Agriculture Reference
In-Depth Information
harvest, we expect cash rent contracts are more likely to be chosen. 25 Similarly, a cash rent
contract is more likely to be chosen when the costs of on-farm storage is high, rendering
crop storage in a public elevator more likely.
Although we have no data on the extent of on-farm storage, we have other information
on landowners that can be used. Not all farmland owners are private individuals. In some
cases, farmers lease land from city or state governments, Indian tribes, banks, or other “in-
stitutional” landowners. For these landowners, crop division costs are likely to be relatively
large. Agents of the institution would have little a priori knowledge or interest in the yield
or possibilities for underreporting. Thus, we expect institutional landowners to be more
likely than private landowners to cash rent their land. To summarize, we expect negative
coefficients for HAY and INSTITUTION.
Predictions 4.2a and 4.2b state that cropshare contracts are more likely when soil ex-
ploitation costs are high. Our data can be used to identify situations in which this is likely to
be true. For example, if farmland is soon to be used for purposes other than agriculture, then
soil quality becomes less important. In the extreme case, where the land is to be converted
at the end of the current contract, the incentives of the landowner and the farmer toward soil
extraction would be identical (
r = r
). In this case, a cash rent contract would approximate
the first-best solution and would be chosen over cropshare. Thus, we expect cash rent farm-
ing to be more common for farmland near urban populations, because the value of the land
for nonfarm uses is relatively high. The variable DENSITY approximates the urbanization
of an area and indicates the extent to which farmland may have alternative uses.
Other situations can also be used to identify cases where soil exploitation is relatively
unimportant. Irrigated land is less likely to suffer from soil exploitation because irrigated
land does not require fallowing, which is a method of conserving soil moisture. 26 Thus,
cropshare contracts are expected to be less likely for irrigated land than for land that is
not irrigated. Tilling, cultivating, and other physical manipulations of the soil present the
same incentive conflict between the landowner and the farmer as fallowing does. The farmer
does not have the incentive to take the long view regarding tilling. In certain cases, excessive
tilling can lead to wind and water erosion, nutrient depletion, and loss of moisture, which
may not be problematic in the immediate period but will lead to reduced crops in the future.
For example, in the relatively dry climate on the Great Plains, the evaporation of surface
moisture draws subsurface moisture upward and reduces the total amount available for
current and future crops. Cropsharing is more likely to be chosen when tillage becomes more
important because the potential for land exploitation is greater. When one is considering the
incentives for different tillage practices, it is useful to distinguish between row crops (such
as corn, potatoes, soybeans, and sugar beets), where the land is tilled more intensively
and other crops (such as barley, hay, and wheat) where the land is tilled less intensively.
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