Author

Vernon E. Bau

Document Type

Thesis - Open Access

Award Date

1957

Degree Name

Master of Science (MS)

Department

Economics

Abstract

Farm leasing arrangements are important in eastern South Dakota. In 1954, 48 percent of all farm land in that area was farmed by tenants. In the entire state, 46 percent of all agricultural land was rented and 68 percent of the operators leased all or part of the land they operated. Between 1880 and 1940 the trend in farm tenancy was steadily increasing. While there has been a decline in the percentage of tenancy since 1940, this appears to be due to the very favorable period of production and prices. Because of the present price-cost squeeze, the percentage of tenants may soon be increasing. Federal legislation has largely concentrated on helping farm families achieve ownership and much of the research that has been done is concerned with land credit, supervised loans, and contract buying. While owner-operatorship may well be a desirable goal, the large proportion of tenancy suggests that more attention directed toward improvement of leasing arrangements might be desirable. Obviously there are many facets to leasing that could be explored and improved upon; but basically, the problem for the tenant is one of security of possession on the land which he operates. Short-term leases do not give the tenant enough security to make it possible for him to farm like an owner would. The tenant does not know that he will be able to remain on the farm long enough to reap the benefits of a soil improvement program and he is reluctant to invest his time and money in repairing buildings and fences. The one-year crop share lease is most commonly used in South Dakota. Landlords feel that a one-year lease is necessary to keep a share tenant on his toes and to make sure he does a good job of farming. Surveys conducted in 1950 and 1952 revealed that 83 percent of the landlords used one-year leases, but that 66 percent of the tenants preferred leases for a three-year term or longer. Since landlords say they cannot rent for periods longer than one year under crop share arrangements, the problem then becomes one of seeking alternative leases that are adaptable to agreements for periods of three years or longer. Cash leases or flexible cash leases are more suitable to long term agreements since the rent to be paid is clearly specified in the lease and cannot be affected by the managerial ability of either the landlord or the tenant after the lease is signed. The value of the produce delivered to the landlord under share rents depends to a considerable extent on the tenant’s ability as a farmer. Hence, share rent landlords tend to discriminate against beginning farmers who have not had a chance to prove their managerial ability. When the landlord’s income depends upon the quantity of crops produced, he is reluctant to rent to a beginning farmer. Thus, landlords with the better farms tend to get the older, more experienced farmer while the beginning farmer frequently has to settle for an inferior or inadequate unit. Both the tenant’s lack of experience and the inadequate unit tends to increase his insecurity. More objective fixed produce or cash leases would provide greater security for such tenants since their management would not affect the landlord’s rent. The increased security might allow many beginning farmers to expand their livestock and machinery inventory more rapidly and allow them a better level of living than is possible under uncertain share crop tenure or when a tenant is forced to buy in order to have security. Because objective leases tend to reduce landlord-tenant disagreement and lease terminations, they help lend stability to the population of a community. When people have secure tenure, they can take a more active part in rural organizations such as churches, schools, and local government. Hurlburt found that under cash leases people in selected areas of South Dakota, Iowa, and Minnesota remained on the same farm longer than they did under any other type lease even though the cash leases were frequently made for one year at a time. Such results seem reasonable because the landlord and tenant do not have as many things about which to disagree when cash rentals are paid. Obviously tenants cannot rent for cash if landlords prefer to use a crop share lease. While there has been some work done to determine what kind of lease the landlords prefer, little has been done to determine what the tenants desire. There is some evidence that many tenants want longer term leases and greater security. But little or nothing has been done to determine how much more rent, if any, tenants would be willing to pay in return for greater security of tenure. In undertaking this study, it seemed logical to first determine the strength of tenants’ preference for longer term leases by asking them how much they would be willing to pay for various alternatives. If their responses indicate that landowners could make long-term cash agreements that would yield net returns of 6 to 8 percent, with less risk than crop-share leases afford, then there is a possibility of attracting new capital into farm lands on a cash rental basis.

Library of Congress Subject Headings

Farm tenancy -- South Dakota
Moody County (S.D.) -- Population, Rural

Format

application/pdf

Number of Pages

92

Publisher

South Dakota State University

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