‘ I "NM ‘ * d an... 3,. “‘1 ran Dough! 3.53. L9 1951 This is to certify that the thesis entitled ‘ "Lquitability of Farm Leasing Systems in Michigan" presented by Loren D. Black has been accepted towards fulfillment of the requirements for __1‘_5__ degree in momi cs 27/; mid Major professor Date M 3 lid? 0-169 EQUITABILITY 0F FARM LEhSING SYSTEMS IN MICHIGAN A THESIS BY Loren Douglas Black Submitted to the School of Graduate Studies of’Michigan State College of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTLfl OF SCIENCE Department of Agricultural Economics 1951 THFQWS’ ACKNOWLEDGEMENTS The auth0r wishes to express his gratitude to all those who helped in the preparation of the manuscript. Sincere appreciation is extended to Elton B. Hill, Professor of Agricultural Economics, who gave generously of his time and critically re- viewed the entire study. Professor Hill's counsel and advice were invaluable in the preparation of the manuscript. Thanks are also due Dr. K. T. Wright and Warren Vincent for their suggestions and guidance in the selection of the study. The author is also sincerely indebted to his wife, Wilma, fer her patience and assistance in typ- ing the original manuscript. The author, of course, assumes full responsibil- ity for any errors that may be present in this manuscript. Loren Douglas Black 253-100 EQUITABILITY OF FAfiM LEASING SYSTEMS IN MICHIGAN BY Loren Douglas Black AN ABS TRAC T Submitted to the School 0L Graduate Studies of Michigan State College of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics Year 1951 Approved { fl A74?” . EQUITABILITY OF FARM LEASIKG SYSTSES IN MICnIGAN AN ABS TRaC T Loren Douglas Black Farm tenancy has become a permanent part of the agricultural economy of the United States. Because farm tenancy is important to American agriculture it is imperative that we have equitable lease agreements between landlords and tenants. Due to custom, landlord and tenant divisions of eXpense con- tributions and income tends to remain fixed year after year deepite the fact that price and cost relationships, and production varies from year to year and over a period of years. This results in many lease agreements that are not equitable. It is the purpose of this study to test the equitability of farm.leases for a one year period, and to test the equitability of the most common type of lease over a period of years. It is reasoned that an equitable farm lease is one in which the eXpense contributions are divided in the same proportion as the gross income. A "balance sheet" listing the division of investments, expense contributions and gross income was used to test the equitability of the lease agreement. The 50—50 CrOp and Livestock Share Lease was found to be the most important type of farm lease used in.Michigan. Although adjust- ments in expense contribitions need to be made on several farms with this type of lease, this lease is still the most satisfactory for Page 2 Loren Douglas Black Michigan farming conditions. On the average the tenants were provid- ing more than their pr0portionate share of the eXpense contributions. Gross income was divided approXLmately on a 50-50 basis. The 50-50 CrOp and Livestock Share Lease Was found to be more equitable a decade ago than it is today. The major reason for this situation is that the tenant's machinery and labor costs have increased more rapidly than the costs of the landlords. The Cash Farm Lease is second in importance in.Michigan. The farms in this study with this type of lease were smaller and less productive than the average for all rented farms. Neither the land- lord nor the tenant fared too well under this type of lease. Most of the farms were too small to have an adequate size of business to pay the landlord a fair return on his investment and give the tenant a satisfactory standard of living. The CrOp-Share Cash Farm Lease is of lesser importance inMMichigan. It is adapted better to the cash crOp areas where only a few livestock are kept. Only 8 percent of the farms in this study Operated under this type of farm lease. The Landlord's 2/5 - Tenant's 1/5 CrOp and Livestock Share Lease is not used very widely in.Michigan. The landlords on farms with this type of lease were in a more favorable position than with some of the other type of leases. However, the landlord assumes a larger risk under this type of lease, therefore, it can be reasoned that the landlord should receive a larger preportion of the gross income. Page 5 Loren Douglas Black In general, a large number of farm lease agreaaents in.Michigan are not equitable. Some lease agreements are unfair to the landlord, and others are unfair to the tenant. Many of these leases need to be appraised and adjustments made in the eXpense contributions. Changing economic conditions and changing values requires adjust- ments from time to time in our fann leases to make them fair to both parties. By the use of a “balance sheet" similar to the one used in the study, the approximate equitability of a farm lease can be determined. A more detailed analysis of this study is provided in the thBSiBo #3 {‘4 CHJ‘LP I. II. III. IV. TABLE OF COnTEhlS INTRODUCTION . . . . . . . . . . . . . . . . . . . Amount of and trends in farm tenancy . . . . . . Importance of study . . . . . . . . . . . . . . Unsatisfactory farm leases . . . . . . . . . . . Technological develOpments and equitable leases. The problem: To determine equitability in farm leases . . . . . . . . . . . . . . THSDAI OF AN EQUITASLE FAAM LEan . . . . . . . . . Determining equitability in farm leases . . . . Method of testing equitaoility of the fann lease Major contributions . . . . . . . . . . . . . . Agreements on division of eXpense contributions. Goal of farm lease . . . . . . . . . . . . . . . PAOCEDUhE AID l-LElI‘ HOLE . . . . . . . . . . . . . . . Selection of sample . . . . . . . . . . . . . . Limitations of sample . . . . . . . . . . . . . Methods of testing equitaoility of farm lease . Adjusting real estate values . . . . . . . . . . Interest rate used . . . . . . . . . . . . . . . Operator's labor charge . . . . . . . . . . . . Charge of landlord's service . . . . . . . . . . Division of other eXpenses . . . . . . . . . . . dquitability of farm lease . . . . . . . . . . . Limitations of method used . . . . . . . . . . . TYPES UI‘ Flu Ll‘-‘l LEAJLLJ Ubfil) IN lVlICIlIGnN . . . o o . 50-50 Crop and Livestock Share Lease . . . . . . Importance of lease . . . . . . . . . . . . . Usual provisions . . . . . . . . . . . . . . Modifications of leases in this study . . . . Advantages of the 50-50 lease . . . . . . . . Equitability of lease . . . . . . . . . . . . Cash Farm Leases . . . . . . . . . . . . . . . . Importance of lease . . . . . . . . . . . . . Farms in this study . . . . . . . . . . . . . Effect on soil conservation . . . . . . . . . Advantages of cash lease . . . . . . . . . . Landlord's 2/5 - Tenant's 1/5 CrOp and Livestock Share Lease . . . . . . Importance of lease . . . . . . . . . . . . . Usual provisions of lease . . . . . . . . . . Risk involved . . . . . . . . . . . . . . . . m tr G (b ~4-q\xt~td K's. TABLE OF cchaeTs (continued) IV. Landlord's 1/5 - Tenant's 2/5 OrOp and Livestock Share Lease . . . . . Importance of lease . . . . . . . . . . . Usual provisions of lease . . . . . . . . Adaptability of lease . . . . . . . . . . CrOp-Share Cash Farm Lease . . . . . . . . . anortance of lease . . . . . . . . . . Usual provisions of lease . . . . . . . . Adaptability of lease . . . . . . . . . Risk involved . . . . . . . . . . . . . . Other farm leases . . . . . . . . . . . . . V. EQUITABILITY OF FARM LEASES, MIOXIGAJ, 1950 . . 50-50 OrOp and Livestock Share Lease . . . . Organization and efficiency factors . . . Investments. . . . . . . . . . . . . . . EXpense contributions . . . . . . . . . . Division of total contributions . . . Labor charges . . . . . . . . . . . . Landlord's services . . . . . . . . . Machinery eXpense . . . . . . . . . . Machine work hired . . . . . . . . . . Other eXpenses . . . . . . . . . . . . Gross income . . . . . . . . . . . . . . Division of total income . . . . . . . Net increases . . . . . . . . . . . Custom work and labor 0 f farm . . . . FHA payments . . . . . . . . . . . . . .n .L Equitability of 50-50 Lease . . . . . . . Increase in farm investment . . . . . Other factors influencing equitability Labor costs . . . . . . . . . . . . Machinery costs . . . . . . . . . . Real estate charges . . . . . . . . Effect on equitability . . . . . . Problem in determining equitability . Adjustments necessary . . . . . . . . Cash Farm Lease . . . . . . . . . . . . . . .Organizauion and efficiency factors . . Investments . . . . . . . . . . . . . . EXpense contributions . . . . . . . . . Gross income . . . . . . . . . . . . . . Equitability of cash farm leases . . . . m- .L ABLE OF COLIILTo (continued) Qy- : 1~v‘ V. Crap-bhare Cash Farm Leases. . . . . . Organization and efficiency factors Investients . . . . . . . . . . . . EXpense contributions . . . . . . . Gross income . . . . . . . . . . . Equitability of crOp-Share cash farm le- Adaptability of lease . . . . . . . . . Land lord's 2/5 — Tenant' 8 1/5 Crop and Livestock Lease . . . . . . . Organization and efficiency factors . . Investments . . . . . . . . . . . . . . Expense contributions . . . . . . . . . Gross income . . . . . . . . . . . . Equitability of landlord's 2/3 ~ ts .-nt 1/5 crop and livestock share 1 Landlord’s 1/3 — Tenant's 2/5 erp and Livestock Lease . . . . . VI. EQUITAEIIL IN 012 53-50 caor .1. .3 LI.“ mmcx 3.... 1.2.3.2. OVA”. A r5110.) GEE-.3153.) . . . . . A Lenawee County dented Pa1m . . . . . Organization and e. ”liciency factors Investments . . . . . . . . . . . . EXpense contributions . . . . . . . Gross income . . . . . . . . . . . Equitability of lease from 1946—50 A Hillsdale County Rented Farm . . . . Organization and efficiency factors InVestments . . . . . . . . . . . . dkpense contributions . . . . . . . Gross income . . . . . . . . . . Equitability o- iazm lease 1941-50 VII. 5U1~fi-;.‘1AY 5.1.) CULCLLJoICN‘.‘ . . . . . . . . 50—50 Crop and Livestock Share Lease Expense contributions . . . . . . . Gross income . . . . . . . . . . . Equ..aoilit of 50—53 Lease . . . . Casi Farm Leases . . . . . . . . . . EXpense contributions . . . . . . . Gross income . . . . . . . . . . . dquitability of Cash Lease . . . . o o o o o o o o o o o 0 SS. FAG; TABLE OF CONT; To (continued) CHAPTJA VII. CrOp-Share Cash Farm Lease EXpense contributions . . . . . . . . . . . Gross income . . . . . . . . . Bquitabllity of Crop-Share Cash . Farm Lease. Landlord's 2/3 - Tenant's 1/} Crop and Livestock lease . . . . . . . . Expense contributions . . . . . . . . . . . Gross income . . . . . . . . . . . . . . . Equitability of Landlord's 2/j Lease 50-50 CrOp and Livestock Share Lease over a period of Years . . . . . . . . A Lenawee County rented farm from 1946-1950 EXpense CUntributiOHB c o o o o o o o 0 Gross income . . . . . . . . . . . . . . quitability Of le&88 o o o o o o o o o A Hillsdale County rented farm from 1941 to 1950 o o o o o o o o o o EXpense contributions . . . . . . . . . Gross income . . . . . . . . . . . . . . Equitability of lease . . . . . . . . . CODCIUSIOHB o o o o o o o o o o o o o o o o o i * i * * 99 99 99 99 100 100 101 101 101 102 102 102 105 105 18.. 2. 5. 5. 6. 7. 8. 9. 10. 11. t" 5! *3 Q .J £3 U”. r. E I Types of eases on 57 rented farms in.hichigan, 1950 o O o o o o o O o o o o o o 0 O o o o O O O O O Usual provisions of the most common crOp and livestock share farm leases . . . . . . . . . . . . Averuse investments of landlords and tenants on 22 rented farms with 50—50 CrOp and Livestock Share 1.86585, I'liChiéan, 1930 o o o o o o o o o o o 0 Average expense contributions of landlords and tenants on 22 rented farms with 53-50 CrOp and Livestock Share Leases, Michigan, 1950 . . . . . . . Division of average gross income between landlords and tenants with 50-50 OrOp and Livestock Share Leases on 22 rented farms, Michigan, 1950 . . . . . Effect of various factors on the equitability of the 50—50 OrOp and Livestock Share Lease on 22 rented Michigan famns in 1950 . . . . . . . . . . . Average investments of landlords and tenants on eight rented farms with Cash Leases, Michigan, 1950 Average expense contributions of landlords and tenants on eight rented farms with Cash Farm Leases in lliCLligan, 1950 o o o o o o o o o o o o o 0 Division of average gross income between landlords and tenants on eight farms with Cash Farm Leases, I‘diChigan, 1950. o o o o o o o o o o o o o o c o o 0 Average investments of landlords and tenants on three farms with CroP-Share Cash Farm Leases in I'liclligan, 1950 o o o o o o o o o o o o o o o o o 0 Average expense contributions of landlords and tenants with Crop-Share Cash Farm Leases in l‘IiChigan, 1950 o o o o o o o o o o o o o o o o o 0 Division of average gross income between landlord and tenants with Crop-Share Farm Leases, Michigan, 1950 . O O O O O O O O O C O O O O O O O O O C . . 26 57 42 48 51 52 55 58 59 62 TABLE - 1" ,. . _ 12. 15. 14. 15. 16. 17. LIST OF TABLdb (continued) Average investaents of landlords and tenants on three farms with Landlord‘s 2/5 - Tenant's 1/5 CrOp and Livestock Share Lease, Micnig n, 1950 . . . Average eXpense contributions by landlords and tenants on three farms with Landlord's 2/5 - Crop and Livestock Share Lease, Michigan, 1950 . . . Division of average gross income between landlords and tenants on three farms with Landlord's 2/5 CrOp and Livestock share Leases, Michigan, 1950 . . . . . Average organization and efficiency factors on 57 Michigan farms by type of lease for the year 1950 . Organization and efficiency factors on a Lenawee County, Michigan rented farm with 50-50 CrOp and Livestock Share Lease for the years 1946 to 1950 . . Organization and efficiency factors on a Hillsdale County, Michigan rented farm with a 50—50 CrOp and Livestock Share Lease for the years 1941 to 1930 . . ***** I'I n . Ada ‘ 69 72 75 Figure Numb e r 1. 2. 8. 9. 10. ll. 12. 15. LIST or ILLUSTRATIONS Farm tenancy in the United States from 1690 to 1945 o o o o o o o o o o o o o o o o o o o o o 0 O Tenancy - percent of feuds Operated by tenants, 1940 and 1945 . . . . . . . . . . . . . . . . . . . . Farm tenancy in Richigan from 1920 to 1945 . . . . . Farm tenancy in.Michigan . . . . . . . . . . . . . . Type of farminc areas in Michigan . . . . . . . . . . Q Investments: percentages contributed by landlords and tenants under 50—50 CrOp and Livestock Share Leases on 22 rented farms, Michigan, 1950 . . . . . . EXpense contributions: percentage contributed by landlords and tenants under 50-50 Cr0p and Livestock Share Leases on 22 rented farms, Michigan, 1950 . . . Gross income: percentage distributed to landlords and tenants under 50-50 CrOp and Livestock Share Leases on 22 rented farms, Michigan, 1950 . . . . . . Investments: percentage contributed by landlords and tenants on eight farms with Cash Farm Leases, bliC-Iligan’ 1950. o o o o o o o o o o o o o o o o o o o EXpense contributions: percentage contributed by landlords and tenants on eight farms with Cash Farm Leases, Michigan, 1950 . . . . . . . . . . . . . Gross income: percentage distributed to landlords and tenants on eight farms with Cash Farm Leases, l‘iiChigan, 1950 C O O 0 O O O C O O O O O O O O O O O Investments: percentage contributed by landlords and tenants on three farms with CrOp-bhare Cash Farm Leases, Michigan, 1950 . . . . . . . . . . . . . EXpense contributions: percentage contributed by landlords and tenants on three farms with CrOp— Share Cash Farm Leases, Michigan, 1950 . . . . . . . P '. ,fi ‘1 ALT“ _ LIST CF ILLUSTAATICES (continued) FIGUdd 11min :1 ‘1 d'fih' .44. “ 14. Gross income: percent distributed to landlords and tenants on three farms with Crop—share Cash Fifi-3m LeCLBE‘S, Iii-Olli‘éLD.’ .1950 o o o o o 0 o o o o 0 O 15. Investments: percentage contributed by landlords and tenants on three farms with Landlord's 2/5 - Tenant's 1/5 CrOp and LiVestock share LeaSe, Eichigan, 1950. . . . . . . . . . . . . . . . . . 16. EXpense contributions: percentage contributed by landlords and tenants on three farms with Landlords 2/5 — Tenant's 1/5 CrOp and Livestock Share Farm Leases, Michigan, 1950 . . . . . . . . . . . . . . 17. Gross income: percentage distributed to landlords and tenants on three farms with Landlord's 2/5 — Tena t's 1/5 Cron and Livestock Share Lease, Michigan, 1950 . . . . . . . . . . . . . . . . . 18. Farm investments of a Lenawee County, Michigan tenant with a 50—50 Cro; and Livestock Share Lease for the years l9d6 to 1950 . . . . . . . . . . . . 19. Farm investments of a Lenawee County, Michigan landlord with a 50-50 Cr0p and Livestock Shar Lease for the years 1946 to 1950 using adjusted farm real estate values . . . . . . . . . . . . . . 20. Eernse contributions: percentage contributed by landlord and tenant on a rented farm in Lenawee County, Michigan, with 50-50 CrOp and Livestock Share Leases, 1946 to 1950 . . . . . . . . . . . . 21. Gross income: percentage received by landlord and tenant on a rented farm in Lenawee County, Michigan with a 50—50 Crop and Livestock Share Lease, 1946 to 1990 . . . . . . . . ... . . . ... . . . . 22. Expense contributions and gross income of tenant on a Lenawee County, Michigan rented farm from 1946 tel-950000000000000000000000. FIGURE NUMEJR 25. 24. 25. 26. 28. 29. LIST CF ILLULTdsTIOhb (continued) PnGd ExPense contributions and gross income of landlord on a Lenawee Count‘ Michivan rented 5 o f= m from 1946 to 1950 . . . . . . . . . . . . . . . . s1 Investments of tenant on a Hillsdale County, Michigan rented farm with a 50-50 Cr0p and Livestock Share Lease for the years 1941 to 1950 . . ER Investments of landlord on a Hillsdale County, Michigan rented farm with a 53—50 Cr0p and Live- stock Share Lease for the years 1941 to 1950 . . . . . 86 Expense contributions: percentage contributed by landlord and tenant on a Hillsdale County, Michigan rented farm with a 50—30 Cr0p and Livestock Share Lease, 19$1—1950 . . . . . . . . . . . . . . . . . . . 87 Gross income: percentage received by landlord and tenant on a Hillsdale County, Michigan rented farm with a 50-50 Cr0p and Livestock Share Lease, 1941-1950 . . . . . . . . . . . . . . . . . . . . . . 88 Etpense contributions and gross income of tenant on a Hillsdale County, Michigan rented farm with a 50-50 CrOp and Livestock Share Lease for the years 1941-1950 . . . . . . . . . . . . . . . . . . . 91 Expense contributions and gross income of landlord on a Hillsdale County, Michigan rented farm with a 50-50 CrOp and Livestock Share Lease for the years 1941-1950 . . . . . . . . . . . . . . . . . . . 91 _' "r". 'j T TrF' ‘H -1. 5- r: ”17-- . “"":rfi“t“.’_“ T" ‘-',\-~-~.;-- ‘4‘le ...‘Iu‘ill. Cr nun Lat-JLinJ 0;.HLA-ai'b-l .Ll‘l i’liUfllWhu By Loan; .3. snack czurrin I Imaowo no 1‘; Farm.tenancy plays an important part in the economy of American agriculture. It provides a means whe-eby a young farmer with in- sufficient capital can get started in farming. It allows a farmer to provides an effective means of helping to keep the farm within the family. It allows older fanners to retire and to pass their exper- iences and wisdom to younger farmers. To have a healthy situation in our agricultural economy probably as high as one-fourth of the farms in the United States can be tenant O“erat3d if the so-called :4 .9 "agricultural ladder" is to Operate efficiently. fl MA“ 1“ 1’1 8W1 ' 5‘19I‘0‘!’ 1‘ AA a. t A A kl. Amount of and Trends In the past, the percentage of farms that was tezant Operated has fluctuated to some extent with changes in economic conditions. For example, during the depression of the 1950's farm tenancy in the United States reached an all time high of 42 percent. When the business cycle swung upward during World War II, farm tenancy decreased and in 1945 averaged only 52 percent. The percentage of farm tenancy in the United St:tes from 1890 to 1945 is shown in Figure I. The trend of farm tenancy in the United States has been upward until about 1955. Since this period the trend has been downward. Page 2 ...-..-,-...- 4. .J .1— 10... u : ... 2V4..- . r: P. 1.22 .1.. 2..