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Landlord Input to Farm Management


There was an interesting article on bloomberg.com about the plastic coverings that farmers use in China, which are less durable than those used in other parts of the world. The article implies that pieces of the plastic are getting into the ground and in the future could cause problems that erode soil quality and crop fertility.

It does bring up an interesting issue about long term soil health and farmland productivity that is an issue for most landlords. There is an agency problem in which a farmer who is renting land needs an incentive to spend the money and time maintaining soil fertility, especially if the farmer may have only a short term lease.

A recent USDA report entitled U.S. Farmland Ownership, Tenure, and Transfer has a section that looks at some of the farm management practices on rented land. There seems to be mixed support in the academic literature sited against the notion that there are fewer conservation practices on rented land. However, in an analysis of survey data the report indicates landlords who are also operators have a greater say in farm management than landlords who are not operators.

Decision making strictly by the tenant, however, is generally less common on land rented from operators, which is intuitive since operator landlords, by definition, are still actively engaged in farming a portion of the land they own and may be more likely than non-operator landlords to possess the knowledge and expertise required to make farm management decisions.

…On land under non-operator ownership, tenants make the decision on permanent conservation practices on 64 percent of rented acres. However, this figure drops to 43 percent on land rented from farm operator, reflecting the fact the operator landlords, in general, are more involved with farm management decisions.

Although one doesn’t need to be a farmer or operator to be a good farmland landlord, it does pay to know best practices (or hire someone who does) and insure that rented farmland is well maintained.

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