What Explains the Rising Popularity of Cash Renting?
Abstract: Over the past twenty years the ratio of cash rent to cropshare contracts across the United States has more than doubled. Predictably, some economists attribute this to ad hoc changes in the relative risk preferences of farmer and landowners. We suggest that it is the result of changes in cultivation practices. The switch from conventional to conservation tillage brought about by changes in herbicide technologies, fuel costs, and knowledge of the benefits of soil micro-organisms, has reduced the ability of farmers to exploit soil attributes. This removes the major incentive of cropsharing and makes cash renting more attractive. Using USDA field level data from across the United States, we find strong support for this hypothesis.