“ .nu’. I Iltxilll I ,i____l,7,i,,,, , , fags 5. The prOportion of farm tenancy varies widely between the different farming areas in the United States as shown in Figure 2. The southern states with their share-crOpper System had the highest percentage Of farm tenancy in 1945. The cash crOp areas of the corn and wheat belts also show a relatively high rate of farm tenancy. Farm tenancy in Michigan followed a similar trend as for the "nited States. Tne percentage of farms Operated by tenants in hichigan h has decreased from 19 percent in 1955 to 12 ercent in l9e5, as shown ’0 n ,1 in Figure 5. However, in l9h5 about -5 percent, Or one acre in four, of all Michigan far“ land was Operated by "non-owners" (i. e. tenants and part owners). The proportion of farm tenancy also varies with the type of farm- ing areas in Michigan, as shown in Figure 4. Farm tenancy is highest in the more productive corn and livestock areas of southern.hichigan. Importance Of study It seems reasonable tO assume that farm.tenancy is a permanent system in our agricultural economy, and for this reason it is important that we have equitable lease agreements. Farming is a business and no business can prosper unless everyone concerned makes a fair profit. A good lease must provide the landlord with a fair return on his investment plus the maintenance Of the soil fertility and improvements. It must also provide the tenant an Opportunity to put his labor and knowledge to good advantage so they will return him a satisfactory standard of living. a m mama “U40 .. e = .m momma N. .. com. ohm.“ own 2.: m a we 9” .. $4.2 0 420m .qu = m: ommfi ., .... ....W .. = mm omma «Lie... “21 ”.0 v .. em 22 . $5.5 2:2: : mm OOQH f o ..N x .f ....u‘ sesame mm 83 g / r . mopmpm 633: how wowmhebd w O. ~\/\’\§ I _ .fi. 0 v «E .... mm m mmV.h.2IJ a deco--- \x. m Te w ._ .- \\ .2; “H -u . HH u . . 39“ a madman .833 ....» anon. .\ ma . new: «NJ oamfl n ohswwm homAD . ko ..I “In! III mama dew Odma .mBZfiZfia Mm mfiaammmo h ho ammommm II HomaZHa .N .MHR c . egg 1 . - . .o a a . "gunngguganfinauflauunnaufln $4 33333338383333338:2333:3333333333338332333333328::1 ‘ '°a::::::::::::: OI. 0.0... ......”‘O...’. cocoon-00a... onto-ac. 0...... ottoman-«u on a so 0 .0. ’0 OD. -:::::::::::::::------- ....”II... .0... 33388833883338“:88338833383333333388333333:: Page 5 . A . .A . _ . . . é 1.3:.u . ... IV!— ..C. 1» ruzL: w i .....4.r...... ...... ‘v irfilllnn fl. 1“ +‘J‘|¢,"|,lll 6 ‘Jfllllllt. A Page 6 Fig. U FARM TENAIJCY IN MICHIG.HN Full owners, number in 19'115 126,589 Part owners, " " 27,096 Tenants, " " " 20,536 'Q Managers, " " " l , Ob? If” 7 AOON . . " 4W 7 '1 95.7%., .5 . ,1 Thu?- '2 “'22" 1., /"W :Z , ' -—-- ll 3 5....1'17551361'." 8 ”all JFCHOO7! b ngPPEWAEA I" u \ 3 aci'rgsou} GE 6 ' 1 Z gmémuc'l t... .5... .. . LT‘ . W, 6 :- ~75 ,/;\-\‘§m,r;1¢if3 I l ' 0<:"Erumm’T . 11:»,‘5‘o‘ax 3} ‘3\ 3:} {28/}, f“: 3307.130 ImgTA—fflm {Q ”T7; 12 in 8 MIGHEGAN Egg 6:13... 125.. _\ EMA, ”8751:“? I‘mfl l ! 6 1 Trends in Farm TeflnaPPL ._ .. mercmmmugn Wimiémfi All Tenant farms 1 6 I "#1116 Year farms Number Percent mwTBLfii" 4mg; Tguk—rfifi—z- “1.7215114 1920 196 117 3h 722 18 13 13 ' 19 i 20 ”3.4““ L, Q 5 _ ‘ 1925 192,327 29,119 15 higfigwfimggflr‘umuifiwuoli _____ 1930 169,372 26,195 16 8 16 1b !2 ! 1’11 7 scan lswluc 1935 196,517 37, 331, 19 W 7 i705; .13 96.571er ~a£$ l 22 l 21 1910 187,589 31,800 17 ? 1M... 7___ 2‘6 35 16 . 15,1116 1916 175,268 20,556 12 , y 8 Friar 17 20 10 rege‘fi'f"29“ __ .1 or'um! 19 mm c1mro~ 3717' 19 - 6 fin”36\. 12 510 26 2h 26 | I1 n Kinds of Tenants , 17 18 17 'L_. -WWD "mi fuféuj ins; lumv lmanm luvmam! 1 ii ,‘i Kind 19118“ Pigus 1.1J 11* {1114.19.4— lb 17;“! 111 tenants 31,800 20,536 Flaggrfli‘é“ WM Tm" WW" :1.ng Cash tenants 11,1110 6,077 9_ j 18 J__15_.L . Share-cash 861 1310 may ugh figs»: swag. Wumfluumu'Tnm Share tenants 15,078 11,358 111 . 28 2h Other 14, L21 2, 691 21 Lib—Ll. Percentage of farms operated by tenants 1935, upper figure Percentage of farms operated by tenants 1913, lower figure z' ' . , . . I . , .~ 1 . ‘ . ' o . v . . , ‘ - . l ' ‘l o '. - .I 5' . U . . _ . . ~ . I o" ' I . . A I ' 4 . 7 ~ . . , . . . 2 7 o . ' ' ‘ u . ~ I c I ' - Q . I ‘ . ~I 1.. g t . \ I... ’ o . . . , . ‘ U a - . I - ‘ ' | . I . a . I ~ ‘ . n .. . . . . D l , ‘ . , . .1 . ‘ . .. , ' h t r . . - U . v . y u I ‘3 s ' I . _ 3 ~ .. , , . . ‘ .p ' q \a . . . . ~l . ,7 A ‘ .‘ 1 O l 1' O .. .. . - . - u .- . -. . s I -~ Page 7 (‘1 v notary Farm Leases *0 F10 Unsat Landlord and tenant divisions of exps1se contributions and in- come tends to remain fixed year after year deepite the fact that prices, costs and production vary from year to year and over a period of years. This results in lease arrangements that may not be equit- able. Many dissatisfactions in farm tenancy has been a direct result of poorly planned and inequitable farm leases. Many of the farm leases are inadequate because they are based on custom and do not adjust to changes in economic conditions. Hence, we cannot eXpect desirable landlord-tenant relationships merely by using a standard farm lease without consideration of the value of the contributions of each party and of all other factors involved. Each farm represents a different situation and must be considered individually. Technological DevelOpmcnts and Equitable Leases Continually changing develOpments around which landlord and tenant relations are founded requires an up-to-date appraisal of these changes. Innovations in agriculture such as the adeption of mechanical power, combines, corn pickers, portable hay balers and field chOppers require a substantially larger investment than was true in the past. The increased importance that is now placed on soil conservation, use of commercial fertilizer, liming, contour farming and other soil management practices presents new problems in the farm lease. Changing relationships with reapect to labor costs and interest rates require adjustments from time to time. Page 8 Other factors such as increasing livestock numbers which require more buildings, equipment and labor saving devices; changes in farm real estate value, taxes, and the increasing costs of farm improve- ments and maintenance on a rented farm; higher standard of living on the farm such as better housing, electricity and bathrooms; changes in farming practices; and changes in the relative bargaining power of landlords and tenants are a few of the factors that must be considered in the appraisal of our lease agreements. Because the lease agree- ment is so important in our landlord and tenant relations it is important that we give careful study and consideration to the prinCiples and factors that make the lease equitable to both landlord and tenant. '1 The Problem: To Determine a uitabllit‘ in Farm Leases __. _il lei... In light of the situation as described in the introduction of this report an attempt will be made to (1) determine what constitutes a fair farm lease and (2) to test the equitability of the present farm leases now used in Michigan. Farm lease agreements will be tested on several farms during the same year and on a few farms over a period of years. It is assumed in this study that the equitability of fans leases depends largely on (1) the managerial skill and efficiency of the ‘tenant Operator; (2) the productiveness of the soil; and (5) the adequacy of the farm and facilities provided by the landlord. A "balance sheet" showing a listing of both the landlord's and tenant's investments, eXpenses and income distribution will be used as a basis for testing the equitability of the farm lease agreements. Page 9 CHAPTER II THECdY OF AN EQUITABLE FAAM lEaSE A farm lease is a business agreement between landlord and tenant which serves as a memorandum of understanding between the two parties. It should contain the standard provisions of such legal agreements and state any special understanding between the landlord and tenant in regards to the Operation of the farm. The landlord is the owner of a relatively large amount of capital in the form of land, buildings, fences, etc., while the tenant is a person with a more limited amount of capital but supposedly capable of providing the labor and "know—how" to efficiently Operate the farm. The drawing up of the lease is essentially a bargaining process between the landlord and tenant in an attempt to arrive at an equitable division of farm income and contributions. The landlord-tenant relationship is usually beneficial to both parties. The landlord possesses a relatively large amount of capital, which along with the tenant's labor, management and limited capital constitutes a producing unit. Determining Seuitability in Farm Leases One of the objectives of a farm lease is to provide for an equit- able division of the farm income and expense contributions between the landlord and tenant. An equitable division of income and eXpense contributions may be considered to mean a division in which the eXpenses are shared in the sane proportion as the receipts. Page 10 Ihere are two ways of securing equitability in a farm.share lease. One is tO assume a fixed division of income between landlord and tenant, and to adjust the division of eXpenses so they will be in the same prOportion as the division of the income. For exaaple, in a 50—50 Crop aid Livestock Share Lease the income would be divided on a 50—;0 basis and the echnse contributions shared in the same preportion. The other method involves the division Of the income in the same preportion as the eXpense contributions provided by each party. For example, in a 50-50 CrOp and Livestock Share Lease if the eXpense contributions were divided 55 percent for the tenant and 45 percent for the landlord, the income would be divided on the same basis. In either case, the assumption used in this study is that an equitable farm lease is one in which the landlord and tenant contribute to the farm Operations in the same proportion as they share in the in- come. It seems that the most satisfactory method would be to hold the division of the income constant and to vary the preportion Of eXpense contributions provided by the landlord and tenant, in the same pro— portion as the income received. What is an equitable division of capital investments, eXpense contributions and income in a 50—50 Cr0p and Livestock Share Lease? The answer depends largely upon each individual case, because equitabil- ity will depend upon the terms of the agreement as a whole and the alue of the contributions of both parties. It has been the custom in the past in leasing farms that the landlord furnishes the farm and all fixed improvements, while the tenant furnishes the major portion of the machinery, equipment, and labor to Operate the farm. The tendency for Page 11 this custom to carry over to present day conditions requires an appraisal of the contributions by landlord and tenant, to determine if the svstem of sharing expenses and income is an equitable arrange— ment to both parties. On the same size of farm the landlord whose farm is worth éfiOO per acre, gives more when he contributes his farm than does the land- lord whose farm is worth only @100 per acre. The type of farming must also be considered, because the tenant who Operates a dairy farm usually contributes more in the way of labor than does the tenant on a corn or wheat farm. A dairy farm also requires a larger investment in building and equipment by the landlord. It is for this reason that rental agreements vary from one area to another where they have been influenced by the productivity of the land and the cost of Operating the farm. These variations in income from farm to farm, even in the same community, makes custom an inadequate guide in develOping a lease for an individual farm. Method of Testing dquitability Of the Farm Leas The equitability Of a particular farm lease can be tested by the use of a abalance sheet" on which is listed the division of eXpense contributions and income of both parties. Many Of the expense con— tributions will be estimated items. Certain items such as the Value of the farm, the Operator's labor charge, the landlord's charge for management, the Value of the personal prOperty, and the interest rate are items upon which an estimated Value must be placed. It is important that the value placed on these items be on a comparable basis, in so Page 12 far as present values and prices are concerned, so as to be fair to both landlord and tenant. If farm account records are available, certain cash expense items are already available. However, if farm account records are not available the estimates of cash expense contributions may not be accurate, but they still can serve to give some idea as to whether a proposed lease is equitable to both parties. ‘ Major Contributions The major contribution of the landlord is the land and fixed hnprovements. The valuation placed on the farm and the rate Of interest to be used will be important factors in determining contributions Of the landlord. The tenant furnishes his Own labor, plus that Of his family upon which a value must be placed. In placing such an estimate on the Operator's labor the question will arise as to whether the use of the house and products used from the farm should be included as income tO the tenant. If the above are considered as income to the tenant, the tenant's wage allowance would have to be included at a correSponding higher rate. However, in most instances the wage rate for the tenant is based on the assumption that in addition he will receive his house rent, garden and other privileges without cost to him. The interest rate on short term loans such as for purchase of live- stock, macninery, feed and other Operating capital is usually valued at about one percent more than the rate on long term loans such as for real estate. fags lj By the use of the above method it is possible to quite accurately determine the total contributions of both the landlord and toner it. If th e contr ieutions are not equit ble , adjustments ca n be made in certain of the eXpense items. For example, the landlord might pay more than his usual share of the cost Of the commercial felt ' zer, grass seed, and also make other contributions so as to mm is the con- tributions of each party more equitable. As was suggested e rli it seems more satisfactory to make the adjuem - elts on the expense items and to hold th is divirion of the income constant, rather than to div1de the income on the basis of contributions by the landlord and tenant. The above method of testing the equitability of farm leases is no 1 better than the judgment 03+ he peeple who make the estimates, however, it doe 8 provide one means of tee tin " the approximate equ .itability of no the farm l;ase. The real test of a farm lease however, is how it works out in actual practice after a year's trial. Does it divide expense moly? Jess it provide for efficient and l4. contributions and income eq: harmonious Operation Of he farm? Jess it really weik out to the satis- faction of both parties? Agreements n DiVision f expense Contrioutions “__.—__.— The landlord and tenant must reach an agreement on the division of some expense items. If the farm is run down 81-1d badly depleted wlien the tenant moves onto the farm, the landlord usLally assumes the cost of lime to bring the f: rm up to a higher level Of production. however, if a farm is hi ghly productive it mi"ht be reason; ble to assume that the tenant should contribute his share toward main :iining the soil productivity. Usually the costs of most comuercial fertilizer is Shir-ed by the land- lord and tenant in preportion to the sharinb or the cro:;. however, I A I“ in certain inst he’s the landlord may say gore than 1-1a proportionate share in order to nuke the ShuIiRT of extenses more equitable. Q C the cost 0? tractor fuel between landlord and '33 (D f “l :__\ a: *1 FAQ s 0~ O tenant presents certain problems. When the power was furnished by horses they were usu 11y fed from undivided feed from the farm. The landlord furni had half of the feed even though the horses were owned by the tenar t. It may now be reasonable to expect the landlord to con- tribute t ward part of the expense of the tractor fuel to offset the saving on feed normally fed to horses. host landlords under a 50—50 Crop and Livestock Lease do contribute half of he tractor fuel. A few landlords allow he tens nts to keep maybe 100 hens to be fed from undivided feed from the farm, and the tenant than pays all the tractor fuel eXpense. In some cases tr e tenant might make cer tain inprcveuents on the ht be reasoned that the costs of these improvements should be borne principally by the tenant when he is the one wh gains from the improvement. For example, the tenant may builda broo er house, range shelters, hog houses, fences, etc. however, arr'n enents snould be made so if the lease is terminated, the tenant will be co: spensate d for une:hausted improvements fUrnished by the tenant. With me at of the farm leases the cash expense of improvements, such as repair and maintexance on building, fences, and drains, are borne largely by the landlord. However, in most situations th lanilord provides the actual cost of the improvement while the tenant provides Page 15 the labor to make such an improvcncnt. For egamgls, the landlord may provide the fencin miterial and the tenant would pr vile the labor to rat it ur. Hhatever sbreeo;nts are made re ardinv the airision of expense items should be clearly defined in the lech, and agreed upon by Loth landlord an; tcnant. The lease anould always be in writing. It is easy ‘ to forget promises, and forgotten pronises 0y either garty nay u3~ {3 rt {3" (D ermination of an otherwise mutually pleasant and profitible farm lease agreesent. 923l_2£ Farm Lease The goal of any farm rental agreeaent should be a successful and profitable farm Operation, and a fair division of the income depending on the auount of contribution by each party. fliis often requires a certain amount of tolerance and "give and tike" by both parties. each party should be willing, at times at least, to go more than half way to make the farm Operation a success. CHnPTQR III PdCCZDJRE AID LETHCDS Selection 2: Sample The sample used in this study was a combination of both random and judgment. The sample was random in so far as it was tshen from the farm account records kept at Hicnigan State College with no partic— ular effort to get a sample from any one type of farming area in Michigan. Forty eight farm accounts on rented farms were taken from the 1950 files. Through a process of elimination and judgment, records that were not complete or records on farms that were not fully rented were removed from the sample. For example, some farms were father and son arrangements in which the son was just getting started in farming and the father was furnishing a larger proportion of the eXpense con- tributions than would normally be done. It was assumed that these re- cords were exceptions and not representative, so they were eliminated from the sample. The final sample was composed of i? fully rented farms located in 20 counties in Michigan. Approximately 50 percent of the cases in the sample were from the grain and livestock regions of the lower counties in Michigan where the percentage of farm tenancy is highest. The dis- tribution of the sample can be seen on the map of.Michigan in Figure 5. Limitations 93 Sample The limitations of the sample used in this study are fully realized. In the first place, the sample is small and may not be representative Figure 5 Type of Farming Areas in Michigan 17 .09 .00.“.079" P‘WNE“ 10. IRON Corn and Livestock Small Grains and Livestock Southwestern Fruit and Truck Crops Poultry, Dairy and Truck Crops Dairy and General F arming Dairy and Cash Crops Dairy, Hay, and Special Crops Beans, Sugar Beets, and Dairy Cattle, Sheep, and Forage Central Potato and Dairy Northern Fruit and Dairy Northern Potato and Dairy General, Self-Sufficing, and Part-Time Cattle, Potatoes, and Self-Sufficing Cattle, Hay, and Spring Grains Dairy and Potatoes Potatoes, Dairy, and Part-Time “a!“ {MM ‘ ‘1 MN Mm ("f \\ " ' I ‘ . . m1, CILH H JAC’VSQ” . ‘ , r ‘ a ,3‘ ,.. ' . v" .v : .r ' I.'-' l 8A20\€A ran ll five I l *9 ,a M 9, Inga” ‘ MW“ fits; .5ZMM'J‘ -+ MW MI“. 