aboveground part of a plant associated with a crop, at the time of harvest or after the harvest, until the farm tenancy terminates as provided in this chapter."

This code section tells us that in the absence of a written agreement to the contrary: 

(1) The tenant has the right to take the aboveground plant residue at any time during the tenancy (until March 1). 

(2) The tenant also has the right to leave all that residue, if that's what the tenant wants to do. 

(3) Nobody else has the right to that plant residue unless the tenant agrees to it, in writing. 

(4) The landowner does not have the right to sell the plant residue to anybody else. 

(5) If a processor – such as a biodiesel or cellulosic ethanol plant — wishes to contract with someone to harvest and remove the plant residue, the contract and any associated payment must be with the tenant. 

An additional question raised in relation to this issue is whether the tenant has the right to subcontract with another party, such as a biodiesel or ethanol processing plant, to allow someone other than the tenant to enter upon the property of the landlord to remove the stover? 

Again, in the absence of written lease provisions to the contrary, Iowa Code 562.5A does not limit the tenant's right to subcontract. In practice, many tenant farm operators already subcontract with others to perform a variety of operational functions, from planting, application of fertilizer or chemicals, or combining of corn or beans. Similarly, the tenant may arrange for another party to remove the plant residue. 

From an economic standpoint, the tenant has paid all the expenses of producing the crop and the stover is part of the crop, so the tenant should get the payment. The tenant would also be responsible for replacing the fertilizer nutrients removed in the stover for next year's crop. 

The potential income from the sale of the stover may be reflected in the cash rental rate. Also, the tenant and the landowner should discuss and agree how much stover can be removed from the field without significantly increasing the potential for soil erosion due to wind or water. Such provisions can be stipulated in the lease agreement.

What is corn stover worth? Here's how to figure the value

Another question: How do you figure the value of cobs and stover?

Until the cellulosic ethanol industry develops a corn stover process and gets a plant up and running on a commercial scale, it will be difficult to determine the market value for the cobs and stover being used as raw material. Harvesting requirements are more stringent for stover used as ethanol feedstock, so it will be more valuable than stover harvested for cattle feed or bedding.

To help you figure the value of stover for your situation, ISU's William Edwards offers the following information and guidelines.

First, there certainly needs to be consideration for the removal value of the nitrogen, phosphorus and potassium in the corn stover. ISU Extension Ag Decision Maker website www.extension.iastate.edu/agdm/ file A1-70 gives estimates of nutrient removal rates per ton of stover harvested, as well as examples of how to value it. An electronic spreadsheet for estimating stover value is also available at the same site.

Second, the farm operator will pay for the cost of harvesting the stover, which could include chopping, raking and hauling as well as baling. Harvesting costs can be estimated from typical farm custom rates. The value of the nutrients per bale plus the harvesting costs would represent the cost value of the stover harvested.

SUMMING UP: If corn stover is harvested and sold on a cash rent farm, whose crop is it? Iowa law says tenant owns the crop residue if the lease doesn't state otherwise. You can estimate value of stover based on harvesting costs and nutrient removal.

For farm management information and analysis, go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and ISU Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.
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