Agriculture Reference
In-Depth Information
FARMLAND LEASE
This agreement is between “landowner” of [residence] and “farmer” of
[residence], April 1, 1982.
Southeast 1/4 of Section 17-140-63
“Farmer” agrees to pay “landowner” $30 per acre for 156 tillable acres for
the crop year of 1982. Total payment of $4680.00, 10% due April 1, 1982—
$468.00. 90% due October 1, 1982—$4212.00 for a total of $4680.00. This
lease shall be renewed automatically year to year unless either party notifies
the other party by September 15. If lease is not renewed, renter will be paid
for the summer fallow with price per acre to be established at that time. All
government payments go to the renter.
Signed by owner and renter.
Figure 3.1
Example of written farmland lease, North Dakota
are as informal as the contracts themselves, with the most common consummation taking
place on the front porch or in the shop.
Costs of Farmland Contracting
In a farmland lease the farmer is not the full owner of the land and its valuable attributes.
He owns many of the land's attributes for the contract period but does not own the future
productivity of the land. His farming practices, however, can strongly influence the future
value of the land. Likewise, the landowner has little financial interest (none if the contract is
cash rent) in the actual harvest. The costs of contracting then, are the resource expenditures
used to try to make both farmer and landowner act as though they were fully integrated
farmer-landowners.
In principle, there is moral hazard on both sides of the contract, and this moral hazard
can potentially be found in many dimensions. When assets (inputs or outputs) are shared,
there are monitoring costs and theft to contend with. Poor harvests, soil erosion, and nutrient