6" _I .upm. , "0"40‘ —* Ease 18 of all rented farms in.Mich15an. Usually the larger the sample the more representative it will be. Another limitation is that the material used was taken from fawn account records. The general criticism of a sample taken from farm account records is that the sample tends to be made up of larger and mcre successful farms than the average for the universe. It is reasoned that only the better-than—average farmers are willing to keep farm account records. This means that we are not likely to include a representative portion of low-income farms. However, for the purposes of this study the assumption is made that the sample will be representative enough to show whether or not farm leasing systems in.Michigan are equitable. If the larger and more successful farmers do not have equitable lease agreements, it is not beyond the sc0pe of reason to expect that similar inequities exist with the smaller and less successful farmers. This study could well be followed and supplemented by additional data to check the validity of the sample and the information taken from the fa account records. Method 2: Testing Equitabilityfgfi Farm Lease The method of testing the equitability or farm lease agreements in this sample was by the use of a “balance sheet“ showing the total contributions of capital, labor, cash eXpenses, and the division of farm income of both landlord and tenant. Records of investments, re- ceipts and expenses were taken from the farm account records. Several estimated items appear on the balance sheet and every effort was made to place a fair and impartial value on the items estimated. Any estimate of this kind is always subject to the judgment of those that make the e st imat es . Page 19 The method of evaluating the equitability of a farm lease is illust‘ated by the balance sheet on Page 20 which is an actual record of a rented farm in a general farming area. In the illustration, the value placed on the farm is 424,397. This value is based on the current farm real estate price index, which for 1950 was 199. All the real estate values in this sample were ad- justed to current real estate price index values. The reason for this adjuscment was the farms on which farm account records have been kept over a period of years, have not adjusted the real estate values to the current price level. In other words, in the farm account project a farm on which records have been kept since 1958 is still using the 1938 farm real estate value, plus or minus depreciation and improvehents. Labor and other eXpense items have been adjusted upward with the inflationary Spiral, so it only seems loaical that the landlord's major contribution, which is his farm, should be adjusted to current real estate values. Adjusting deal Estate Values The method that was used to determine the current real estate values was as follows: First we determinedin what year farm account records were first kept on the farm. The next step was to get the ratio of the current farm real estate index and the firm real estate index for the year when the valuation was first placed on the farm. For eanple, if the valuation was first placed on the farm in 1953, the present valuation on the farm will vary only in the amount of the depreciation subtracted from, or improvement added to the farm. The farm.account records may show the farm in 1950 vslued at $12,000. The farm real estste ate index had in— (9‘ index for 1958 was 92, while in l950 the farm real es I CHECKING 2y INVESTMENTS, EXPEN§§§ AND INCOME DISTRIBUTION IE FARM LEASES gage :3. Name J ohn Doe Year 1950 Type of Lease 50-50 CrOp and Livestock Share Lease Acres 22 Values Interest Int.chgs.for the yr. INVESTMENTS Rate Total Tenant's Landlord's Tenant's Landlord Farm (inc. dwelling) . . 55 24,59] $5 _. 3% ob, 501 51% 3 -... 33 1 90:3 Machinery and equipment. §,§O 5, 050 -- ;- 158 .... Livestock: Cows and bull 6,060 5,030 j,03~0 2; 16L 161 Young cattle. . Hogs . . . . 896 448 448 5;- EL :5 Sheep . . . . Poultry . . . 39 L9 12 33} 1 lL FGGdoooooooooc é.62§ 5'728 __.-m4 __.—1&4 T013313 o o o o o I o o o 11' I2“ alga: M __.—__— __.5£é._ #15- Operating expenses for the year OPERATING EXPENSES —"—"‘“‘"' "“"""""" Total Tenant's Landlord's 1. Management and labor: Operator . .19. months .‘ . . 3 1.359 Unpaid family labor . . . Hired labor 0 o o o o o o 266 266 Cash cost board, hired labor.........o 3% l _ .. 2. Management and services provided by the landlord. 24o _ - ___2_5'Q_ 3. Power and machinery: Depreciation .and maintenance 02 942 l 160 Fuel and oil . . . . . . . . Machine, work hired . . . . . 4:31 __..llil. __EZSL b. Improvements: Depreciation, repairs and upkeep and maintenance. Include dwelling and all other buildings; also fences, water supply and drains §22 .. 599 5. Feed: Purchase and grinding and pasture rent . . 2.1454 1 21 1.211 6. Crop expenses: Purchased seed, fertilizer, etc. 1,186 2’92 5&9: 7. Livestock exp. (vet. bills,D.H.I.A.,breed fees) . 226 ll: 11: 8. Taxes: On real estate and farm personal property 266 ' 18 245 9. Miscellaneous ; telephone, electricity, dues, etc. 153 84 gl; 10. Totals: Operating expenses, lines 1 to 9 . . . . $ é gal, 33 5 9H 3 5 610 11. Interest charges from invest. section . $ 2,020 $5 545 33.3:151’2 120 '1th Contributions, lines 10 and 110 o o o o o 0 $33 102904 $ $812k 335.0% x. H“ h - ~~- Au _ .-“’ - ’9‘ .—4< Checking 92 the farm lease, continued Name John Doe Year 1950 Type of Lease 50—50 Cr0p and Livestock Share Lease __.»- --—— __.—— Income for the year 1110013 IT? Tot fl Isnant's share Landlord's share Percent Dollars Percent Dollars lo CrOpS o o o o o o o o o o $ 2.862 . :29 % $5 1.142,; in % 3’ 1.351 2. C C O O 3. 0000 h. Dairy product sales . . . 6,218 50 51412 59 5 519 S. Cattle, net increase“. . 3028 59 1 522 59 J 529 ....29. 6. Hogs, net increase“. . . 2,004 1,002 QC 1,992 7. Sheep and wool net 5:1ch 8. Poultry, net increase” . 1A 59 9. Eggsales........ 22 20 11 jo 11 10. Custom work . . . . . . . [Q 100 25 .... .. 11. Labor off farm . . . . . 12. Woodlot products . . . . 13.0t-hers ......... 1h. Mpayment O O o o o o O 128 W 64 59.. __...65. 15. TOtal Income 0 o o o o o $ 15.!2! $ z.52§ m 8 70222 Ma 16. Income, percent. to each. xxx I *Value of use of the farm dwelling and other perquisites received by the tenant were not added as a part of tenant's labor charge and thus are not entered as income to the tenant in this section. **Net increase: To determine the net increase in cattle (1) add the cattle inventory value at the beginning of the year to the purchases of cattle during the year. Then, (2) add the cattle inventory value at the end of the year to the sales of cattle dur- ing the year. If the sum resulting from (2) exceeds the sum resulting from (1) the result is called a "net increase". It is really the gross income from cattle. Net increases for hogs, sheep and poultry are determined in the same manner. f‘) Iago c... creased to 199. 199 i 92 - 2.16 x 130 - 216. In other words, the for 1950 would be 216. The valuation Q 5'3 \1 .j corrected form re‘l estate in :4 on the firm has increased to 216 percent since 19‘5, or 912,000 x 2.16 = ’. @35,920, the new adjuSLed Valuation placed on the farm. Interest hate Used g; b D I I l 1 interest rate on the real estate is estimated at 45 percent, :5 :r .4. C) D D 'J. (D the contribution made by the landlord each year. This rate is UJ (D (F 'ed on the Drj revailin; rate of interest for good farm mortrages. An interest rate of 5% percent was used for the personal preperty. This rate was used because the rate of interest on money borrowed for Operating capital usually costs about one percent more than lonD term capital. 93eratcr's Labor Charge The Operator's labor charms was estimated at a total of 91,560. This is equivalent to 4150 per month for his labor and managemen . The tenant also receives his house rent, plus such produce which he uses from the farm free, along with other privileges as mi;ht be provided in the lease. It is reasoned that if a higher Operator's labor charge were to be allowed we should then consider the value of the home grown farm produce used by the tenant's family and the house rent as income to the tenant. It does not make much difference which method is used. Charge for Landlord's services It is also assumed that the landlord either hires a manager to look after his interest in the fann, or that he makes frequent visits to the farm to make settlements, maintain the real estate and to perform.other Page 25 functions necessary for efficient farm Operation and maintenance. It is estimated that 8 Charge of $20 per month, or QEAO for the year would be reasonable for the management and services on the part of the landlord. S U) (7) Division _£ Other aspen The other expenses were taken directly from the farm account books. In this particular illustration, the landlord paid for 50 per- cent of eXpense for tractor fuel and oil. He also paid the tenant for one-half the cost of combining, inasmuch as the tenants owns the combine. This then becomes income to the tenant and expense to the landlord. Other custom work hired was divided fifty—fifty between landlord and tenant. The landlord also paid for one-half the farm share for elec- tricity and telephone. Enuitability of Farm Lease . A In the example used, it is shown that the tenant's total expense contributions were about 53 percent of the farm total, while the land- lord's total expense contributions were about 47 percent. When the total contributions of both landlord and tenant are as close to being equitable as in this illustration, only a minor adjustment would be required to make a 50—50 division of eXpenses. The landlord might pay more than 50 percent of the crOp expense, if needed in order to attain an equal division of the total expenses. However, in some cases the preportion of eXpenses contributed by the tenant will be higher than they were in this illustration. Under such circumstances other adjust— ments must be made in the division of expense contributions to make the lease fair to both parties. legs 24 Limitations of bathed Used It is realized that this method of testing equitability of farm lease agreements and the attempt to balance the eXpanse contri- butions, or to Change the division of income between landlord and tenant, is not without error. The method is of no more value than the judgment of the peeple evaluating the contributions of the land- lord and tenant. however, it does serve as an effective means of testing out lalses to see if they are approximately equitable in the diVision of income and eXpenses. CHLPTLfi IV ""‘ FT!" '7‘" ‘ “ 37" '7‘" .A. ' '7: “ T" 7-~"’~;"."‘- liruo CE “AU‘L L—‘L-JHU UQHU .L.“ rilulqu-MJV The principle farm rental agreements used inidichigan arc the share leases and the cash leases or a conbination of the two. The share rental agreements includes the Various crOp and livestock share leases which are the most important and the most widely used in Michigan. The crOp and livestock share leases are of three types as follows: (1) 50-50 CrOp and Livestock Share Lease; (2) The Landlord's 2/5 - Tenant's 1/5 Crap and Livestock Share Lease; (3) The Landlord's 1/5 - Tenant's E/j CrOp and Livestock Share 'ease. The usual provisions for these types of leases are found in Table 1A. Another type of rental agreement is the CrOp-Share Cash Farm Lease, which is a cembination of the cash and share rental agreements. It is not as important and as widely used in Michigan as some of the other type of leases. The other rental agreemen mentioned was the Cash Lease which is used on about 50 percent of the rented farms in Micniéan. Each type of rental agreement will be discussed on the following pages. TABLE 1 - Types of Leases on the 57 rented farms in.Michi5an, 1950 which were included in the study. Type of Lease Number of Percentage of Farms Total Cash 8 22 Crop-share cash 5 8 50—50 crOp and livestock 22 59 Landlord's 2/3 crOp and livestock 3 8 Landlord's l/j crOp and livestock l _j - Totals 57 100 Table La —— The following table shows the usual provisions of common crop and livestock share form leases. Page 26 the most ITEMS 50-50 Lease Landlord‘s 2/j Landlord's 1/5 Landlord Tenant Landlord Tenant Landlord Tenant Inve atme nt 5 Farm All 0 All 0 All 3 Machinery 0 All All 0 0 All Milk house squipment‘ Bargain Bargain All 0 Bargain Bargain Cattle, hogs & sheep 1/2 1/2 All 0 All Poultry‘ Bargain Bargain Bargain Bargain Bargain Bargain Feed 1/2 1/2 2/3 1/5 1/5 2/5 Expenses Labor 0 All 0 All 0 All Tractor fuel and oil Bargaifl’Bargainf All 0 0 All Machinery expense and repairs 0 All All 0 0 all filectricity, farm share 1/2 1/2 All 0 0 All Combining, baling, silo filling 1/2 1/2 All 0 0 All Corn Picking Bargain Bargain All 0 0 All CroP eXpenses such as seed, fertilizer,etc. 1/2 1/2 2/5 1/5 1/5 2/5 Livestock expenses 1/2 1/2 All 0:].- o=t All Feed, feed grinding, pasture rent 1/2 1/2 2/5 1/5 1/5 2/5 Buildings, fences, tile drains Minor repairs Material Labor Material Labor Material Labor Major repairs All 0 All 0 All 0 Income Crops: ' Usual field crOps 1/2 1/2 2/5 1/5 1/5 2/5 Cattle: Increase 1/2 1/2 2/5 1/5 1/5 2/5 Products 1/2 1/2 2/5 1/5 1/5 2/5 Poultry: If owned in common 1/2 1/2 2/5 1/5 1/5 , b 2/5 If owned by tenant ' 0 All 0 All 0 All Hog increase 1/2 1/2 2/5 1/5 1/5 2/5 Sheep increase and wool 1/2 1/2 2/5 1/5 1/5 2/5 ’Such as milk cooler, water heater, washing tanks and can rack. In some instances the tenant is permitted to keep a Specified number of hens and receive all the income from them. TIn most cases, however, tractor'fusl and oil expense is paid one-half by each party. itExcept that each party would pay for their share of breeding fees, and also for veterinary and medicine for young stock. Page 27 \ i () f) '1 0 fix 9.) :3 i1. [-4 fJo 6 (0 + O 0 F? ( f I W ‘1) rd () ‘r U) (D S) Importance of Lease: The 5 5O Crop and Livestock Share Lease is probably the most important and the most widely used of all the different He leasing agreements n Michigan. Approximately 50 percent of all the rented farms in Michigan are Operstc' under this type of lease. In this study, 59 percent of the farms were Operated under this type of lease (Table 1). Usual Provisions: With the usual provisions of the 50—50 CrOp and Livestock Share Lease the landlord furnishes the farm plus one-half the livestock and possibly some equipment such as a mechanics milk cooler. He also pays all the taxes and insurance on the real estate. The tenant provides the labor, one-half the livestock, the machinery and most of the equipment needed to efficiently Operate the farm. Management de- cisions are often shared equally. The lease also states the duties of the tenant as to weed control; labor for minor repairs to buildings, fences, and drains; etc. The Operating expenses such as for custom work, and for feed, crep, livestock and miscellaneous expenses are usually divided on a 50-50 basis. The maflfinery eXpenses and repairs are paid by the tenant. However, the be gaining between landlord and tenant may make mod fi ations in the contract, such as ownership of poultry, division of gas and oil eXpense, miscellaneous eXpense and others. Modifications of Leases 'n this Study: In this study however, the actual averages showed that the tenants owned 61 percent of the poultry and received a similar share of the poultry income. The tenants also contributed 75 percent of the miscellaneous eXpense. however, the land— lord provided 52 percent of the crOp eXpense and 57 percent of the live- Page 28 stock expenses. In some instances when the tenant owns all the poultry, and re- eives all the poultry inCone, he also provides all the tractor fuel and oil eXFcnse. For instu-ce, in this study the tenants owned 61 percent of the poultry, and contributed 60 percent of the gas and oil expense. Other modifiCations of the lease agreement can also be found de- on each individual situation and the bargaining between landlord and tenant. However, the income is usually divided on a 53450 basis, with certain exceftions such as poultry ineove. Custom work and labor off farm income, if it is permittei in the lease, is usually retained by the tenant. Advantages of the 50-50 Lease; The 50—50 Cro; and livestock Share Lease has many advantages to both landlord and tenant. To the landlord it provides an Opportunity to share in the management and to help in deciding chat enterprises shall be kept on the farm. He can often help to deve10p a system of farming which leads to greater income and main- ‘3 tenance of the soil fertility. The tenant has the advanta5e oi assuming less risk than he would be required to do under some other lease arrange- ment, for the chances of a poor croc year and poor prices a~e shared eqaally With the landlord. Jab :lltt' A“ _A‘ t.” Teui+ r' ease: The 50-50 Crop and Livestock Share Lease is P .L _— 1 probably the most workasle and (L esirable tvpe of lease. In:nost instances 3 equitable and involves a closer working arranbeaent between the Po it landlord and tenant. However, it should net be considered as a full part- 1 hership, and this yrovision sxeuld be clearly stated in the lease agreement. Imnrrt. ace c; Legse: The Cash Fa rm LGLSG is second in 1;,clcrnce ts. “prroxins tely ’0 percent of the {his ercentage tends to be rented farms are rented on a cash basis. "('5 ' (I highest in the northern parts of the state, $3 to 133 percen , and low- est in mos+ of the soutmi rn count ies with 10 to $5 percent. In Wayne, masonb, axi C3H{ and counties, however, 63 to 80 percent or the tenants Farms ;n this ”tudv: In general, in this study the farms that were rented on a cash 1e as b sis were iarm s the were too small or where the landlord 1a ked sufficient capital to rep t on a ,3-30 b sis. The average tillable acres on cash rent farms was 84 as COLpared to 141 for farLs rented on a 50-50 basis. The farm car ital resources of the land- lord were also much smaller for cash rented firms t1 an for farm rental on a 50-50 basis. Ef-ect on Soil Conservation: The cash lease is probably an important factor in soil conservation. In renting on a cash basis, the tenant pays a certain sum of money for the use of the farm and improvements. This type of lease contains more risk for the tenant, who guarantees the land- lord a definite sum of money for the use of the farm, regardless of whether the profits from the farm will be sufficient to cover his Operat- ing eXpenses. Under this system, the tenant assumes complete management and responsibility for the farm, and has the Opportunity of working it as he E. B. Hill, Farm and Field Ken ntal Agree scents. Michigan State College Gooserative Extension Service Folder F—l56. 1951. .— Pa5e $0 See 3 fit, unless o ”rt in r15 hts are reserved by the landlord and written into the le so. Often whs t happens on many farLs is that the tenant, faced with the problem of paying a lump sum rental payment feels that he mu; t 5st everythin: he can off the farm in ca oh crols, and feelin5 his tenure is only teipor ry Is is not interested in buildin5 up tr e fertil- ity of the soil for the man who will follow him. Advan,d as of Cash case: In some cases the cash rental a5reeLen is advantageous. A landlord may prefer a cash lease because the aLount he will receive is definite, and the farm does not require as close supervision as under other type of leases. lne lease is al so sinle, and there is little chance for controversy. The tenant may prefer a cash ease because he is more independent in the Operation of the farm. He also rece ”V s more of the benefit from superior mane; anent. AQ ust dents in re ental charges can also be made more easily under a cash lease. However, many times the provisions of the cash lease do not provide for the maintenance of the soil fertility. The result is the gradual depreciation of the landlord's investments. since cash rents are b sed on the productiveness of the fa L, the landlord' 3 income grud- ually decreases. In many ways, it is a shofissighted lease. 1 Landlord' s 2/% :Te nant's 1/ Crop and Lives ck Share Le» :1) .