Conservation Practices and the Growth of US Cash Rent Leases

Over the past 20 years the ratio of cash rent to cropshare land leases across the US has more than doubled. We test different theories that might explain this, and conclude that the shift is mostly the result of revolutionary changes in cultivation practices. The switch from conventional to conservation tillage brought about by changes in herbicide technologies, genetically modified seeds, increased fuel costs, and knowledge of the benefits of soil micro-organisms, has reduced a tenant-farmer's ability to exploit a landowner's soil. This removes a major incentive to cropshare and makes cash renting more attractive. Using USDA field-level data from across the US, we find strong support for this hypothesis, and some evidence that increased corporate structure also influences cash renting. Alternatively, we cannot find evidence that changes in risk, risk-aversion or insurance coverage explain the growth in cash renting.