Johnson, Jerome E.

Rice, Billy B.

Staroba, Arlyn R.

English

NDSU Libraries Institutional Repository

CIRCULAR EC-598 AUGUST 1975 SECTION IX: NO.4 FARM LEASING IN NORTH DAKOTA ARLYN R. STAROBA, JEROME E. JOHNSON, and BILLY B. RICE* RENTING LAND is an important way North Dakota farmers acquire and control needed resources. About 60 percent of the farm operators rent all or part of their land resources, and they operate almost three-fourths (;f the land in the state. Renting facili-tates changes in farm size without the purchase of land. Farm leasing provides the flexibility needed to adapt to constantly changing agricultural conditions. The information herein came from a mail survey of farm renters in six widely separated North Dakota counties. The 1973-74 study involved 704 question-naires reporting on over 1,300 leasing arrangements. Fifty-seven percent of the leases were crop-share, 41 percent cash rent, and 2 percent involved crop-share-cash arrangements. Map I summarizes the types of leases by county. Crop-Share Leases The crop-share lease was the most widely used lease type. Contract arrangements specify what crops are to be shared and the proportion of each crop the landlord or tenant receives. It also lists the costs to be shared and the percentage to be paid by each party. The landlord receives a share of the crop as rental payment, and the tenant receives use of the land and a specified percentage of the production. The 75-25 lease, 2/3-1/3 lease, and 50-50 lease were the most common crop-share arrangements used (Map 2). The decision on which arrangement to use depends on the abilities of the landlord and. "Staroba is assistant in agricultural economics, Dr. Johnson is associate professor on agricultural economics, and Rice is extension farm management economist, North Dakota State University. Fargo. the tenant to finance operating costs and their willingness to be involved in the management of the land. Bargaining positions of each party and local custom also affect the decision. The arrangements for sharing expenses and re-turns are the same for the crop-share and crop-share-cash leases. Information on the two lease types are combined in Table 1. Ninety percent of the tenants using a 50-50 lease paid half of the fertilizer costs, 6 percent paid all of the cost, and 4 percent paid none of the cost. Fifty-eight percent of the tenants using a 2/3-1/3 lease paid all of the fertilizer costs, 40 percent paid 2/3 of the cost, and less than 1 percent paid for none of the cost. For tenants using a 75-25 lease, 94 percent paid all of the costs of fertilizer, 5 percent paid 3/4 of the cost, and less than 1 percent paid none of the cost. Other expenses reported are summarized in a similar manner. When the 75-25 leasing arrangement was used, (he tenant typically paid all expenses other than taxes and received three-fourths of the receipts from crop sales. All counties reported similar arrangements for the 75-25 lease. The tenant paid all expenses (other than taxes) under a typical 2/3-1/3 share lease. In Richland and Grand Forks counties the landlord also paid one-third of the fertilizer expense. Landlords in Grand Forks County also paid one-third of the crop insur-ance costs. Landlords with a 50-50 crop-share lease generally pay a larger share of the costs. Most landlords paid all seed, taxes, and building repair costs, plus one-half of the costs of fertilizer, weed spray, custom Cooperatiw Extension Service North Dakota State . ~iyersity CASH 24% CROP-SHARE 73% CROP-SHARE-CASH 3% CASH 36% CROP-SHARE 63% IW.\,\,"--~HARE- CASH 1% MAP 1. PERCENT OF LEASES BY TYPES I N USE IN 1973-74 75-25 36% 2/3-1/3 49% 50-50 1 f% MAP 2. PERCENT OF CROP-SHARE LEASES IN USE IN 1973-74 23% 31% 39% CASH CROP-SHARE CROP-SHARE- CASH 37% 61% 2% CASH CROP-SHARE CROP-SHARE-CA SH 1% 75 25 2/3 -1/3 50- 50 The total is less than 100% in some cases due to the presence of other share ratios. $8-$15 $11-$23 $18-$48 $15-$25 $12-$20 $15-$40 f1AP 3. CASH RENT PER ACRE --TI LLABLE LAND (1974) $3-$12 $3-$9 $5-$15 $5-$10 $6-$16 MAP 4. CASH RENT PER ACRE--PASTURELAim (1974) weed spraying, combining,and crop insurance. Aver-ages for Williams County varied slightly because landlords paid one-half of the costs of swathing and grain hauling. Cash Rent Cash rent has become more popular in North Dakota. A tract of land available for cash rent facilitates a bidding process when demand is active. Tenants have greater managerial freedom, which be-comes increasingly important as farms become larger and land is rented from more than one landlord. Landlords may prefer cash rent because of the as-surance of a fixed income from the property. The amount of cash rent paid varied according to the quality of the land, location in the state, and de-mand. Maps 3 and 4 show the range of cash rents per acre for tillable and pastureland. Cash rent is related to the market value of the land and is often negotiated as a percentage of market value. Traditionally, this figure has ranged between 7Y2 percent and 8Y2 percent. In 1973, it ranged from 9 percent to 12 percent and in 1974 from 9% percent to 13 percent, reflecting a strong demand by farmers for additionalland. TABLE 1. AVERAGE TENANT SHARE OF SELECTED EXPENSES FOR CROP-SHARE AND CROP-SHARE-CASH ' .. AN LEASES IN 1973-74 % of Tenants on % of Tenants on a 50-50 Lease a 2/:'-1/3 Lease That Paida That Paida Expense All 1/2 None All 2/3 None - - - - - - - - - peJl.c.e.nt: Fertilizer 6 90 4 58 40 * Seed 7 14 79 97 2 * Gasoline 96 3 * 99 * * Weed Spray 21 68 9 76 22 0 Custom Weed Spraying 30 68 * 85 14 0 Swathing 72 25 * 96 3 * Combining 25 64 0 95 3 0 Grain Hauling 73 23 * 97 2 0 Crop Insurance 33 65 1 58 39 * Machinery Repair 97 2 * 99 * 0 Building Repair 31 6 63 73 1 25 Fence Repair 72 5 23 92 0 8 Hired Labor 98 1 * 99 0 0 a Total is less than 100 percent in some cases because some tenants had a different share arrangement. * Less than 1 percent. DATE DUE IQQC.L .. ., ... -% of Tenants on a 75-25 Lease That Paida All 3/4 None 94 5 * 98 * * 100 0 0 97 3 0 97 3 0 100 0 0 99 0 0 100 0 0 81 17 0 100 0 0 86 0 10 95 0 3 99 0 0 GAYLORD 234 PRINTED IN USA Cooperative Extension Service, North Dakota State University of Agriculture and Applied Science, and U. S. Department of Agricul-ture cooperating. Myron D. Johnsrud, Director, Fargo, North Dakota. Distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. We offer our programs and facilities to all people without regard to race, creed, color, sex, or national origin. 

Farm leasing in North Dakota

https://library.ndsu.edu/ir/bitstream/10365/17206/1/EC-598-1975.pdf

Farm leasing in North Dakota

Abstract

Similar works

Full text

Available Versions

NDSU Libraries Institutional Repository