‘3 v Imgprtance g: L9 86: The Landlord's 2/3 - Tenant's 1/3 CrOp and Livestock Share Lease is of lesser 'nportsnce on.hichigzn rer mt d farms. In this study only 8 percent of the rented farms were rented on this basis. Usual Provision s of Lease: Under the usual provisions, the landlord fur shes th e farm, all the machinery and equipment and all the livestock. Pa5e $1 The landlord places this large investment in the farm and personal preperty in the hands of the tenant who is to provide the labor to Oper- ate the farm. Some variations occasionally exist in the prov1sions such as ownership of brood sows on 2/5 - 1/5 basis to make division of hog income easier. Operatin5 eXpenses such as fuel and oil, crOp, feed and livestock expenses are usually paid on a 2/5 - l/j basis. All other expenSes are paid by the landlord. Risk Involved: Usually such a leasin5 arran5ement involves a much hi5her risk than most landlords are willin5 to take. Often the tenant, who does not own the machinery and livestock does nOt take as much interest as he would if he were owner and the result may be hi5h losses to the landlord. Such a system mi5ht be satisfactory for a tenant who lacks capital and is just startin5 in farming, but in most cases a 30-50 basis would be more desirable. Under this type of ease the landlord must also assume an active role in supervising and mana5in5 the farm in order to protect his high investment. Landlord's l/f ~ Tenant's 212 CroE and livestock share Le;se Importance of Lease: The Landlord's 1/5 - Tenant's 2 § Crop and Livestock Share Lease is not very important in Mich'5an. It is usually used when the landlord chooses to contribute less capital, mana5ement and risk in the business. The tenant usually has a larger investment in.machinery and livestock. Usual Provisions of Levee: Under this type of lease a5reement the landlord furnishes the land and improvements. The tenant usually pro- vides all the machinery, equipment, livestock and labor. Ownership of poultry and brood sows is often on a 1/5 - 2/fi basis. Page 52 Operating expenses such as crop and feed eXpense, breeding fees, insurance, veterinary fees for joint owned stock are divided on a 1/5 - 2/5 basis. All other expenses except taxes and insurance on the real estate are paid by the tenant. The farm income incxuding live- stock increases is divided 1/5 to the landlord and 2/5 to the tenant. Adaptability of Lease: In general, this is not a very satisfactory type of lease where the landlord is able or wishes to contribute an adequate amount of capital and management. If the landlord has the necessary capital it would probably be to his advantage to rent the farm on a 50-50 basis, and hire a farm management service to look after his interest. However, under certain circumstances where the landlord lacks sufficient capital, or does not wish to assume the risk and management reSpon81bility, this type of lease may best fit his particular needs. A father and son arrangement or where the tenant is related to the landlord may work out satisfactory under this type of lease. CroP—Share Cash Farm Lease Importance of Lease: The CrOp-Share Cash Farm Lease is not very important in.Michigan. It is used primarily in the lower two or three tiers of counties in the southwestern part of the State. It usually provides that the tenant give the landlord a share of all the cash crOps and in addition pay cash rent for the hay and pasture land, and for the use of the buildings. The amount of this cash rent will vary according to the productivity of the soil, and the condition and value of the buildings. Usual Provisions of Lease: The tenant owns all the machinery, equip- ment and livestock and receives all the income from the livestock. Page 55 The share of the crOp which the landlord and tenant will receive is determined by the productivity of the soil, the risk involved, and by the contributions of both parties. Usually the landlord's share oi'more intensive crOps, which requires more labor, is less than on less in? tensive crOps. However, the usual division of crOps is on a 50-50 basis. The purchaselof commercial fertilizers and grass and clover seed are usually shared equally between landlord and tenant. The tenant harvests and delivers the landlord's share of corn and grain to the market designated by the landlord. The landlord's share of hay and silage are purchased by the tenant after harvest at the current farm.price. Adaptability g: Leases This type of lease is usually adapted to cases where the landlord chooses to provide little or no management, and sufficient capital to Operate on a 50—50 basis. It has not been too p0pu1ar with landlords and tenants in Michigan. Landlords receiving only a share in the crOps and having no interest in the livestock are not interested in maintaining or adding improvements such as fences and buildings which are necessary for a good livestock prOgram. The result usually is that the soil productivity decreases and the farm.becomes "run down" and depleted. This type of lease might be satisfactory in areas where corn and other cash crepe are raised and where only a few livestock are kept, but is not very satisfactory for most of the typesof farming in.Michigan. Risk Involved: This CrOp-Share Cash Lease places less risk on the tenant than does a straight cash lease. The landlord, by accepting a part of the rent in the form of a share of the cr0ps, assumes part of the risk due to weather, prices and other causes. Probably, for this reason, Page 54 to be equitable, the landlord should receive a larger share of the farm income for the average year than he would under a cash lease. However, under most circumstances the CrOp-Share Cash Farm Lease is not adapted to most of the typesof farming carried on in.Michigan. Other Farm Leases Two other types of farm leases are in use in.Micnigan. They in, clude (1) Field leasing on the croP-share basis and (2) Father and son farm-Operating agreement. These two types of leases were not included in this study and will not be discussed in this paper. Page 55 CHaPTEd V EQUITABILITY OF FAAM LfiASEfi, MICHIGAN, 1950 50-50 CROP AND LIVJSTUCK SHARE LaaeE Organization and Efficiency Factors The 22 farms in this study that were rented under a 50-50 Cr0p and Livestock Share Lease contained an average of 206 acres with 141 acres tillable. These farms also had an average of 55 productive animal units, which was considerably higher than the average for all rented farms. The average crOp yield index‘ on these farms was 99. This was just slightly below the average of all farm account co- Operators. These farms had an average of 495 productive man work units per farm. Their average number of men was 1.5. Labor efficiency was quite high, averaging 455 productive man work units per man, and 5.8 productive man work units per tillable acre. This high labor efficiency seems to correSpond to the large number of productive animal units kept on these farms. It is desirable on rented farms to maintain a large volume of business and high labor efficiency. The rental agreement cannot be successful unless the farm is productive enough and the size of business is large enough to provide a fair return to both landlord and tenant. ‘ Crap yield index is the method of measuring cr0p yields on a farm. It represents the percentage the crop yields on an individual farm are of the average yields of all farms in that type of farming area. Page 56 Investments The farms in this study with this type of lease had an average total investment of $51,455 for 1950 (Table 2). Table 2 - AVarage investments of landlords and tenants on 22 rented farms with 50-50 Crop and Livestock Share Leases, Michigan, 1950. T _— __— _ - - Farm Investment ITEM Total Farm Tenant's Share Landlord's share dollars dollars percent dollars _ percent Farm, (including dwelling 19,519 -- - 19:519 100 Machinery and equipment 4.575 4.157 95 216 5 Feed and crops 5,002 1,501 50 1,501 50 Productive Livestock 4,429 1,818 41 2,611 59 Poultry 150 72 61 58 59 Totals 51,455 7,548 24 25,905 76* The tenant's investment was $7,548 or 24 percent of the total; the landlord's investment was $25,905, or 76 percent of the total. The tens ants furnished 95 percent of the machinery and equipment, and 41 per- cent of the livestock. They also owned 61 percent of thepoultry. The investment in feed and crOps was shared on a 50-50 basis. The major investment of the landlords was the farm which was valued at an average of $19,519 (dwelling included). The farm real estate values were ad- justed to the 1950 farm real estate price index. The tenant's investment was made up entirely of farm personal prOperty. Some variations exist in investments of landlords and tenants with 50-50 Crop and Livestock Share Leases. The usual provisions of this type of lease is that the tenant will own all the machinery and most of the Page $7 equipment; 50 percent of the productive livestock usually excluding poultry; and one-half of the investment in feed. However, on some of the farms in the study, the machinery and equipment is owned on a 50-50 basis. It can also be seen from Figure 6 that the landlord owns more than one-half of the productive livestock. Figure 6 -- Investments: Percentage contributed by landlords and tenants under 50~50 CrOp and Livestock Share Leases on 22 rented farms, Michigan, 1950. Percent of Farm Investments Item 0 25 50 75 100 Farm (including house) - , ‘ ,5 a” gt : m Machinery 8:, Equipment L2 Feed and Cr0ps L_ 'W 1504; t Productive Livestock {gg' ”rgfl‘;- .tfz‘ , ‘5591 l Poultry fh,.:ddj**7~~i7j5u_ { Total Investment ii, ..- ~ ~w5=fi'55.7m.-6'*f~b"-. h‘75l I [:::1 Landlord's Share [:::] Tenant's Share Wide variations also exists in the ownership of poultry. Some land- lords allow the tenant to keep a small flock of hens with all the poultry income accruing to the tenant. On other farms, the tenant keeps a flocx Page 58 of hens and feeds them from undivided grains from the farm. In return the tenant pays all the fuel and oil eXpense on the fann. There is no set pattern in ownership of poultry. Each farm is an individual case with variation from farm to farm. However, on famms where poultry was a major enterprise, the ownership was on a 50—50 basis. Expense Contributions Division gf Total Egpense Contributions: Total eXpense contributions for farms with 50-50 Cr0p and Livestock Share Leases averaged $7,717 for 1950 (Table 5). Of this amount the tenants provided 34,474 or 58 percent, while the landlords contributed $5,245 or 42 percent (Figure 7). Labor Charges: The Operator's labor charge varied with type of farm— ing areas with some tenants, where labor is cheaper, receiving a lower labor charge than others. The average Operator's labor charge was $1,475. Unpaid family labor averaged $165 per farm. Landlord's Services: Management and services provided by the land- lord were estimated at $20 per month, or a total of $240 per year. It was reasoned that the landlord would probably spend one or two days per month at the farm making settlements, improvement repairs and other management functions. If the landlord did not provide these services himself, he would probably hire a farm.management service to look after his interest. Machinery Expense: Depreciation and repairs on.machinery and equip- ment were paid primarily by the tenant. In most cases the fuel and oil eXpense for the tractor was divided on a 50—50 basis. 0f the fuel and oil exPense, 60 percent was contributed by the tenants and 40 percent by the landlords. Page 59 Figure 7 -- EXpense Contributions: Percentage contributed by land— lords and tenants under 50—50 Cr0p and Livestock Share Leases on 22 rented farms, Mictigan, 1950. Percent of EXpense Contributions Item 0 25 50 75 100 Operator's labor [:g ='“"fl' ‘ F 4.{7~3a ,' ~~ ff'i'-5'”.f73if103 Unpaid family labor [;. £~ ’ ' “ ‘I-l~:_t4» m“fiiif17*” ‘* #7 laiilogi .3— Hired Labor Pj_ ! Power and machinery [V l5; L 1 Improvements expense I ‘fii ._,j; .4 .13] ,;.f7 fifl.5m7,_fi ~. »W:106 Feed eXpense i ‘.§¢»T?Wé7”£”7T ‘~I'A50; __] CrOp EXpense [ipngrmii“,35 .q .Sfl“f;52§ :] Livestock eXpense f"',‘.t.,ggr _‘ -_ _ 27,;571 F1 ...... Taxes [ V f; " y—g—d‘ 3.-i_;'.5.'f£;§§;5:5..3:15.73 7‘ >421 1: Miscellaneous eXpense i. - l‘fié“” 271 g Interest charges Lgugpif ~t~fw.lfiwie~.gn"f a.-2';;,Z§& ? Total contributions V' “"¥~~*K‘«~-'“ 5421 j l _ ‘ Landlord's share I i Tenant's share Page 40 Table 5 —- Average eXpense contributions of landlords and tenants on 22 rented farms with 50-50 CrOp and Livestock Share Lease, Michigan, 1950. Expense contributions Item Total Farm Tenant's Share Landlord's Share dollars dollars percent dollars percent Operator's labor 1,475 1,475 100 -- -— Unpaid family labor 165 165 100 - —— Hired labor 265 254 96 11 4 Services of landlord 240 - - 240 100 Power & machinery 1,552 1,178 87 174 15 Machine work hired 2 120 49 125 51 Improvements 529 - —— 529 100 Feed eXpenses 780 589 50 591 50 Cr0p eXpenses 655 501 48 552 52 Livestock exPenses 154 66 45 88 57 Taxes 190 14 7 176 95 Miscellaneous exPense 152 97 75 ‘55 27 Total Operating Exp. 6,160 4,059 - 2,101 -- Interest charges 1,557 41 26 1,142 74 Total contributions 7,717 4,474 ' —— 5,245 - Percent contributed by each -— - 58 - 42 Machine Work Hired: The eXpense of.macnine work hired was contributed 49 percent by the tenants and 51 percent by the landlords. On some farms where the tenant owned the special machines, the landlord paid the tenant for one-half the commercial rate of the custom.work. This then becomes ins come to the tenant and 6Xp6n86 to the landlord. This seems like afair practice and should be encouraged on.more farms with this type of rental agreement. Other Expenses: The improvement cash eXpenses on the farm real estate were contributed entirely by the landlord. Feed eXpenses were shared on a 50-50 basis. Page 41 CrOp expenses were not always shared entirely on a 50-50 basis. On some farms the landlords contributed more than 50 percent of the cr0p eXpense. For example, in this study the landlords contributed 57 percent of the grass seed, and 52 percent of the commercial fertilizer. However, the landlord contributed over 50 percent of the crOp eXpense only on a few farms. It seems reasonable that on a large number of the fanns where the division of expenses are not equitable, the landlord might furnish all the grass seed and a larger prOportion of the commer- cial fertilizer. The livestock expenses were contributed 45 percent by the tenants and 57 percent by the landlords. This expense is shared in about the same prOportion as the ownership of productive livestock. Taxes on the real estate were paid by the landlord, while taxes on personal prOperty were contributed on the basis of ownership. However, only a few tenants paid any taxes at all on personal prOperty. It is generally recommended that the miscellaneous expense, which includes the farm share of telephone and electricity, be shared equally by landlord and tenant. In this study the landlords contributed only 27 percent of this expense, while the tenants contributed 75 percent. The interest rate on the real estate was estimated at 4% percent which is the approximate rate on long term capital. The interest rate on the personal prOperty was placed at 5% percent. The total average interest charges were $1,557 with $1,142, Or 74 percent being contributed by the landlords, and $415, or 26 percent, by the tenants. The interest charge on investments was the major eXpense contributions of the land— lords. Page 42 Gross Income Division 3: Total Income: The average total gross income on farms in this study was $8,950. This was divided $4,516 or 51 percent to the tenants, and $4,416 or 49 percent to the landlords (Table 4). The largest single income item was dairy product sales which were divided on a 50—50 basis. CrOp income was the second largest income item and was also divided on a 50—50 basis. Table 4 -- Division of average gross income between landlords and tenants with 50—50 CrOp and Livestock Share Leases on 22 rented farms, Michigan, 1950. I j Gross Income Item Total Farm, Tenant's Share Landlord's Share dollars dollars percent dollars 4percent CropB 1.745 875 50 872 50 Dairy product sales 5,728 1,864 50 1,864 50 Cattle, net increases 1,412 648 46 764 54 HOgs, net increases 1,556 678 50 678 50 Sheep and Wool, net increases 152 66 50 66 50 Poultry, net increases 51 2O 65 ll 55 Egg sales . 282 165 58 120 42 Custom work 115 115 100 -— - Labor off farm 54 54 100 - -- Woodland products -- - -- -- ~- Other 25 14 58 10 42 PMA payment 25 42 51 58 Total income 8,950 4,516» —— 4,416 -- Percent to each -- -- 51 -- 49 Net Increases: Cattle, hog, sheep and wool, and poultry "net in- creases" were considered as income. A ”net increase" is really the gross income from that particular enterprise. For example, to determine the Page 45 net increase in cattle (1) add the value of the cattle inventory at the beginning of the year to the purchases of Cattle during the year. Then, (2) add the value of the cattle inventory at the end of the year to the sales of cattle during the year. If the sum resulting from (2) exceeds the sum resulting from (1) the result is called a "net increase". If the sum resulting from (2) is less than the sum resulting from (1) the result is called a "net decrease" and would be considered as an ex- pense item. Cattle net increases were divided 46 percent to the tenant and 54 percent to the landlord. Usually under this type of lease a 50—50 division would be recommended. However, in this study, the landlords owned more than a 50 percent interest in the cattle, so as a result they received more than 50 percent of the net increases in Cattle. Net increases from hogs and sheep were both divided on a 50-50 basis. Poultry net increases were divided with a larger prOportion to the tenant due to his greater investment in the poultry enterprise. Egg sales were also divided with a larger pr0portion going to the tenant due to this same reason. Custom Work and Labor Off Farm: Custom work and labor off farms all accrued to the tenant. There is some question as to whether the tenant should be allowed to do custom work, 0r labor off the farm without the landlord's consent. However, if the tenant is doing a satisfactory job in Operating the farm he may well be allowed to do the custom work and labor off farm, PMA Payments: Production and Marketing Administration.payments were usually divided on a 50—50 basis between landlord and tenant. On most Page 44 farms the payment was divided on the basis of the contributions of both parties. If the landlord provided all the fertilizer, lime, or grass seed for which the payment was made, he usually received the full amount of the payment. The average FHA payment on the farms studied was $54 per farm with the tenants receiving 42 percent of the total, and the land- lords receiving 58 percent. Figure 8 -- Gross income: percentage distributed to landlords and tenants under 50-50 CrOp and Livestock Leases on 22 rented farms, Michigan, 1990. Item Percentage of Gross IncE-ne f ‘?5 3° 75 1‘? Cr0ps L_ ”*7“j;;1;;.71‘*.7ff50¥ Dairy product sales [‘ f"*~ -> " '50} ] Cattle, net increases L ;'l°!f“slwwj -..wjififu,§4l I Hogs, net increases {7'} ,L ;; 23337”‘7W”qu50£ I Sheep & Wool, net Inc.