29. Isern (1981) reports that many cutters have been in the business for two or three generations.
30. According to Isern, this formula was typically 3/3/3 when it first emerged in the early 1940s. The high yield
payment compensates the cutter for slower progress (in terms of acres) with higher yields and greater wear and
tear on the machines.
31. Isern (1981) also notes that it is costly for farmers to hire reliable and experienced short-term labor.
32. See Isern (1981) for 1948 and 1957. For 1999, see the AP article “Custom Cutters: Kansas Farmers Watch
Wheat Quality Decline while Waiting for Harvesting Crews to Arrive,” Bozeman Daily Chronicle , Sunday, July
33. It is somewhat of a puzzle why cutter payments do not depend directly on the crop yield. Perhaps the answer is
that such yield payments would not adequately compensate the farmer because the yield contribution of the cutter
could not be easily separated from that of the farmer during the growing season.
34. For example, DuBow (1999) reports how cutters flatten “any strips of missed wheat with the grain cart's
monster treads” (37). This “trick,” used to “make the cutting look more precise,” implicitly lowers the crew's cost
of completing a job.
35. This contiguousness does not hold for wheat planting and pesticide application, partly because spring wheat
dominates in the north and winter wheat dominates in the south. As a result, we do not observe migratory custom
planting or pesticide application for wheat. We do find custom harvesting in Germany, where custom cutters follow
the ripening grain up certain river valleys as elevation changes lead to different, but contiguous, harvesting times.
36. In an Iowa Extension Services bulletin prepared for farmers, Edwards and Meyer (1986) note: “Custom hiring
is particularly useful for specialized machines that are expensive to purchase and used only seasonally. This method
is also attractive for beginning farm operators with limited capital resources and labor, for other farm operators
who are expanding and have other uses for available capital, and for small scale farmers.”
37. Government intervention is limited. States regulate vehicles and often discriminate against out-of-state combine
crews with taxes and license fees. States also require that cutters clean machines before crossing state borders in
order to limit the transportation of noxious weeds.
38. Over the past decade, locations for hauling grains have become more centralized and hauling distances have
increased. As a result, there has been a dramatic increase in the optimal size of grain trucks. Hauling grain, however,
is not subject to any timeliness problems. As our model predicts, farmers are abandoning their hauling roles with
small five-ton trucks to rent hauling services from operators with semi-tractor trailer units.
39. House is quoted in Stephanie Sorenson, “From Texas to Montana: Tracking Shorty's Crew on the Custom
Harvest Trail,” Prairie Grains (September 1997): 3.
Chapter 9: Farm Organization and Vertical Control
1. The analysis in this chapter draws on Allen and Lueck (1998).
2. Binswanger and Rosenzweig (1986), Johnson and Ruttan (1994), Nerlove (1996), and Royer and Rodgers
(1998) are among the studies that examine organizational issues beyond sharecropping in undeveloped countries.
Important recent studies of agriculture by Bardhan (1989), Hayami and Otsuka (1993), and Hoff, Braverman, and
Stiglitz (1993) focus on land and labor contracts and ignore broad organizational questions. Roumasset (1995) is
a recent paper with a similar focus to this chapter.
3. See, for example, Brewster (1950), Castle and Becker (1962), Ellickson and Brewster (1947), Heady (1952),
Holmes (1928), and Schultz (1954).
4. We ignore intrafamily incentives and consider a husband-and-wife team (and their juvenile children) as a single
agent. While this assumption ignores intrafamily shirking, this is unlikely to be serious as long as families are
bound by intergenerational contracts. We also ignore the distinction made in chapter 8 between control of assets
through ownership and contracting.