What%20Explains%20The%20Rise%20In%20Cash%20Renting?

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What Explains The Rise In Cash Renting?

• An example of
• Dirt Research

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Allen Homestead
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2004
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Lots of Wind Rows everywhere. (Notice land is
fallow)
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2012, Windrows being taken out. (Notice the
stubble in the field)
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no one uses a cropshare anymore!
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It turns out hes right.
In 15 years, Cash Rents have gone from twice as
common to 4-5 times as common as Cropshares
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The Blackboard Economist Explanation
Risk sharing is also used to explain the growing
dominance of cash rental agreements in the US.
Huffman and Just (2004) suggest the benefits of
risk sharing have changed, as owners who rent
out farmland are now more risk averse than
farmers.
risk aversion and risk preference, one of the
richest sources of ad hoc assumptions
concerning tastes.
Stigler and Becker AER 1977
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Brief Review of the Famous Allen and Lueck
(1992) Model

• Farmers supply costly to observe effort.
• Farmers use costly to observe land attributes
• eg. Moisture, Nitrogen, etc.
• 3. Cash Renters use too many land attributes.
• 4. Cropshare contracts mitigate this incentive,
  but
• cause an input distortion on effort, and
  create
• an under reporting incentive for crop
  output.

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The AL model suggests looking at the field level
TC, for an explanation
and there has been a quiet revolution going on
...
No Till Cultivation
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Conventional Tillage
Plough the land
Use harrows or disks, to smooth the land.
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Plant into loose topsoil
Often cultivate during growth to kill weeds.
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Conventional Tillage 1. Eliminates weeds,
natural plants, and prepares bed for seed. But
2. Dries out the soil (bare dirt exposed to
sun). 3. Decreases moisture storage,
infiltration, and nitrogen. 4. Kills small
organic matter microbes, ants, worms 5.
Creates tillage pan about 6 inches below
surface. - increases run
off. 6. Often requires land to be fallow (idle)
to increase moisture. 7. Takes several passes
with machinery (fuel costs). 8. Makes land
subject to erosion (rain and wind).
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No Till Avoids all of the costs.
Planting Into last years stubble.
Crushing a winter Rye cover crop to plant into.
Crop growing through corn stubble.
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No Till, by Crop, across US 1995-2011.
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No Till, by Region, 1995-2011
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No Till, Over Time in US, by Crop
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No Tillage Soybeans Over Time
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The AL Implication
No Till Cultivation practically eliminates the
farmers ability to exploit the soil.
Therefore, Cash Rent contracts should
dominate. The transition to No Till should
explain the growth in cash renting.
Data come from USDA Phase 2 and 3 ARM Survey,
1996-2011.
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Why are the wind rows coming out?