-L~-'p?hfl*"” u“ ".HTQQ;;50§ _j Poultry, net increases_§“47.fiifigaac:-Mj§l 1 Egg sales :_ ... ~ ‘ 1+5; I Custom work :_¥ l Labor eff farm (Continued on next page) Figure 8 (co Other PMA payments Total income Page 45 ntinued) o 25 50 75 100 o o o i, 0 iv 3 . E21 3 E“ g 581 l. i; a 49¢ T :‘vpa Landlord's Share ! ? Tenant's Share Equitabilityfg£_the 50—50 Lease It was stated earlier in the discussion that, on the average, tenants received 51 percent of the total income whereas they contributed 58 per- cent of the eXpense contributions. The landlords received 49 percent of the income and contributed only 42 percent of the eXpense contributions. Basing our judgment on the assumptions of an equitable farm lease as one in which eXpense contributions are divided in the same prOportion as in— come, and assuming that our estimates are approximately correct, it can be reasoned that some of the 50—50 CrOp and Livestock Share Leases in this study are not equitable. eXpenses in the same prOportion as income received. The landlords are not contributing to the Increase in Farm Investment: 0n analyzing the equitability of present fann leases it is evident that a much larger capital investment must be made in the farm business than.was necessary a decade ago. The machinery, equipment and labor which are furnished largely by the tenant Page 46 are high cost items and their value on some farms has greatly increased. Real estate values, taxes, and costs of maintenance have also greatly increased the landlord's contributions, but usually not in the sane prOportion as the tenants. Therefore, it may be reasoned that the land- lords should make a larger contribution toward eXpense items to offset this higher investment and expense by the tenant. For example, it would not be unreasonable to ask the landlord to pay for all the grass seed and alarger proportion of the commercial fertilizer. In this study, on some of the farms with the most equitable farm . leases the landlords not only owned one-half the investment in the pro- ductive livestock and feed, but they also owned one-half the machinery. Under this arrangement they also provided one-half the machinery de- preciation and maintenance cost. Other Factors Influencing Eeuitabilit’: However there are other Q .L ’ factors which must be considered before determining the equitability of a farm rental agreement. We have already stated that the main contribution of the tenant, under a 50-50 CrOp and Livestock Share Lease, is the machinery and labor to Operate the farm. We must now consider these major contributions and attempt to determine if their costs are larger than what would nor- mally be required to Operate the farm efficiently; If the tenant is over-invested in machinery, or has a high labor cost, part of his larger contribution to the farm eXpenses can be eXplained by these factors. The same reasoning as above can be applied to the landlord. If the farm is over capitalized and has excessive improvements it would result in larger improvement eXpense, higher taxes and interest charge than would Page 47 normally be found on a farm of that size. These excessive charges would present a distorted picture on the "balance sheet" and would be unfair in determining the equitability of the lease. To attempt to segregate these factors and to find their effect on the equitability of the farm lease, the farms in this sample were divided into three groups on the basis of the percent of eXpense con- tributions made by the landlord. It can be seen in Table 5 the effect of these factors on the preportions of eXpense contributions made by the landlord and tenant. Labor Costs: The cost of labor furnished by the tenants shows a direct correlation between the percent of the eXpense contribution furnished by the tenants and the labor cost. Where the tenants furnish- ed a larger prOportion of the expense contributions, there was also a higher labor cost. In general, on the farms in which the tenant's prOportion or eXpense contribution were lower or more nearly equitable, the labor costs were also lower. Machinery Costs: The machinery cost, which is the second major contribution of the tenant, also shows a direct correlation between the prOportion of the eXpense contributions made by the tenant and the machinery cost. Where the tenant has a large investment in.machinery, the "balance sheet" shows him providing a larger prOportion of the eXpense contributions. Real Estate Charges: The landlord's major contribution, which is the real estate, shows a direct correlation between the prOportion of eXpense contributions provided by the landlord, and the real estate charges and improvement eXpense per tillable acre. The more the landlord has Page 48 invested in the land and improvements, the more he contributes toward the eXpense contributions. Table 5 - Effect of various factors on the equitability of the 50-50 CrOp and Livestock Share Lease on 22 Michigan farms in 1950. A landlord's contribution of 50 percent of the total eXpense is considered as equitable. L. L. '8‘ Real Improve- EXpense No. T.A."”|I Labor cost per Machinery cost Estate ment Contributions of per T.A. P.M.W.U. per Charge EXpense Percent of Farms Man **" T.A. P.M.W.U. per per Total TOAD TOAO Under 40 9 98 $16 e4.16 s11.55 $5.11 3150 52.66 40-45 7 115 15 4.20 11.01 5.02 156 4.85 Over 45 6 155 12 5.54 7.48 2.27 160 4.48 Average 22 115 14 5.97 10.01 2.80 149 4.00 * L. L. -- Landlord ** T. A. -- Tillable acre *** P.M.W.U. -- Productive man work unit. Effect 29 Equitability: It can be reasoned from.the previous dis- cussion that excessive costs and charges do have some effect on the equitability of a farm lease. It is clearly shown that where the tenant has high labor costs, or has an excessive investment in machinery, this will be reflected on the "balance sheet“, and will distort the equita- bility of the farm lease. The same is true for the landlord whose farm is over capitalized with excessive improvements. The “balance sheetn will show him contributing a larger proportion of the total eXpenses than Page 49 normally would be contributed under average conditions. Problem 12 Determining Eeuitability: The problem in determining the equitability of a farm lease agreement involves an analysis of the entire farm business. Consideration must be given to such factors as excessive capitalization in the farm, and over-investment in.machinery and high labor costs. It will be difficult to determine the exact effect of these factors on the equitability of the farm lease. But by pointing them out, the landlord and tenant can take them into consider- ation in their bargaining for a farm lease which will be fair to both parties. Sometimes the lease agreement may appear to be equitable but it still may not be very profitable. Even if the landlord provides a good farm and farm home, if he has a tenant who is an inefficient Operator the farm busineSs will act be very profitable. Under such circumstances. the landlord should not be required to pay a larger prOportion of the eXpense contributions to make up for the inefficiencies of the tenant. Adjustments Necessary: From the above data it is evident that ad- justments are necessary on some of the farms with 50-50 CrOp and Livestock Share Lease. The type of adjustment will depend on each individual case. By using a nbalance sheet" and listing the division of expense contri- butions and income, adjustments can be made which will make the farm lease approximately equitable. CASH FAAM LEASE Organization and Efficiency Factors As a general rule, the farms in this study that were rented on a cash basis were smaller and less productive farms. These farms were not . Page 50 arge enough and the landlords did not have sufficient capital invested to Operate on a 50—50 basis. The size of business was small on these farms in this study. The average number of acres was 149 with 64 acres tillable. They had an average of 274 productive man work units per farm. These fanns averaged 17 productive anneal units per farm. The man equivalent was 1.2 men. Labor efficiency and crOp yield index were both below average. The productive man work units per man averaged 2§5. These farms also averaged 5.6 productive man work units per tillable acre. The average crOp yield index was 80 which reflects the low productivity of the farms. Investments Total investments on the farms in this study with cash leases were considerably smaller than on fanns with 50—50 CrOp and Livestock Share Leases. The average total investment per farm was $15,981. The landlords had an investment of 67,762 or 56 percent of the total. The tenants had 46,219 invested, which was 44 percent of the total (Table 6). The only investment of the landlords was in the land and improvements. These real estate values were adjusted to the 1950 farm real estate price index. All the other investments were made by the tenants. Page 51 Table 6 -- Average investments of landlords and tenants on eight rented farms with Cash Leases, Michigan, 1950. Farm Investment Item Total Farm Tenant's Share Landlord's Share dollars dollars gpercent dollars . percent Farm (including dwelling) 7,762 .. ..- 7,762 100 Machinery and equipment 2,814 2,814 100 —- _— Feed and crOps 1,275 1,275 100 -_ -— Productive livestock 2,095 2,095 100 -- -- Poultry 5], 57 100 -- _- Totals 15,981 6,219 44 7,?52 567 Figure 9 -- Investments: percentage contributed by landlords and tenants on eight farms with Cash Farm Leases, Michigan, 1950. Itan Farm (including dwell- ins) Machinery & Equipment Feed and crOps Productive livestock Poultry Total investments E:’ ? Landlord's Share Percent of Farm Investments w ‘ r , ' . , l. v .v a , u ' . - , . o 25 50 75 100 1003 I . J Li; .J L .- * == ': “756} I E: Tenant's Shar e Page 52 dxpense Contributions With the Cash Farm Lease most of the eXpense contributions were made by the tenant (Table 7). Table 7 -- Average ex;ense contributions of landlords and tenants on eight farms with Cash Farm.Leases in.Micnigan, 1950. Expense Contributions Item. Total Famn Tenant's Share Landlord's Share dollars dollars percent dollars percent Operator's labor 1,440 1,440 100 - - Unpaid family labor 204 204 100 -- —— Hired labor 250 250 100 -- -- Services of landlord 240 —- -— 240 100 Power & machinery 922 922 100 -- -- Machine work hired 100 100 100 -- - Improvements 212 - —- 212 100 Feed eXpense 445 445 100 -- - CrOp expenses 565 565 100 -- -- Livestock eXpenses 142 142 100 - - Taxes and cash rent #64 595 85 71 15 Miscellaneous expenses 150 144 <96 6 4 Total Operating eXpenses 4.932 4,405 -- 529 - Interest charges 700 542 49 4558 ‘51 Total contributions 5,652 4,745 -- 887 —— Percent contributed by each 100 - 84 - l6 Of the eight farms studied with Cash leases, the major contribution by the landlords was the interest charge on their investment in the land and improvements, plus the taxes, repairs, and depreciation on the improve— ments. These real estate Values were adjusted to the 1950 farm real estate price index. Page 55 The landlords with Cash Farm Leases were allowed the Same manage- ment and service charge as those under a 50—50 CrOp and Livestock Share Lease. It is realized that the landlord has more responsibility in the management and Operation of the farm under the 50-50 leases. However, it is reasoned that even under a cash lease the landlord must make frequent trips to the farm.to make improvement repairs, and other services so they were allowed the same amount. The improvement eXpenses and taxes on the farm real estate were all paid by the landlords. Cash rent and taxes on personal preperty were contributed by the tenant. The average eXpense contributions under cash leases was $5,652. Of this amount $4,745, or 84 percent, was contributed by the tenants, and $887, or 16 percent was contributed by the landlords. Gross Income All the income from the farm.accrued to the tenants (Table 8). The tenants in return paid a fixed sum as cash rent to the landlords, regardless of the amount of gross income received from the farm. The total gross income on these farms averaged $5,108. The tenants received $4.725 or 92 percent of the total. The cash rent received by the landlords averaged $585 and was only 8 percent of the total gross farm income. Page 54 Figure 10 - Expense contributions; percentage contributed by landlords and tenants on eight farms with Cash Farm Leases, Michigan, 1950. w Percent of EXpense Contributions Itan :0 25 5o 75 100 Operator‘s labor r 7 Unpaid family labor F Hired labor I Power and machinery Lg Improvement expense { 7 Feed expense i Cr0p expense Livestock eXpense i Taxes and cash rent Miscellaneous expense 1448 Interest charges ; ‘ 51: E Total contributions :_; 161 {.; l Landlord's Share E: Tenant' 8 Share Page 55 Table 8 - Division of average gross income between landlords and tenants on eight farms with Cash Farm Leases, Michigan, 1950. _L J __.:— Gross Income Itan Total Farm Tenant's Share Landlorde Share dollars dollars gpercent dollars . percent Cr0ps 1,092 1,092 100 —- - Dairy product sales 2,588 2,588 100 —- —- Cattle, net increases 725 725 100 —- -— Hogs, net increases 510 510 100 _- .. Sheep & wool, net increases —- —_ -- -- -- Poultry, net increases 42 42 100 - -- Egg sales 49 49 100 __ .. Custom work 17 17 100 —_ _- Labor off farm 54 54 100 -- __ Cash rent 585 —— -_ 585 100 Other 51 51 100 -- -_ PMA payment 15 15, 100 -- -- Total income 5,108 4,725 -— 5&5 _. Percent to each - - 92 - 8 Equitability 2: Cash Farm Leases From the data presented it might be reasoned that the landlords did not receive a large enough cash rent to compensate them for their farm maintenance and investment. The landlords provided 16 percent of the eXpense contributions, and received 8 percent of the income. The tenants on the other hand provided 84 percent of the expense contributions and received 92 percent of the income. However, if we examine the data more closely we find that the tenants did not fare too well either. Over 50 percent of the tenants in this study with Cash Leases had a negative net income. All of the landlords failed to realize enough gross income to equal their eXpense contributions. Page 86 Figure 11 - Gross income: percentage distributed to landlords and tenants on eight farms with Cash Farm Leases, Michigan, 1950. Fercent of Gross Income Itan a 25 50 75 100 CrOps L: T Dairy product sales [ A_J Cattle, net increasesi Hogs, net increases Lg Poultry, net increased Egg sales Custom work [_ Labor off farms I Cash rent g _ A_+ ~£§103 Other L, I PMR payments [ _J Total gross income :8. J I I Landlord's Share l i Tenant's share Page 57 One of the first requirements for a successful farm rental agree- ment is that the farm business must be large enough to pay the landlord a fair return on his investment and to provide the tenant a satisfactory standard of living. It is obvious that the farms in this study with Cash Farm Leases do not meet this requirement. Unless the size of business on these farms can be increased there is little Opportunity of obtaining an equitable lease agreement on.most of these farms. These small, less productive farms also attract the poorer, ineXperienced and less progressive tenants. The result is a low income from.the farm, depletion of the soil resources and improvements, and eventually a "run down" abandoned fann. CHOP-SHAKE CASH FARM LEASES Organization and Efficiency Factors The farms in this study with CrOp-Share Cash Farm Leases were larger and more productive than the average rented farm. They averaged 168 acres per farm with 155 acres tillable. The crOp yield index on these farms averaged 100. They had an average of 24 productive animal units. The man equivalent was 1.5 men. Total productive man work units averaged 470 per fann. Labor efficiency was quite high with an average of 596 productive man.work units per man. However, productive man work units per tillable acre was low with only 5.2 per tillable acre. Investments Average total investment on the fanms in this study with CrOp-Share Cash Farm Leases was $2 ,000. Of this amount the tenants had invested $11,775, or 44 percent. The landlords provided $15,228, or 56 percent of the total investment on these farms (Table 9). Page 58 Table 9 -- Average investments of landlords and tenants on three farms with Crep-Share Cash Leases in.Michigan, 1950. Item Farm Investments Total Fann Tenant's Share Landlord's Share dollars dollars 4percent dollars percent Farm, (including dwelling) 14,489 —- -— 14,489 100 Machinery and equipment 5,165 5,165 100 -— - Feed and crOps 4,005 5,267 .82 758 18 Productive livestock 5,104 5,104 100 —— . - Poultry 259 259 100 ~— -- Totals 27,000 11,775 44 15,228 58* *---* Figure 12 - Investments: percentage contributed by landlord and tenant on three farms with Crop-Share Cash Farm Leases, Michigan, 1950. Percentage of Investment Item 0 25 50 75 100 Farm (including i‘--:fi. , Jypyg’. :‘; :1; ~2;;_r. ‘>.. p.5f‘ 10d house) Machinery & equip. [—— —1 Feed and crepe [g 181 k] Productive livestock [ :j Poultry I i Total investments {f.f 87"””““‘Qgfln 11:5 2 If 4&7 l 7 I Landlord's Share 1 I Tenant's Share Page 59 As is customary with this type of lease the tenants owned all the machinery, equipment and the liVestock. The machinery investment averaged $5,165. The average investment in feed and cr0ps was $4,005. or this amount, the tenants investment was e5,267, or 82 percent of the total, while the landlords had invested 0758, or 18 percent. Expense Contributions The amounts and division of 6Xpen86 contributions can be seen in Table 10. Table 10 - inverage ex;ense contributions of landlords and tenants with CrOp-dhare Cash Farm Leases in.Michigan, 1950. EXpense Contributions Item Total Farm Tenant's Share Landlord's share dollars dollars gpercent dollars qpercent Operator's labor 1,450 1,450 100 —- ~— Unpaid family labor 167 167 100 -- - Hired labor 155 155 100 -- -- Services of landlord 240 .. -. 240 100 Power & Machinery 1,825 1,825 100 - - Machine work hired 551 54 15 297 85 Improvements 295 —— - 295 100 Feed expenses 827 827 100 - -— Crap eXpenses 574 287 50 287 50 Livestock eXpenses 65 65 100 - -— Taxes & cash rent 455 292 67 141 55 Miscellaneous expenses 146 146 100 -- -— Total Operating eXpenses 6,506 5,246 - 1,260 ~— Interest charges 1,556 645 —— 695 52 Total contributions 7,842 5,889 - 1,955 - Percent contributed by each 100 - 75 - 25 Page 60 The tenants provided all the labor expense; the power and machinery eXpense; the feed and livestock eXpense; and the miscellaneous eXpense. The landlords provided the charge for their services; the im— provements eXpense; and the taxes on the real estate. The cr0p expense was shared on a 50—50 basis between landlords and tenants. Machine work hired was provided 85 percent by the landlords and 15 percent by the tenants. The reason for the larger contribution by the landlords was that some of the tenants owned the Special machines and the landlords paid the tenants for harvesting their share of the crepe. The average total eXpense contributions on these farms averaged $7,842. The tenants provided 75 percent of this amount, while the land- lords provided 25 percent. Gross Income The amount of and the division of the gross income is shown in Table 11. The only income received by the landlords was 45 percent of the crOp income and an aVerage of $440 as cash rent. The remaining farm income accrued to the tenants. The income from dairy product sales was the largest income item and was followed by the crOp income. The average total gross income per farm was e9,751. The tenants received 82 percent of the amount and the landlords 18 percent (Figure 14). Figure 15 -- Expense contributions: percentage contributed by landlords Page 61 and tenants on three farms with CrOp-Share Cash Farm Leases, Michigan, 1950. Percent of Expense Contributions Item 0 25 50 75 100 Operator's labor Lg I Unpaid family labor [ j Hired labor I 1 Power and machinery I 1 Improvement eXpenses [g_'”* 1 fl 05 Feed eXpense f I Crop expense I, '55017 j Livestock eXpense r_ 1 Taxes and cash rent }.L7 "_553 Y Miscellaneoux expenses 1 I Interest charges I _5217 4—j Total contributions [1' 25;» l C: Landlor d ' s Shar e l I Tenant's dhare Page 62 Table 11 —- Division of average gross income between landlord and tenants with CroP-Share Cash Farm Leases, Michigan, 1950. Gross income Item Total Farm Tenant's share Landlord's Share dollars dollars percent dollars Appercent CrOpB 29986 1:651 55 1:555 45 Dairy product sales 5,599 5,599 100 -- .