This growing interest in the nutrient value of hog manure prompted researchers at the Drake University Agricultural Law Center to conduct an on line survey to learn whether contractual agreements are being drafted to protect both parties.
Results of a 2007-2008 study showed only 23 of the 61 pork producers completing the survey had a contractual manure agreement — about half were written, half were verbal. Only a couple put a dollar value on the manure.
Survey participants represented more than 30,000 sows and 1.17 million finishing hogs, from all regions in the state.
“Our goal was to identify types of decisions hog farmers are going to make in the next 12 months and provide them with legal tools to help make those decisions,” explains Neil Hamilton, professor of law and director of Drake's Agricultural Law Center.
A significant trend in the survey reports: “Hog manure has gone from being treated as a cost to being seen as a significant component of many operations' cash flows. As the price of corn and the cost of production rise, primarily the cost of commercial nutrients, the value of hog manure rises as well.”
That interest has resulted in a growing number of crop farmers becoming interested in either raising hogs or entering into agreements that would gain them access to hog manure.
In response, Drake's Agricultural Law Center developed a 43-page Manure Agreement Decision Making Tool, www.law.drake.edu/centers/agLaw/docs/manureAgreements.pdf.
The document presents the characteristics of a legally binding agreement. Simply stated, “A manure agreement is between at least two parties where one party has manure and the other party has land for application. The party with the manure may be an individual, family corporation, or other legal entity that owns an Animal Feeding Operation (AFO).”
Two types of agreements include:
A “manure contract” is the sale of manure through a legally binding document, and
A “manure easement” allows someone to apply manure to the land of another, and it may include provisions for paying for that use.
Easements can be combined with contracts to provide flexibility concerning land access while negotiating contract renewal.
Authors of the tool reinforce that legally binding agreements are always negotiable, and they caution that the unwillingness of one party to negotiate may be a forerunner of future problems. Furthermore, all agreements should be incorporated into a written document because oral modifications and verbal agreements are difficult to enforce.
Elements of a thorough contract are compensation for manure; guarantees of application, manure type and quality; application method and compensation, if applicable; and duration of the contract. The adjoining sidebar offers some additional questions to consider when developing a manure contract.
Contracts should specify the minimum and maximum amounts of manure to be applied or indicate if no minimum is guaranteed. It should also state whether the producer is under any obligation to continually provide manure during the term of the contract, and easements should allow for enough acres to ensure the producer is able to apply manure under all circumstances.
Suppliers of manure may want to include a contract clause that states there is no warranty in regard to the quality of manure or the resultant crop yields. On the other hand, crop producers may want to specify some nutrient standards, especially if they are relying on the manure as part of their soil fertility plan.
Some more abstract elements of a contract may address industry changes affecting a landowners' desire to apply manure to their property and a hog producer's need for land to apply manure. Details of the agreement should protect both parties.
Parties involved in an agreement should negotiate all foreseeable issues before the document is signed.
On a cautionary note, Drake University officials note the manure agreement decision-making tool is not intended to provide legal advice, so individuals should consult an attorney licensed to practice law in their state before entering into any written contract related to manure.
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Because manure easements and contracts are now perceived as added value when attached to property, the agreement should specify that it “runs with the land.” That means the agreement or a memorandum of the agreement must be recorded with the county recorder.
In their findings, Drake University officials note that just 10 years ago, producers were challenged with finding enough land to support manure application. Manure easements were commonly used to access land.
Current competition for hog manure among crop farmers has boosted demand.
Third-generation pork producer Jim Boyer of Ringsted, IA, explains their multi-family, 8,000-head finishing facilities rely on a written manure agreement. The contract involves 600 acres and was established as a 10-year perpetual contract that is binding until one of the parties wishes to dissolve it.
“We don't place a dollar value on the nutrients and no money changes hands,” Boyer says. “Our manure management plan outlines details of distributing the manure. We've never had any difficulties with the agreement.”
Although Boyer receives calls from neighbors every year asking about manure availability, all manure is currently spoken for. “I believe the Drake tool would be useful if we ever wanted to sell manure,” Boyer says. “When I investigated selling it, I was concerned about the guarantee of analysis. I believe that would require ongoing testing.”
In closing, Drake researchers think manure agreements will evolve to reflect manure's volatile value and the possible legal challenges that could occur.
The survey was supported by the Smithfield Swine Industry Enhancement Grant Program through the Iowa Attorney General's office.
Questions to Ask
Who is entering into the agreement?
Who has the responsibility to obtain, record and keep a manure management plan?
Are there protections against liability for accidents or other claims of negligence or wrongdoing?
How will disputes be resolved?
Can the agreement be terminated?
What period of time should the agreement cover?
Does the agreement guarantee any manure will be applied on a given piece of land?
What kind of manure is going to be applied?
What type of application will be used?
Who pays to determine the nutrient content of the manure?
What type of property is included in the agreement?
When will manure be applied?
Is the agreement assignable?
Will there be compensation?
Does the animal feeding operation (AFO) have sole rights to use the land for manure application?
What happens if the AFO can sell the manure to someone else?
What amount will be charged?
Is compensation negotiated annually?
Does the contract specify that a certain type and quantity of manure be applied to specific parcels of land?