Features of typical agricultural contracts
Features (parties, payment, duties)
Farmer rents equipment on a time basis (day, month,
year) or on an hourly rate of use.
Field implements, tractors
Farmer rents land in return for a cash or share of the
crop. Input costs are sometimes shared.
Small grains, pasture
Farmer hires labor for skilled and un-skilled work.
Payment can be hourly, monthly, or based on piece rates.
Farmer agrees to deliver crops of a specific quantity and
quality to a processor. Farmer and marketing firm share
the revenues. Farmer typically controls production and
Apples, other fruit, dairy,
sugar, cattle, vegetables
Farmer agrees to produce a crop under the direction
of another firm. Farmer will be required to use certain
inputs and techniques and may share costs. Firm will
generally control production and own the crop.
Seed, vegetables, poultry,
Farmer hires firm to perform specific tasks. Typically
the firms provides both the labor and the specialized
Harvesting, pest control, cattle
farmer does not control the production process or own the crop. Marketing contracts re-
fer to arrangements in which the farmer maintains production control and crop ownership.
Production contracts are common in the poultry and swine industries, while marketing con-
tracts are common in corn, fruit, vegetables, and sugar. 21 Table 2.5 summarizes some of the
features of these contracts and shows where they are most commonly found. Although our
empirical focus is primarily on farmland contracts, we do examine contracts for equipment,
production, and such services as harvesting and processing.
Farm Ownership and Organization
A key focus of our topic is the determination of farm ownership, both over assets and
across stages of production. One of the salient characteristics in the history of industry is the
transition from family firms to large factory-style corporations. Large corporations dominate
modern economies. In 1989 corporations made up 18.5 percent of all nonfarm businesses
but generated 90 percent of all nonfarm business receipts. 22 Agriculture, however, has
largely resisted the transition to large corporate ownership. The 1997 U.S. Census shows that
approximately 86 percent of farms are organized as “family farms.” Excluding small family-
held corporations, farm corporations made up only 0.4 percent of all farms in 1997, 1.3
percent of all farm acreage, and generated only 5.3 percent of all sales receipts. 23 Especially