— Cattle, net increases 1,057 1,057 100 - ~— HOgs, net increases 685 685 100 -- -- Sheep & W001, net increases 171 171 100 -- -- Poultry, net increases 99 99 100 _. _— Egg sales 160 160 100 -- .. Custom work 406 406 100 —— -- Labor off farm 512 512 100 -- -_ Cash rent 440 -— —- 440 100 Other 6 6 100 ' -- . -_ PMA payment 12 11 100 1 - Total income 9:751 7:955 -- 1,776 - Percent to each - -- 82 —- ‘ l8 L _- Equitability'2£_Or0p98nare Cash Farm Lease From the data in this study it can be reasoned that the CrOp-bhare Cash Farm Lease has not been too satisfactory. The landlords provided 25 percent of the eXpense contributions and received 18 percent of the income. The tenants provided 75 percent of the eXpense contributions and received 82 percent of the income. However, before the equitability of a particular farm lease can be determined we must also consider other factors. The size of machinery investment, labor costs, real estate charges, and improvements expense per tillable acre must also be conp sidered as was done with the 50-50 CrOp and Livestock Share Leases. Page 65 Figure 14 -- Gross income: percent distributed to landlords and tenants on three farms with CrOp-Share Cash Farm Leases, Michigan, 1950. Item Percent of gross income _ C 25 50 7‘) 100 CrOps F "r _T— 7 £5: ] Dairy product sales [ ] Cattle, net increases F7 i Hogs, net increases { Sheep & wool net ! increases Poultry, net increases [ 1 Egg sales F 1 Custom work I ‘_7 Labor off farm [ J Cash rent -_’ " AA 150*: Other [ __j PMA payment [ 1 Total gross income I as. 18Ifi 4? L 8! Landlord's Share I t Tenant's Share Page 64 Adaptability g: Lease This type of lease is not very well adapted to Michigan farming conditions. Most farms in Michigan require“ a livestock prOgram in order to build up the size of business and to conserve the soil. If the land— lord has no interest in the livestock program he is not interested in maintaining the buildings and fences for a good livestock program. The landlord may also insist on the growing of more cash crepe. The conse- quences are likely to be a decrease in soil fertility, low income and a run down farm. Landlord's 2/5 - Tenant's 112 Qggp_ggd Livestock share Lease Organization and Efficiency Factors The three farms in this study on a Landlord's 2/5 - Tenant's 1/5 oasis were smaller than the average of all rented farms. They averaged 142 acres per farm with 96 acres tillable. They also had an average of 27 animal units. The man equiValent on these farms was 1.5 men. Pro- ductive man work units averaged 487 per farm. Labor efficiency was medium. The average productive man work units per man was 552. Productive man work units per tillable acre averaged 5.1. Cr0p yields were quite high on these farms. The average orOp yield index was 116. Investments Average investments on these farms can be seen in Table 12. A large prOportion of the investment was made by the landlords. The landlords provided about all the machinery and equipment and the pro- Page 65 Table 12 -— Average investments of landlords and tenants on three farms with Landlord's 2/5 - Tenant's 1/5 CrOp and Livestock Share Lease, Michigan, 1950. Farm Investments Item Total Farm Tenant's Share Landlord‘s Share dollars dollars percent dollars Ipercent Farm, (including dwelling) 14,424 - - 14,424 100 Machinery and equipment 4,561 104 2 4,457 98 Feed and crOps 5,519 1,290 57 2,229 65 Productive livestock 5,258 84 5 5,174 97 Poultry ,_541, 155 58 214 62 Totals 26,105 1,611 6 24,493 94 r4 1 __— “ y Figure 15 - InVestments: percentage contributed by Landlords and Tenant on three farms with Landlord's 2/5 - Tenant‘s 1/5 CrOp and Livestock Share Leases, Michigan, 1950. Percent of Investment Item 0 25 50 75 100 I 0 O O O 0 Farm Chufluding I’ ... ;'1 4' ‘ 57 'j" 9.10QA dwelling) *7 Machinery & equipmentI 5f "_ ',.,~. ' . '-;ie -.ZT~ Cé' <93I I Feed and crepe I_ ‘,vrfi*~"- ".~,- “631 ::] Productive livestock I; . =~w= .-"" . " ’ '"W - 91; I Poultry I '.g« W_i77v ‘-f f. 621_ J Total investments I '4" ‘8 : 'Iw “'Uffini,ii~“’“““ 4"f9ég 2_j I. I Landlord's Share I I Tenant's Share ductive livestock. 1/5 basis. Page 66 The average total investment on these farms was p26,105. lords provided 94 percent of this total investment (Figure 15). Expense Contributions The investment in feed and in poultry was on a 2/5 _ The land- Table 15 shows the eXpsnse contributions on these farms and the amount provided by landlords and tenants. Table 15 -- Average eXpense contributions by landlords and tenants on three farms with Landlord's 2/5 CrOp and Livestock Share Leases, Michigan, 1950. EXpense Contribution Item Total Farm Tenant's Share Landlord's share dollars dollars percent dollars percent Operator's labor 1,560 1,560 100 - -- Unpaid family labor 620 620 100 —- —— Hired labor 29 27 94 2 6 Services of landlord 240 -- —— 240 100 Power and machinery 1,771 406 25 1,565 77 Machine work hired 115 46 40 69 60 Improvements 521 -— _- 521 100 Feed EXpenses 777 295 58 484 62 Cr0p expenses 559 124 57 215 65 Livestock eXpenses 56 21 57 55 65 Poultry decreases 151 48 57 85 65 Taxes 161 -- —- 161 100 Miscellaneous eXpenses 124 #55 44 69, 56 Total Operating eXp. 6,244 5,200 -— 5,044 - Interest charges 1,292 89 6 41,205, 94 Total contributions 7,556 5,289 - 4,247 -- Percent contributed by each 100 -- 44 —— 56 The tenants provided most of the labor to Operate the farm. The land- lords provided a very small percentage of the hired labor. Page 67 The landlords provided all the improvements expense, taxes on the real estate, and their charge for services and management. The crOp eXpense, feed eXpense, livestock expense, and poultry de— creases were divided approximately on a 2/5 - 1/5 basis. The power and machinery eXpenee was provided 77 percent by the land— lords and 25 percent by the tenants. The landlords owned the machinery and equipment, therefore they provided most of the repairs and depreciation on the machinery. The average expense contributions was $7,556. The landlords pro- vided 56 percent of this amount and the tenants provided 44 percent (Figure 16). Gross Income Most of the income items on these farms weredivided approximately on a 2/5 — 1/5 basis. There were some minor Variations in the division of some income items as is shown in Table 14. Dairy product sales was the largest single income item followed by crOp income and egg sales. Custom work income was divided on a 2/5 — 1/5 basis because the landlord owns the machinery used for the custom work. The average total income was $9,811. This amount was divided 65 percent to the landlords, and 57 percent to the tenants (Figure 17). Page 68 Figure 16 —— Expense contributions: percentage contributed by landlords and tenants on three farms with Landlord's 2/5 - Tenant's 1/5 CrOp and Livestock Share Farm Leases, Michigan, 1950. Item Operator's labor Unpaid family labor Hired Labor Power and machinery Improvement eXpense Feed eXpense CrOp eXpense Livestock eXpense Taxes Miscellaneous eXpense Interest charges Total contributions ‘. Ii. I .., Percent of Expense Contributions 25 50 75 100 L 5 l6. 1 I 17. L I -'-‘ " 7* W 100.; L 162 I. l Heirf3.,.,. »'-j 7 55I 1 l " ' it". ._ 65; 1, F a.“ 103:: '- ‘p 56} g {g g ‘ ._,; ,‘.;;;;3e.g793L T 3- - 561 j Landlord's Share I l Tenant's Share Page 69 Table 14 -— Division of ayerage gross income between landlords and tenants on three fanns with Landlord's 2/5 CrOp and Livestock Share Leases, Michigan, 1950. Gross Income Item Total Farm Tenant's share Landlord's share dollars dollars percent dollars percent CrOps 2:070 751 57 1:519 65 Dairy product sales 4,025 1,498 57 2,525 65 Cattle, net increases 1,265 474 58 789 62 HOgs, net increases 545 158 40 207 60 Sheep and wool, net increases -- —— -- -- -- Poultry, net increases 14 6 41 9 59 Egg sales 1,565 512 57 855 65 Custom work 689 259 58 450 62 Labor off farm Woodland products Other 58 15 55 25 65 EMA payment 4 1 25 5 75 Total income 9,811 5,652 —- 6,160 _- Percent to each - —— 57 -— 65 _— t L— j. 1 11 __— Figure 17 —— Gross income: percentage distributed to landlords and tenants on three farms with Landlord's 2/5 — Tenant's 1/5 CrOp and Livestock Share Leases, Michigan, 1950. [ Percent of Gross Income Item ’3 25 5o 75 100 CrOps i'. . - . 851. Dairy product sales ;, ..- .- - ’ 651 f Cattle net increases [5 ~’:' “ ‘ 62Jfif j HOgs, net increases f7_ pg ~-' " - 601, _g; Poultry, net increases [‘ . ' ' . 4—5945 g; (continued on next page) Figure 17 (continued) 0 25 50 75 100 Egg Sales §_ 55; 1 Custom work L_ 62X ;i Other L 65;; 7 as payment {' . 75; i T Total income [ A 65; I [:::J Landloro's Share I I Tenant‘s share Eguitability g: Landlord's 275 - Tenant's 175 Crop and LivestOck Share Lease- From the above data it can be reasoned that the landlord is in a favorable position under this type of lease agreement. The landlords are providing 56 percent of the expense contributions and are receiving 65 percent of the income. However, it must be rec0gnized that under this type of lease the landlord is assuming a much greater risk, and therefore he should receive a higher prOportion Of the gross income to compensate him for hearing this risk. The tenant‘s major contribution is his labor, while the landlord contributes the farm, the machinery and equipment, and the live— stock which he places in the hands of the tenant. The risk is much higher for the landlord than under most other types of leases. Page 71 If an adjustment of expense items is desirable under this type of lease, a reduction in the Operator's labor charge would be in order. At the sane the the amount allowed for the landlord's services and management could be increased. Under this type of lease the tenant usually is ineXperienced and must rely heavily upon the landlord's man- agement decisions. Therefore, the landlord must aesume a more active role in the management functions in order to protect his high inVestment. Hence the landlord should be compensated for the increased amount of management and supervision that he must perfonm. Only minor adjustments would be necessary to make these lease agree— ments equitable. Usually the landlord and tenant are related, or close friends, and the adjustments can be worked out without too much difficulty. Landlord's l/fi - Tenant's 212 Crop and Livestock Share eases The sample of farms with this type of farm rental agreement was too small to be representative or signifiCant, therefore, the equitability of this type of lease will not be discussed in this chapter. Page 72 Table 15 -- Average organization and efficiency factors on 57 Michigan farms by type of lease for the year 1950. Type of Lease Item CrOp— Land- Ten- Average Cash Share 50-50 lord's ant's Cash 2/5 .1155 Number of farms 57 8 5 22 5 1 Acres: Total 192 149 , 168 206 142 500 Tillable 145 84 155 141 96 242 Animal units 22 17 24 55 27 9 Man equivalent 106 192 105 105 1.5 208 P .M.W.U.: Total 475 274 470 495 487 640 Per man 525 255 596 45 552 229 Per tillable acre 5. 7 5.6 5.2 5.8 5.1 2.6 CrOp yield index 98 80 100 99 116 96 Dairy sales per cow $267 $247 $270 $248 $244 5527 EXpense per tillable acre 47 58 4O 46 6O 52 Tractor fuel and oil eXpense per tillable acre 5.10' 5.16 2.42 2.64 5.47 5.79 Investments: Tenant's 8,785 6,219 11,775 7,548 1,611 17,167 Landlord's 19,466 7,762 15,228 25,905 24,499 25,917 Expense contributions, tenant's percent of total 65 84 75 58 44 79 EXpense contributions, landlad's percent of total 57 16 25 42 51 21 Income, tenant's per- cent of total 59 92 82 51 57 71 Income, landlord's per- cent of total 41 8 18 49 65 29 Page 75 CHAP TSP. VI EQUITAEILITY OF 50—50 CROP AND LIVEJTOCK SHAKE LEADS UVgH A PidIOD OF Ydafib In Chapter V, the discussion related to the equitability of differ- ent farm leases for one year, 1950. It is the purpose of this chapter to present material relating to the equitability of the 50-50 CrOp and Livestock Share Lease on two individual farms over a period of years. One rented farm was selected because it had a wide variation in the div- ision of expense contributions and gross income between landlord and tenant. Another farm was then picked in which the farm lease appeared to be approximately equitable from the standpoint of the landlord's and ten- ant's division of income and eXpenses. The records of these two rented farms for aperiod of years was studied for the purpose of comparing the equitability of the farm rental agreement one year with another. The procedure for testing the equitability of the farm lease was the same as that used in Chapter V. A "balance sheet" was used listing the investments, expense contribution, and gross income of landlord and ten- ant. Farm real estate prices were adjusted to the current farm real estate price index by the same procedure as that used in Chapter V. Other items which required estimating were calculated in a similar fashion. é Lenawee County Rented Famm The first farm studied was a 200 acre rented farm located in Lenawee County. This farm is rented under a 50-50 Cr0p and Livestock Share Lease. Farm account records have been kept since 1945. This farm for 1950 shows Page 74 a wide variation in the division of eXpense contributions and gross in- come between landlord and tenant. The farm rental agreement was tested, for equitability for the years 1946 through 1950. Organization and Efficiency Factors: This farm had a total of 200 acres (Table 16). The number of tillable acres varied from 160 acres for 1946 to 155 acres in 1950, and averaged 157 acres for the five year period, The crop yield index averaged 87 for the five year period, with a range of 69 to 98. The number of animal units ranged from 25 in 1948 to 49 in 1950. The average was 58 for the period of this study. The size of business increased each year from 1946-1950. The pro- ductive man work units increased from 496 in 1946 to 606 in 1950. They averaged 559 for the same period. Similarly, productive man work units per tillable acre increased each year from 2.4 in 1946 to 4.0 in 1950. Labor efficiency has decreased on this farm. The productive man work units per man has decreased from 582 in 1946 to 557 in 1950. The average for this period was 558. The main reason for this decrease in labor efficiency is because the average number of men on this farm has increased from 1.5 in 1946 to 1.8 in 1950. The size of business has not increased enough to efficiently employ this extra labor. Investments: In 1946, the total investment on this farm was 924,089. Of this amount the landlord provided 619,898 (85 percent) and the tenant provided $4,189 (17 percent). The investment in.machinery and equipment was $2,615, of which the tenant provided $2,152. Other investments in productive livestock and feed was divided on a 50—50 basis (Figures 18 and 19). In 1947, the total investment on the farm had increased to $29,520. The tenant provided $5,719, or 19 percent of this total, while the land- lord provided $25,805, or 81 percent. The tenant continued to own most of Page 75 Table 16 -- Organization and efficiency factors on a Lenawee County, Michigan rented farm with 50-50 CrOp and Livestock Share Lease for the years 1946-1950. Years Item 1946 1947 1948 1949 1950 average Acres: Total 200 200 200 200 200 200 Tillable 160 59 159 55 155 ' 157 P.M.w.U.*x Total 496 522 571 602 606 559 Per man 582 581 556 554 557 558 Per tillable acre 2.5 2.6 2.9 5.9 4.0 .2 Man equivalent 1.5 1.4 1.7 1.7 1.8 1.6 Animal units 55 47 25 55 49 58 CrOp yield index 94 98 69 86 90 87 Dairy sales per cow $550 8450 e459 e550 e565 @586 Total eXpense per tillable acre 27 57 48 47 49 42 Gross income: per man 6,195 8,272 6,200 6,290 7,120 6,815 Per tillable acre 50 72 66 70 84 68 Investments, tenant's 4,189 5,715 10,089 9,702 12,125 8,56 Percent of total 17 19 29 28 55 26 Investments, land- 1°rd'8 19:598 25.805 24,557 24.696 24,465 25,456 Percent of total 85 81 71 72 67 74 EXpense contributors, . tenant's 5,551 4,289 5,515 4,547 6,044 4,709 Percent of total 58 57 59 65 64 60 Expense contributors, landlord‘s 2,594 5,221 5,719 2,656 5,460 5,090 Percent of total 42 45 41 57 56 40 Gross income, tenant's 4,028 5,855 5,279 5,548 6,516 5,401 Percent of total 50 51 50 50 51 50 Gross income, landlord's 4,028 5,751 5,262 5,548 6,577 5,555 Percent of total 50 49 5O 50 49 50 * P.M.W,U. - A productive man work unit is the amount of work that can be accomplished by one man in a 10 hour day working at average efficiency. Puge 76 the machinery and equipment. The productive livestock and feed continued to be owned on a 50-50 basis. In 1948, the total farm investment again increased over 1947 to $54,626. The landlord's investment was 924,557, or 71 percent of the total. The tenant's investments in the farm business almost doubled over the previous year to $10,089, or 29 percent of the total. The tenants big increase in investment was for machinery and equipment where the total jumped from $2,445 in 1947, to $6,289 in 1948. Investments in livestock and feed increased only slightly. In 1949, the total investment in the farm business decreased slight- ly over the 1948 level. This decrease was in the tenant's investments. The tenant's investment decreased from $10,089 in 1948 to 89,702 in 1949. This was 28 percent of the total farm investment in 1949. The landlord had $24,696 invested in the farm business in 1949. In 1950, the increase in the total farm investments was from a54,598 in 1949 to $56,588 in 1950. The tenant's investment during this year increased from $9,702 to $12,125, while the landlords investment de- creased from $24,696 in 1949 to $24,465 in 1950, or 67 percent of the total investment. The above data shows that from the period 1946—1950, the total farm investment has increased every year except in 1949. This increase was from $24,087 in 1946 to s56,588 in 1950. Figure 18 shows that the tenant's investment increased from $4,189 in 1946 to $12,125 in 1950. The tenant‘s percent of the total investment increased from 17 percent in 1946 to 55 percent in 1950. In the same period of time the landlord's percent of the total investment decreased from 87 percent in 1946 to 67 percent in 1950 (Figure 19). The above data will be important in determining the equita— ............................... .....---- .s-peECent-of _- ‘-__‘7 ............ ... . . . ..$.-.. ..11.,. - v I I I l n .10 é , .1948 A f .Yehrs‘ 1 bf a Lenawee‘Oounty, 50"5001‘011 and Livestock ! ‘ 7 iahd-J . ‘ 7 7_ ,__ 7 Figure: 19 -7 Farm 7 \ Lease for” j ' 7 7 _ jlord'hith - , ,_ . 7 .7 to§19907 adjusted 17327.17- ; 7 I : :estate f g ‘ j . 7 . ; ; . . . . I . s 7 4 :4 7 7 a a. _ 7 7 7 7 7 7 7 7 7 7 7 I _ 7 7 7 7 7 7 7 7 7 _ 7 _ 7 _ . u 7 _ 7 77 7 7 7 7 7 7 7 7 _ 7 f 77 _ 7 7 7 7 7 7 _ 7 7 7 _ 7 7 7 7 7 7 7 7 7 2 7i _ 7 7 7 _ 7 _ 7 7 7 7 7 7 7 7 . 7 7 7 7 7 _ 7 7 _ _ 7 . 7 7 7 7 7 7 7 7 7 7 . _ 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 _ 7 77 . 7 77 7 7 7 7 7 7 7 7 7 7 7 _ 7 7 7 7 7 7 7 7 _ 7 7 7 77 7 7 Page 78 bility of the farm lease on this farm and will be discussed later in this chapter. Expense Contributions: The total expense contributions on this farm has increased from $5,751 in 1946 to $9,504 in 1950. In the same manner the total eXpense per tillable acre on this farm has increased from $27 in 1946 to 549 in 1950. Most of the expense contributions were divided on the usual basis for this type of lease. The landlord paid 50 percent of the fuel and oil eXpense. However, for the years 1947, 1948 and 1949, the landlord paid approximately two-thirds of the crOp eXpense. In 1950 the cr0p expense was paid on a 50—50 basis. The landlord also paid about one-third of the miscellaneous expense. Figure 20 -- Expense contributions: percentage contributed by landlord and tenant on a rented farm in Lenawee County, Micnigan, with 50-50 CrOp and Livestock Share Lease, 1946 to 1950. Percent of Expense Contributions Year 0 25 50 75 100 1946 E777..3,,3_:h_vgw 42; I 1947 ry 75—7"3f'ff' 77.77 43: 71 1948 7 7 i .317 —7 1949 F 7 ’7 Averages (1946—1950) Lay7gé:usggyaa,43i -*‘ 1 Landlord's Share [:::] Tenant's share age 79 Figure 20 shows that the percentage of the total eXpense Contri- butions contributed by the tenant increased every year except 1947, from 58 percent of the total in 1946, to 64 percent in 1950.' The percentage of the total eXpense contributions provided by the landlord decreased every year except 1947 from 42 percent in 1946 to 56 percent in l950. Gross Income: It can be seen from Figure 21 that the gross income was divided on a 50—50 basis about every year from 1946 to 1950. There was a slight Variation in 1947 and again in 1950 when the tenant re- ceived 51 percent of the gross income and the landlord received 49 per- cent. The reason for this variation was that the tenant received income for labor off farm and from custom work which increased his gross income slightly over that of the landlord. All the other farm income Was divided approximately on a 50-50 basis. The net income on this farm, however, was not divided on a 50-50 because of the differences of the contributions of the two parties. basigj‘ The landlord's net income increased about every year while the tenant's net income decreased. The landlord's net income averaged $2,065 for the five year period. The tenant's net income aVeraged only $692 for this same period. Equitability of Lease from 1946—1950: From.the above data, and Figures 22 and 25, we might reason that this farm lease is not equitable. The tenant's percent of the total eXpense contributions has continued to increase each year, while that of the landlord has decreased. The main contribution of the landlord which is the land and improvements has in- creased with the increase in real estate values. The cost of maintaining a rented farm has also increased. However, they have not increased in the same preportion as the investments and contributions of the tenant. Page 80 Figure 21 -— Gross income: percentage received by landlord and tenant on a rented farm in Lenawee County, Michigan with a 50—50 CrOp and Livestock Share Lease, 1946-50. Percent of Gross Income Year [5 25 50 75 100 1946 .50: ‘7 1947 7'.