Cropland Share Rental
Goals and Objectives
Understand the 5 principles of a good crop share lease.
Learn how technology adoption can affect share arrangements.
Understand the budgeting process used to arrive at equitable share leases.
Crop producers in many areas rely heavily on rented land in their farming
operations. Because rented land is so important in the majority of farming
operations, rental agreements between the landowner and the producer can have
significant impacts on the risk and returns of those operations. It is crucial that
producers understand how changing production practices impact rental
arrangements and different rental arrangements affect their operations.
Rental arrangements often appear unresponsive to changes in production practices
and generally slow to change over time. Producers generally work with multiple
landowners and may be reluctant to change rental arrangements with any one
landowner unless changes can be made with all landowners. Rental arrangements
may be slow to change because land is often rented from the same landowner for
an extended period of time and the parties involved may feel that the costs of
renegotiating the rental arrangements on a regular basis outweigh the benefits.
Crop land is typically rented in one of three ways: (1) cash rent, (2) crop share, or
(3) cash/share combinations.
Determining crop shares. Establishing terms for crop share rental arrangements
is often a struggle. Economic theory says that equilibrium rates occur where
supply of land equates with demand for land. In arriving at a equilibrium price for
land, landowners and tenants often resort to some sort of negotiation and claim to
want a crop share lease that is “fair” and equitable to both parties.
The concept of an equitable crop share arrangement is to identify all contributions
made separately by a landowner and a tenant and