Tenants often report that landlords do not 
understand the management of no-tillage crop 
production.  Cash lessors who manage the land properly 
can often convince the landowner that, though the 
fields may look dirtier with additional residue, the 
soil is being conserved and weed problems are not 
increasing.  If the lease is a crop share, arrangements 
regarding the splitting of input costs arise.
    For example, most share leases have the landowner 
and tenant sharing the cost of inputs such as seed, 
fertilizer and chemicals.  The tenant is usually solely 
responsible for providing labor, fuel and equipment.  
The landowner provides the land and improvements.  The 
problem arises that the landowner sees less expense for 
inputs supplied solely by the tenant and greater 
expense for inputs split between the two. 
    Adopting no-tillage crop production does not 
necessitate a lease change but it is a good time to 
reevaluate a crop share lease.  Ideally, a crop share 
lease should be structured so that each party receives 
the percent of yield commensurate with their 
contribution.  Guidelines for determining crop share 
leases can be found in MU Guide G428, "Customary Farm 
Rental Agreements."
    Using the Conservation Tillage Corn Budget and No-
tillage Corn Budget in the preceding article to 
complete a crop share lease form would provide an 
analysis similar to the one below.


Crop Share Analysis of Conservation Tillage and 
No-tillage Corn Production
    
                                         Conservation
                                           Tillage    No-tillage    
                                         ------- $/acre -------
Landowner Contribution
  Land interest                                75          75
  Land taxes                                    5           5
    Total Landowner Contribution               80          80

Tenant Contribution
  Machinery and equipment expense           62.83       54.72
  Labor                                      8.05        5.96
  Fuel                                       5.02        3.89
  Management                                11.00       11.00
    Total Tenant Contribution               86.90       75.57

Total Landowner and Tenant Contributions   166.90      155.57

    Landowner Share                           48%         51%
    Tenant Share                              52%         49%


    The analysis shows that the relative contribution of 
each person has changed by about 3%.  The tenant 
contributes less and the landowner more.  Given that 
the landowner's increased contribution (increase in 
herbicide costs) will be a cash contribution, concern 
over a change to no-tillage is understandable.  The 
tenant's cash expenditures may also rise slightly so 
that he does not perceive that he is pushing more of 
the burden onto the landowner.
    Though the relative shares for conservation tillage 
shown in the table are 48% landowner and 52% tenant, 
the lease would probably be a 50:50 lease.  Because 
most leases are approximate (i.e., 50:50 share rather 
than 45:55 share), a change of a few percentage points 
might not necessitate a share change.  The share lease 
associated with no-tillage is so close to 50:50 that it 
would probably also result in a 50:50 lease.
    Additionally, the above example does not take into 
account the value of no-tillage production to the 
landowner in retained land productivity nor the 
additional management expertise needed to effectively 
farm using no-tillage production practices.  If the 
tenant can convince the landowner that the annual value 
of erosion control and increased management 
contribution of the tenant equals about $11/acre, no 
change in relative contribution would exist. 

Conclusion
    Switching tillage practices frequently raises 
questions about the fairness of crop share leases.  The 
relative contributions of landowner and tenant usually 
change with production practice changes.  The questions 
that need to be answered include:
 1.  Are all inputs valued appropriately?  It is difficult 
but necessary to value land stewardship and 
management.
 2.  Is the change sufficient to warrant a new lease?  
Because leases are customary and general (e.g., 
50:50 rather than 48:52), a movement of a few 
percentage points may not change the lease.
 3.  What kind of relationship exists between landowner 
and tenant?  A good, trusting relationship is worth 
a lot and both are wise to protect it.
    While switching production practices may have little 
impact on the relative contributions of landowner and 
tenant, it does provide a framework for discussing the 
lease arrangement.  Use this opportunity to discuss all 
aspects of the lease.  Perhaps other factors have 
changed and modifications would benefit both persons.

[ AgEBB ] - [ Farm Management ]