“ 497, j 19A8 7 $0; 1 1949 ___ EOI : 1950 p; 49; i Average (1946-1950) ‘355g:_ .1 5‘.'{~ ' '- 4 , 4 Landlord's Share I ! Tenant's ohare machinery and most of the equipment. The tenant's main contribution to the farm business is the labor, the All of these items at the present time are high cost items on the farm. The investment in machinery and equip- ment required on a farm today is considerably larger than it was a decade ago. creased from $2,152 in 1946 to $7,757 in 1950. For example, on this farm the tenant's investment inxnachinery in— In the same period the labor eXpense per tillable acre increased from $10.05 per tillable acre in l9e6 to $18.50 per tillable acre in 1950. However, in determining the equitability of the farm lease, we must consider these investments and charges excessive. ,7 ....r A ,. .72... 191277 f : 1 7 : . : 19.48 7 . 1949 7 Years" 3 5 g and gross indome : .. ,1 1 . . .... g. ' 1 Figure. 25 -—I Expenpe 3 ’ i ‘ ' I ‘ Ion: a - ....._.._-..‘.____._ -... ....-- ' 1 _ ‘ I County, Michigan rented ] -- -- E__. .. 3 "'1 1916 3,0. :__.,y . 3, ”hi“ _ .; 7 , 2 7 i s 7 l 7. = ~ : i E ' = i 1 7 5 i 7 a l _ -.-. .....i_._.._'__-.‘__. -...-. .. . ._ x '. Page82 The tenant's macninery investment in 1950 was $7,757. This invest— ment is much higher than the average machinery investment for all farm account COOperators in the same area. The average investment of all farms account COOperators was $5,512. Even the tOp one-third of the farms in this area with the highest incomes had only an aVerage of e6,108 invested in machinery. So, it can be reasoned that this tenant probably has a higher machinery investment than what would be necessary to Operate the farm efficiently. The tenant's labor expense increased from $10.05 per tillable acre in 1946 to $18.50 per tillable acre in 1950. This labor expense of $lo.50 per tillable acre in 1950 is higher than the average of all farms account COOperators in the area. Even the less efricient farm account cooPerators in the area, who had a labor expense per tillable acre of $17.87, had a lower labor expense than the tenant on this farm. However, the labor efficienty on this farm is within the recommended standard for this area. In summary, it can be reasoned that part of the excess expense con- tributions of the tenant on this farm can be explained by his large in- vestment in.machinery, and also for his high labor cost. However, even if adgustments were allowed to correct these excessive charges, the tenant would still be contributing more than 50 percent of the total expense contributions. This same reasoning as above can be applied to the landlord. 'If the farm is over-capitalized, or has excessive improvements, the interest charges, taxes and improvement eXpense will be out of prOportion for the size of the farm business. Under such a situation the "balance sheet" would be distorted in favor of the landlord. Page 85 If the farm lease agreement on this farm is to be made equitable, adjustments.must be made in the expense contributions. But, before any derinite adjustment could be recommended for this farm, a more detailed study should be made with both the landlord and tenant, to make sure the estimates and division of expenses are agreed upon by both parties. Only with the consent of both parties can an equitable, satisractory agreement be reached. é Hillsdale County Rented Farm Organization and Efficiency Factors: This farm.was chosen because it appeared to be approximately equitable, based on the assumptions of an equitable farm lease. This farm is located in.Michigan Type-of-Farming Area 1. Farm account records have been kept on this farm since 1957. This study is for the period 1941 through 1950. Table 14 shows the organization and efficiency factors for the years 1941-50. The total acres in this farm is 204. The number of tillable acres varies from 156 in 1945 to 107 in 1950. The total productive man work units varies from 451 in 1944 to 560 in 1948, with an average of 412 for the period. Labor efficiency was about average and ranged from 557 production man work units per man in 1945 to 254 in 1946. This averages 295 for the period. The cr0p yield index was about average from 1941-50. The range was from 71 in 1945 to 145 in 1950. The average for the period was 101. Investments: Total farm investment on this farm increased from e16,151 in 1941 to $55,562 in 1950. The tenant's total investment increased from $2,902 in 1941 to d5,551 in 1950. The landlord's investment increased from Page 84 Table 17 —- Organization and efficiency factors on a Hillsdale County, Mich- igan rented farm with a 50—50 Cr0p and Livestock Share Lease for the years 1941 to 1950. Year Item 1941 1945, 1944 1945 1946 1947 1948 1949 1950 Aver. Acres: Total 204 204 204 204 204 204 204 204 204 204 Tillable 127 156 125 125 125 155 118 118 107 124 P.n.w.u.*z Total 447 421 451 411 591 415 560 410 405 412 Per man. 555 557 501 248 254 519 277 515 289 295 Man equivalent 1.5 1.2 1.5 1.6 1.6 1.5 1.5 1.5 1.4 1.4 Animal units 20 24 58 51 52 52 25 51 56 53 Cr0p yield index 102 71 106 105 79 92 84 124 145 101 Dairy sales per cows :88 $149 $140 $161 s175 $185 $204 3248 e215 2175 Total eXpense per tillable acre 20 25 27 29 50 50 56 59 46 51 Investments, tenant '3 2:902 5:652 5:666 5:894 4: 084 5:725 4:065 4:978 5:551 4: 055 Percent of total 18 18 17 17 15 15 l5 l5 17 16 Investments, Landlord's 15,229 16,082 17,878 19,575 22,471 25,207 26,558 28,092 28,011 21,900 Percent of total 82 82 85 85 85 87 87 85 85 84 EXpense contri- butions, . tenant's 1,644 2,010 2,252 2,714 2,851 5,116 5,090 5,520 5,551 2,725 Percent of total 49 55 55 54 54 54 52 52 55 55 EXpense contri— butions, . landlord’s 1,786 2,055 2,007 2,505 2,414 2,614 2,801 5,097 2,940 2,444 Percent of total 51 47 47 46 46 46 48 48 47 47 Gross income, tenant's 1,922 1,950 2,596 2,416 2,576 2,806 2,788 5,242 5,879 2,659 Percent of total 50 51 5o 50 5o 49 50 50 50 50 Gross income, landlord's 1,918 1,864 2,578 2,418 2,569 2,872 2,807 5,245 5,848 2,655 Percent of total 50 49 50 50 50 51 5o 50 50 50 *P.M.W.U. - A productive man work unit is the amount of work that can be accomplished by one man in a 10 hour day working at aVerage efficiency. .l 615,229 in 1941 to $28,011 in 1950. The investment in livestock, excluding poultry, was on a 50-j0 basis. The investment in machinery and equipment was apgroximately on a 50—50 basis, for the years 1941-50. This is unusual for this type of farm lease where the tenant usually provides most all the machinery and equip- ment. Here we have a farm with a 50—50 lease on which the landlord pro- vides approximately 50 percent of the investment in machinery and equipment. Poultry on this farm was owned by the tenant. Figures 24 and 25 shows that the percentage of the total investment provided by the landlord and tenant has remained relatively constant for the years 1941-50. Eggense Contributions: The total eXpense contributions on this farm increased from $5,475 in 1941 to 56,715 in 1950. The total eXpense per tillable acre increased in a similar manner from 520 per acreixll94l to .46 per acre‘in 1950. The Operating eXpenses were divided on the usual basis for this type of farm lease, except for the power and machinery exPense. The landlord owns approximately one-half of the machinery, so he also contributes 50 percent of the machinery eXpense. Figure 26 shows that the division of total eXpense contributions be— tween landlord and tenant has not fluctuated very widely for the years 1941-50. Gross income: The division of the gross income on this farm was on a 50—50 basis for the years 1941—50 (Figure 27). There were minor variations in some years where the tenant received income from labor off farm, and where the landlord sold some timber off the farm; however, the regular farm income was divided on a 50—50 basis. .1Io 'll‘ll'l , I" d... . I . l l ;_. O . 4 z 1 .omotiall I ---+--¢-:--1 - u ..... , 44 42 ' 4&4 ‘ 16 . 46 - V E 5 ' l Years: - 1 _ ‘ of landlord on a Higlledalge C'ouqty, . ; I i rented ram with a; 50.50 brop and Liweetoowsmra L ' . ..l___' _-'_......IbsssabetheLyaaIOLlslflfltc~31950r- .:‘___.___1_ 4-..! .' . u 6 agar; 25 .1. A .111 .147 11 1 1 1 1 1 1 1 1 1 _ __ 1 . .1 . _ 1 1 1 1 1 _ _ 1 1 _ 1 1 1 1 _ . _ 1 1 1 _ _ 1 1 1 _ 1 1 1 1 1 1 1 _ _ _ . 1 .1 _ 1 1 . 1 _ — .1 1 1 _ 1 1 _ . 1 1 _ 1 1 1 1 . _ 1 1 1 1 1 1 1 . .1 1 l1 h _ 1 u w . T m 1 .1 _ _ 1 1 1 _ 1 1. . 1 1 1 1 1 1 _ 1 1 1 1 1 . _ 1 1 1 _ ._ _ 1 1 _ 1 . . 1 1 1 1 1 1 . 1 . 1 1 1 1 1 1 . 1 1 1 1 1 1 _ _ 1 1 _ _ 1 1 1 1 1 1 _ 1 1 1 1 1 1 _ 1 _ 1 _ _ 1 _1 _ 1 1 _ 1 1 . 1 11 1 1 1 1 1 _ _ _ . . _ _ w _ m 1 m m _ . 1 1 1 1 1 1 i _ 1 _ _ n 1 1 1 1 _ _1- 1 1 1 1 _ _ _ 1 _ u 1 ‘ r 1 . _ 1 _ . 1 . 1 1 _ _ ‘ “.1 n 1 1 1 1 . . 1 . 1 1. _ 1 1 H 1 .1 1 . 1 11 1 1 _ 1 1 1 1 .1 _ 1 1 m .n u a _ a . w. _ u n i; m . _ _ . 1 .. 1 1 _ ._ 1 1 _ . 1 _ 1 .1 1 1 1 1 1 1 1 1 1 _ 1 1 11 1 1 1 1 _ _ 1 1 1 . 1 1 _ . 1 1 _ 1 1 1 1 1 1 . _ 1 1 . 1 1 _ 1 1. _ 1 1 _ 1 _ 1 1 _ 111.11 1.1 1. 1 1 _ 1 1 1 1 . 1 __ ._ _ 1 1 1 1 1 1 .1 1 . . 1 1 1 1 1 1 1 ..-—-1 _ : _ The net income on this farm, however, has not been very satisfactory. Page 87 The net income of the landlord averaged only 4191 for the period 1941 to 1950. The tenant's net income averaged a negative @755 for this same period. Figure 26 -- Expense contributions: percentage contributed by land10rd and tenant on a Hillsdale County, Michigan rented farm with a 50—50 Cr0p and Livestock Share Lease, 1941-30. 1. ‘—-—‘————— Percent of expense contributions Year 0 25 50 75 100 1941 I 51T 1' 1945 1 ' 5“ " - 474 l 1944 L ' : ' III-1 J 1945 I "46; 1946 t 465 _I 1947 I ~~~461 j 1948 I 48; I 1949 E 484 17 1950 L “471 Z Average (1941—50) I ‘59,. ; ‘1»;47; I r]. l M Landlord '8 Share E Tenant's Share Page 88 Figure 27 - Gross income: percentage received by landlord and tenant on a Hillsdale County, Micaigan rented farm with a 50—jO CrOp and Livestock Share Lease, 1941-50. I Percent Year P 25 50 75 100 1941 L 501 I 1945 L ”49L . J 1944 l )0; ‘ 1945 :2". ‘.;.. . .1. 50; j 1946 [f_1p.'- . ,1 .59; 1947 F1321.1¢1‘ <“ .1 ' 151; 1948 E 501 I 1949 F 2 , ' -- , ' so} I 1950 :rti:i;.-Lf*: .1 . 501 1[ Average { wg 50* g: :::3 Landlord's Share :::3 Tenant's Share Sagitability E: Farm Lease 1941450: In determining the equitability of the farm lease on this farm, it can be noted from Figures 28 and 29 that there is no wide variation in the division of expense contributions and Page 89 income between landlord and tenant. Although the division of the expense contributions is not quite on a 50—50 basis, as is the division of inr come, they do not Vary too far from the 53-50 basis. The tenant is providing on the average 55 percent of the total ex- pense contributions. However, the labor charge, which is the main con- tribution of the tenant, is quite high for the size of business on this farm. In 1950 the labor expense per tillable acre was $19.25 as compared to $16.70 per tillable acre for the average of all farms account co- operators in this area. This high labor charge and relatively low labor efficiency will partly offset some of the larger expense contribution be- ing made by the tenant. In general, it can be reasoned that this farm lease is not too far from being equitable to both landlord and tenant. It is important to note that on this farm there is no wide variation in either the percentage of the total investment, or in the division of the total expense contributions from year to year by landlord and tenant. One of the important reasons for this situation is that the landlord owns approximately 50 percent of the machinery and equipment, in addition to his usual investments under this type of lease. Therefore, as the invest- ment in machinery has increased over the past decade, the landlord's ins vestment has increased at the same rate as the tenant's. It can be rea- soned that this is an mpcrtsnt'fsctcr in causing this farm lease to be more nearly equitable than some other farms witd this type of lease. On some of the other fanns in this study where the fann lease was considered to be approximately equitable, the landlord also provided about 50 percent of the investment in machinery and equipment. This has not been Page 90 one of the usual provisions in our 50-50 CrOp and Livestock Share Leases. However, serious consideration should be given to this factor if we are to continue to divide the gross income on a 50-50 basis. It can be reasoned that this farm lease is approximately equitable in the division of eXpense contributions and gross income. However, it can be noted that even though the lease agreement is equitable, it is not too profitable. Neither the landlord nor the tenant are faring too well in net income. The landlord's net income averaged only $191 for the per- iod 1941 to 1950, and the tenant's net income averaged a negative e755 for the same period. One of the reasons for this farm.business not being very profitable is probably because of an inefficient tenant. Upon examining the effic- iency factors on this farm (Table 17) we find that dairy sales per cow are very low. There is also a wide fluctuation in crOp yields. It Can be noted that during the years that both the landlord and tenant had a nega- tive net income, the crOp yield index for that year was very low. Labor efficiency could also be improved on this farm. From the study of this farm it can be reasoned that even though the "balance sheet" shows that the lease agreement to be equitable, the agree- ment still might not be profitable and fair to both parties. The landlord is providing more of the investment and eXpense contributions than is usually provided by the landlord under this type of lease, but he still is not faring too well because of an inefficient tenant. Page 91 , 11...: and,g;' Iaard aes_ ranted I O c e .1. e a -Iv.$4u “-3 .61 EB.“ Page 92 CHAPTSA VII SUMMAAY ALD CONCLUSIONS Farm tenancy has become a permanent part of our agricultural economy. The trend in farm tenancy in the United States was upward until 1955 when it reached an all time high and then declined. In 1945 about 52 percent of the farms in the United States were Operated by tenants. In Mich- igan the trend in farm tenancy has been similar to that for the United States and in 1945 was 12 percent. However, about 26 percent or one acre in four of all Michigan farm land was Operated by "non-owners" (i. e. tenants and part owners). It has been esttnated that in many farming areas approximately 25 percent of the famns can be tenant Operated if the so-called "agricultural ladder" is to Operate efficiently. Because farm tenancy is so important it is imperative that we have equitable lease agreements. Due to custom, landlord and tenant diVisions of expense contribu- tions and income tends to remain fixed year after year deepite the fact that prices and cost relationships and production vary from year to year and over aperiod of years. This results in many lease agreements which are not equitable. Technological develOpments in agriculture and continually changing economic conditions makes custom an inadequate basis for determining an equitable farm lea 9. An up-to-date appraisal is required to study the effects of these changes on the farm lease agreements. It is the purpose of this study to determine what constitutes an Page 95 equitable fans lease and to test tne equitability of farm leases used in Michigan. It was reasoned that an equitable farm lease is one in which the expense contributions are shared in the same preportion as the income. The method used to test the equitaeility of the farm leases was a "balance sheet" on which were listed the division of investments, expense contributions and gross income. Most of the data used was taken directly from the farm account records at Michigan State College. However, several items such as values placed on the prOperty, the Operator's labor charge and the interest rate were esthat;d items; an attempt was made to place a fair and impartial value on these items based on currect prices and values. It is realized that the interest rate allowed on the farm real estate may have been too low. Inasmuch as the capital provided by the landlord in the farm is high risk capital, possibly a higher interest ‘ate should have been used. In this study it was found that the 50-50 CrOp and Livestock Share ease was the most p0pu1ar type of farm lease used in.Michigan. Fifty-nine percent of the farms in the sample Operated under this type of lease. The Cash Farm Lease was second in importance in.Michigan. Twenty— two percent of the farms in the sample Operated under a cash lease. How- ever, it was noted that the farms rented on a cash basis were smaller, less productive, and Operated less efficiently than the farms under the other types of leases. The Landlord's 2/5 — Tenant's 1/5 CrOp and Livestock Share Lease and the CrOp-Share Cash Farm Lease were of equal importance on the farms in this stud‘. Each of these fann leases were used on 8 percent of the farms Page 94 in this study. These types of leases were not very p0pu1ar and do not adapt themselves to most Michigan farming conditions. The Landlord's 1/5 - Tenant's 2/fi CrOp and Livestock share Lease is not important with Michigan fanners. Only 5 percent of the farms in this study Operated under this type of lease. On testing the equitability of the above farm leases, each farm was tested individually and then averages were taken for each type of farm lease. 50550 Crgp and Livestock Share Lease The farms Operating under 50-50 Cr0p and Livestock Share Leases were about average in size and in productivity. Labor efficiency was above average on most of these farms. The average investlent on these farms was $51,453 of which 76 per- cent was furnished by the landlords and 24 percent by the tenants. The tenant's investments provided 95 percent of the machinery and equipment, 50 percent of the feed, 41 percent of the livestock and 61 percent of the poultry. All other investments were provided by the landlords. Expense Contributions: Total expense contributions on farms in this study with 50—50 CrOp and Livestock Share Leases averaged $7,717. Of this amount the tenants provided 58 percent while the landlords provided 42 percent. The tenant's eXpense contributions included all the Operator's labor charge and unpaid family labor, 96 percent of the hired labor, 87 percent of the machinery and power eXpense, 50 percent of the feed eXpense, 48 percent of the crOp eXpenss, 45 percent of the livestock expense, 7 per- cent of the taxes, 75 percent of the miscellaneous eXpense and 27 percent of the interest charges on the investment. The landlords provided the Page 95 balance of the eXpense contributions. Gross Income: The average gross income on farms in this study with 50-50 CrOp and Livestock Share Leases was a8,950. The tenants received 51 percent of this amount while the landlords received 49 percent. Most of the income items were divided on a 50—50 basis. ouch items as custom work income and labor off farm accrued to the tenant. Dairy product sales were by far the largest single income item. CrOp sales were second in importance. Equitability 2£_5O-5O Leases: If our assumptions of an equitable farm lease are correct, it can be reasoned that adjustments need to be made on some of the farms Operating under this type of lease. The ten- ants on the average are providing 58 percent of the eXpense contributions and are receiving 51 percent of the income. The landlords, on the other hand, are providing 42 percent of the expense contributions and are re- ceiving 49 percent of the income. However, before we can determine the equitability of a farm lease other factors must also be considered. It was found in this study that on farms where the tenants provided the highest percentage of the eXpense contributions, they also had the highest labor expense and the highest machinery eXpenee. It was also found that tenants who provided the small— est prOportion of the eXpense contributions had the lowest labor and machinery eXpenee. It can be reasoned from this study that the tenants who were contrib- uting the highest pr0portion of the eXpense contri‘utions may have had excessive labor costs, poor labor efriciency, and also an excessive invest- ment in machinery. It was also found that on farms where the landlords were providing a Page 96 higher pr0portion of the expense contributions they had the highest improvement eXpense and real estate charges per tillable acre. The above factors must be considered in testing the equitability of a farm lease. On some farms the tenant may have high labor costs, poor labor efficiency and an excessive investment in machinery. The "balance sheet" may show the tenant providing a larger prOportion of the eXpense contributions. The farm may also be over-capitalized with excessive improvements. The "balance sheet" will then show the landlord provid— ing a larger improvement eXpense, higher taxes, and a larger interest charge than is justified for the size of business on tne farm. These factors distort the true picture on the ”balance sheet“. In analyzing the equitability of a farm lease, part of the larger preportion of the eXpense contributions provided by either the.landlord or tenant can be offset if the above factors are found to exist. In some cases it might not always be desirable to divide the eXpense contributions in the same prOportion as the gross income. The landlord who provides a good farm with a modern home may find that he has a poor and inefficient tenant. The result may be low earnings and inefficient Oper— ation of the farm. Under such an arrangement it would not be fair to ask the landlord to provide more of the expense contributions to make up for the inefficiencies of the tenant. Under such an arrangement it could very well be that even if the farm lease was equitable, (i.e. eXpense contributions were divided in the emne preportion as gross income) the farm business might be unprofitable. On some of the farms in this study the farm lease appeared to be equitable, but both the landlord and tenant received a negative net income. The ”bal- ance sheet" alone cannot determine if a fans lease is equitable. Consider- Page 97 ation must also be given to other factors that may be present and effect the equitability of the lease agreement. Cash Farm Leases F’rms in this study that Operated under a cash lease were smaller and less productive farms than the average rented farm. Labor efficiency and the crop yield index were both below average. The average total investment on these farms was $15,981 of which 44 percent was provided by the tenant and 56 percent by the landlords. The landlords provided the farm and all other investments were made by the tenants. Expense Contributions: Total expense Contributions on these farms averaged $5,652. Of this amount 84 percent was provided by the tenants, and 16 percent by the landlords. The landlords contributed the interest on their investment, their service charge, the improvement expense and the taxes on the real estate. The tenants provided the remaining eXpense contributions. Gross Income: Gross income on farms with cash rent leases averaged $5,108. The tenants received 92 percent of this amount, and the landlords 8 percent. All the regular farm income was received by the tenants. The landlords only income was the cash rent received from the tenant. This averaged $585 per farm. Equitabilityigf Cash Leases: It might be reasoned from the above that farms with cash leases are not fair to the landlords. The landlords provid- ed 16 percent of the eXpense contributions and received only 8 percent of the income. However, if we examine these farms more closely we find that over 50 percent of the tenants had a negative net income. The remainder of the tenants barely broke even. Page 95 There is little possibility of arriving at an equitable farm lease on these fanns. They are too small and unproductive to give the land— lord and tenant a fair return for their contributions. Crop-Share Cash Farm Lease The farms in this study with CrOp-ehare Cash Farm Leases were larger and more productive than the average of all rented farms. Labor effic- iency and crOp yield index were both above average. The average total investment on these farms was $27,000. The land- lords provided 56 percent of this amount and the tenants 44 percent. All the machinery and equipnent, livestock and poultry were provided by the tenants. The landlords provided the farm and owned 18 percent of the in? vestment in feed and crOps. Exnenee Contributions: Total eXpense contributions on these farms averaged 67.842. Seventy-five percent of this amount was provided by the tenants. The expense contributions provided by the landlords includes their service charge, interest on their investment, 50 percent of the crOp exp pense and the taxes on the real estate. The remaining expense contri- butions were provided by the tenants. Gross Income 3 Gross income on these farms averaged $9,751. The tenants received 82 percent of this amount and the landlords received 16 percent. The only income received by the landlords was 45 percent of the crOp incOme and the cash rent paid by the tenants for the hay and pasture land, and for use of the buildings. Equitability of CropeShare Cash Lease: The CrOp-Share Cash Farm Lease has not been too satisfactory. The landlords provided 25 percent of the eXpense contributions, and received only 18 percent of the income. The Page 99 farming practices usually are not very satisfactory because the landlords receive only a share of the crOp sales and are not interested in a good livestock program. This type of lease is not adapted for most of the type of farming in Michigan. Landlord's 21; - Tenant's l/5 Crop and Livestock Share Lease The farms with this type of lease had a smaller acreage than the average for all rented farms, but labor efficiency and crOp yields were both above average. The average investment on these farms was 926,109. The landlords provided 94 percent of this investment. The tenant's investment included 2 percent of the machinery and equipment, 57 percent of the feed, 5 per- cent of the livestock and 58 percent of the poultry. Expense Contributions: Expense contributions on these farms averaged $7,556 of which 56 percent was provided by the landlords and 44 percent by the tenants. The labor was provided by the tenants. The landlords pro- vided the improvements cash expenses, their service charge and the taxes on the real estate. Most of the other eXpense contributions were divided approximately on a 2/5 — 1/5 basis. Gross Income: The gross income on farms with this type of lease averaged 39:811. This was divided 65 percent to the landlords and 57 per- cent to the tenants. Most of the income items were divided approximately on a 2/5 - 1/5 basis. Eguitability of Landlord's @[5 Lease: It might be reasoned that land— lords on farms with this type of lease are in a more favorable position g than with some other types of lease. The landlords provided 56 percent of Page 100 the engense contributions, and received 65 percent of the income. how- ever it must be recognized that under this type of lease the landlord 1 ‘ assumes a much higher ris than with any other type of lease, nence, he should be entitled to a larger preportion of the income. It crn also be reasoned that the tenant shou-d be allowed a lower labor Charge be- cause of the increased anount of supervision and management that must be provided by the landlord. The Landlord's 2/5 — Tenant's 1/5 CrOp and LiVestock Share Lease is not very important in Michigan. It does not adapt itself very well to hissigan conditions, and has not been very satisJaetory with landlords and tenants. 53.5.3 CRLP a Lian-“riot: same: Lined ‘ \(V This study had two objectives. The first was to test the equitabil- ity of farm leases for a one year period. The other objective was to test the equitability of the 53-50 CrOp and Livestock Share Lease over a period of years on two farms. 5 Lenawee County_§ented Farm from 1936 32 1950 One of the r nted farms studied over a puriOd of 5 years was a 200 acre farm located in Lenawee County. Farm account records have been kept on this form since 1945. In this study the farm le,se was tested for the years 1946-50. This farm was above averige in acreage but below average in cr0p yields. 0 U‘ The size of usiness has increased each year fron 1946—50, but labor efficiency has decreased each year for the same period. Page 101 Total investnents on this farm has increased from $24,089 in 1946 Ito a54,598 in 1950. The investnent of the tenant has increased from $4,169 in l9w6 to dl2,l£5 in 1950, or from 17 percent of the total ins vestment in 1946 to 55 percent in 1950. In the Same period, the land- lord‘s percentage of the total investment drOpped from 87 percent in 1946 to 67 percent‘in 1950. Exeense Contributions: ‘otal expense contributions on this farm have increased from d5,571 in 1946 to 99,504 in 1950. The percentage of the total eXpense contributions provided by the landlord has decreased about every year from 42 percent of the total in 1946 to 56 percent in 1950. The percentage of the expense contributions by the tenant, on the other hand, have increased. Gross Income The division of gross income on this farm has been approximately on a 50-50 basis for the years 1946-50. The net income, however, was not divided on a 50-50 basis. The landlord's net income has increased about every Year wh'le the tenant‘s net income has de— creased. Equitability of Lease: It Can be reasoned on the basis of the shar- ing of the expense contributions that the farm lease agreement on this farm is not equitable. The tenant's preportion of the expense contri— butions has increased each year, while the division of income has remain- ed approximately on a 50—50 basis. For example, in 1946 the tenant was providing 58 percent of the expense contributions and received 50 percent of the income. In 1950 the tenant provided 64 percent of the expense contributions and received 51 percent of the income. The major reason for this increase in the proportion of expense con- tributions provided by the tenant has been his much larger investnent in Page 102 machinery and equipment. Labor costs which are provided by the tenant have also greatly increased. It was found in this study, however, that the machinery and labor provided by the tenant on this farm were excessive. But, even if allow- ances were made for these factors the tenant would still be providing more than his prOportionate share of the eXpense contributions. If this farm lease is to be made equitable, adjustments must be made in the eXpense contributions. The landlord is not providing the eXpense contributions in the same prOportion as income received. é Hillsdale County dented Farm from 1941 tg_l9“0 The second rented farm that Was studied OVer a period of years is a 204 acre farm located in Hillsdale County. Farm account records have been kept on this farm since 1957. This study covers the period 1941-50. The total farm investment on this farm increased from $16,1i1 in 1941 to $35,562 in 1950. The percentage of the total investment provided by landlord and ten- ant has remained relatively constant from 1941-50. The cnief reason for this is that the landlord has continued to provide approximately one-half the machinery and equipment along with his other usual investments. Expense Contributions: Total eXpense contributions increased from $5,475 in 1941 to $6,715 in 1990. The prOportion provided by landlord and tenant has remained relatively constant during this period. They were divided approximately on a 50—50 basis. Gross Income: Gross income on this farm was divided on a 50-50 basis during the years 1941—50. However, this farm business was not very profit- able. The landlord had an average net income of only e191 for the period 1941 to 1950 and the tenant had a negative net income for this same period. Page 105 Equitability of Lease: The fann lease agreement on this farm appears to be approximately equitable. There is no wide Variation between the division of income and eXpenses. Only minor adjustment would be required in the eXpense items to make this lease equitable. It is anortant to note that the landlord on this farm provided approximately one-half the investment in machinery and equipment. This is not one of the usual provisions of a 50—50 CrOp and Livestock share Lease. The "balance sheet" shows the farm lease on this farm to be approx- imately equitable. However, the farm business is still not very profit— able. One of the reasons for low earnings on this farm appears to be because of an inefficient tenant. Conclusions It can be reasoned from this study that a large number of the farm lease agreements in.Michi5an are not equitable. dome lease agreements are unfair to the landlord and others are unfair to the tenant. In general, many of the 50—50 Cro; and Livestock Share Leases need to be appraised and adjustments made in the expense contributions. The usual provisions of this type of lease may have been approximately equit- able a decade ago, but this situation does not seem to be true today. If we are to continue to divide the income on a 50-50 basis, we should make adjustments so the expense contributions are also divided on similar basis. Upon examining the records of the farms where the lease agreement is approximately equitable, we find several modifications from the usual pro- visions. One important modifiCaticn of the 50-30 CrOp and Livestock Share Lease was that the landlord owned 50 percent of the machinery and equip- ment as well as his usual investments. This may not be a desirable Page 104 recommendation to make for this type of lease; however, this study shows that serious consideration should be given to this factor if the farm lease is to be made equitable. Another modification of the usual provisions of the 50—50 CrOp and Livestock Share Lease is that the landlord pays the tenant for his share of the custom work where the tenant owns the Special machines. This seems like a fair practice and should be recommended; however, in this study only a few landlords followed this practice. Other modifications that were made in this type of lease are that the landlord furnishes all the grass seed and over 50 percent of the commercial fertilizer. On some farms the landlord pays for one—half the cost of hired labor. The above modifications along with other adjustments Can be made if it is desirable to divide the eXpense contributions in the same proportion as income. However, each fans is an individual case and adjustments must be made on that particular farm which will make the lease agreement fair to both parties. On several of the rented farms in this study, the "balance sheet" showed the landlord to be in a favored position. The landlord was not contributing to the expense contributions in the sans prOportion as in- come received. It is realized that possibly the interest rate that Was allowed on the real estate was too low. An interest rate of 4% percent was used which is the going rate on well secured farm mortgages. however, it is reason- ed that the landlord in providing the farms for the tenant is assuming a large amount of risk. In other words, the landlord is providing risk capital and therefore should receive a higher rate of interest. Poesibly Page 105 an interest rate of 6 percent should be allowed on the real estate. Tnis higher interest rate still would not make the lease agreement equitable on a large number of farms, but it would help to make the expense con— tributions more nearly equitable to both parties. It was also found in this study that the equitability of a farm lease agreeient cannot be determined entirely by the "balance sheet”. The "balance sheet" may show th= lease agreement to be approximately equitable, but still the lease agreement may net be fair and the farm business may not be profitable. For ex” ple, the landlord may provide a good farm with a modern home and have an inefricient tenant Operating the farm. Under_such circumszances in attempting to make the ledse agree- ment equitable, the landlord may be required to make additional expense contributions to make up for the inefficiencies of the tenant. When using the "balance sheet“ in attempting to arrive at an equit- able leaae agreement, consideration must also be given to all other factors involved. The lease agreement must be fair to both parties, and the farm business must be profitable if we are to have satisfactory leas- ing agreements o l. 2. 5. 6. 7. 8. 9. 10. ll. 12. Ackerman, Joseph Arthur, Io W. Barry, Russel L., Hill, E. B. Henderson, 8. Brandt, Karl Case, H. C. J., and Ackerman, J. Case, H. C. h., and Cunningham, J. B. Castle, Emery, and Pine, We Ho Cldrk, NO Cunningham, J. B. Falconer, J. I. Harris, Marshall, and Hill, a. B. Harris, M. D., Tharp, M. M., and Turner, H. A. Page 106 BibliOgraphy "Status and Appraisal of Research in Farm Tenancy". Journal of Farm economics, p. 277, 1941. "Changes in Farm Leases". August issue. Iowa Farm Economist, Iowa Agr. Ext. Serv. 1948. How to Keep Your Farm in the Family, Michigan State College Agr. Expt. Sta. Spec. 5141].. 557’ 41 pp. 1949. "Toward a More Adequate ApprOach to the Farm Tenure Program". Journal of Farm dconomics, p. 206. 1942. Farm Leases for Illinois. Ill. Agr. EXp. Sta. Cir. 505, 55 pp. 1940. Better Farm Leases, Illinois Farm Economics, May issue, Ill. Agr. 212-it. Serv. 1947. Customary Farm Leasing Arrangements in Kansas. Kan. Agr. dxpt. Sta. Agr. soon. Report No. 41, 1950. Improving Farm Tenure in the Midwest. 111. Agr. expt. eta. Bul. 502, 26 pp. 1944. "Leasing Arrangements in Northern Illinois". Illinois Farm Economics, July issue, Ill. Agr. Ext. Serv. 1948. Ohio Farm Leases. Ohio Agr. SKp. Sta. Res. Bul. 685. Columbus. 1945. Family Farm Transfer Arrangements. Ill. Agr. Ext. Serv. Cir. 680, 59 pp. 1951. Better Farm Leases. U. 5. Dept. Agr. Farmers' Bul. 1969, 41 pp. 1945. Ii. 14. 15. 16. 17. 18. 19. 20. 21. Bibliography (continued) Harris, M. D. Heady, Earl 00 Hibbard, B. H., and McNall, P. S. Hill, 3- B. B. a Hill, O Hill, 13. B. Hill, a. 3. Hill, a. B. Schickele, R. Scofield, W. H., and Case, H. C. M. "A Suggested adjustment in the Farm Tenancy system". Journal of Farm dconomics p. 892. l957. "iconomics of Farm Leasing Systems". Journal of Farm aconomics p. 659. - 1947. The Farm Lease and the dental Contract. Wise. Agr. ext. eerv. Cir. 535. 1941. Farm Tenancy in Michigan, Farm Mgt. Dept. Mich. State College, East Lansing, processed. 1957. Farms, Mdrtgages, Teiancy, and Wages. 1940. Census Maps. arm.Mgt. Dept. Mich. State College, East La sing, 1941. Farm and Field Rental Agreements. Mich. State College COOp. Sgt. derv. FOldt‘JI‘ F-l580 1991. Michigan Farm Leases. Agr. Econ. Dept., Michigan state College, processed. Field Leasing on the CrOp—bhare Basis. Cash Lease for the Farm. Grey-Share Farm Lease. Father and Son Partnership Agreement. jO-fiO CrOp and Livestock-Snare Farm Lease. Tenant's 2/5 CrOp and Livestock Share Farm Lease. Landlord's 2/5 CrOp and Livestock Share FarmLease. It's Farm Lease Time, Mich. Agr. Ext. Serv. Farm sconomics Ho. 98. 1951. "Farm Tenure Under the Strains of War" Journal of Farm Economi s, p. 255. 1945. Farm Leasin? Practices in Illinois. a Ill. Agr.’3£pt. bta. Adhl962, Mimeo. 1942. ’3 (— 0 f0 4:. 0 DJ \H o Scofield, Th arp, 1181{ PI. m1 , 1.11qu 0 1'1 0 W. 1‘1 0 ho Page 108 Bibliography (cor tinued) * * * Tenants Irobleus Ioint to need for Lease Improvements. Illinois Farm economics, Jan. issue. I11. Agr. Ext. derv. 1941. Your Farm Lease. U. 5. Dept. of Agrio M18061. Fab. 627 pp. 1949. "Tenant, La dlori, and Farm Benefit From “ QQ 0Q Le ease " The ngr. fiit “1 on 5'34 Oct 1948. Landlord—Tenant Relations. Eorth Central ne:-iona1 Land Tenure Committee, Ohio Agr. dxpt. eta. BUlo 2030 Mimeo. 23 P0 1947. * * I ‘1‘. .-..l t. ‘l .1 ‘ .Q‘l ‘ 1‘ L. ’ I 1 I II I l N I 1’ 1....IIJ 11041an smTE UNIV. LIBRRRIES Will"llll”WWIWWII“WI‘IIUIWIWUI 31293100557893