xt7k6d5p9x8r https://nyx.uky.edu/dips/xt7k6d5p9x8r/data/mets.xml   Kentucky Agricultural Experiment Station. 1954 journals 018 English Lexington : Agricultural Experiment Station, University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Kentucky Agricultural Experiment Station Progress report (Kentucky Agricultural Experiment Station) n.18 text Progress report (Kentucky Agricultural Experiment Station) n.18 1954 2014 true xt7k6d5p9x8r section xt7k6d5p9x8r Progress Report 18 March, 1954 ·
METHODS OF RENTING LAND
I IN _
WESTERN KENTUCKY
,, cBy Wesley B. Sundquist and john H. Bondurant
CONTENTS
Page
Summary ---—----—-~——---—-—---—--- I
Objectives ————-—----—-—-—-----—-—-- 1
L Area Studied ~---————--———-~———————-- 2
Land Tenure in the Area ——------—-—---—-- 2
A Recent Developments Affecting Land Renting —-—---—- 3
Procedure — — - - · --——— — —·—-————---——-- 3
Objectives of a Rental Agreement ---—-————-—-- 3
1 Types of Rental Agreements and Suggestions for Improvement - I 4
I Livestock-Share Agreements -—-- - ~ — -- —---———- 4
Crop -Share Agreements ——~————————-— - --—— 9
Field Renting —— - - —- ·· —————·—-— — ———-——- 12
V ' Opportunities for Land Renting and Land Ownership ——~——-~ 16
  A
Kentucky Agricultural Experiment Station
University of Kentucky, Lexington
t In cooperation with the
Tennessee Valley Authority

 METHODS OF RENTING LAND IN WESTERN KENTUCKY_ .
. ‘ by
Wesley B. Sunquist and john H. Bondurant ·
SUMMARY
. Recent changes in agricultural technology, farm prices, and land values,
together with increased industrial development in western Kentucky, have created
(some) new land —rental problems in the area. Some of the generally accepted custom-
ary rental agreements have become unsatisfactory, The decreased number of
l available tenants and farm laborers and the increased opportunity for off -farm
A; employment have resulted in a better bargaining position for land renters relative
( to that of land owners. An especially significant change has been the increase
in acreage rented on a field basis.
Three types of rental agreements predominate in the Tennessee Valley counties.
I These are (l) livestock-share, (2.) crop-share, and (3) field renting. The most
S common livestock-share agreement is a 50-50 division of costs and income. The
usual crop—share and field renting agreements consist of a landlord 1/3 - tenant
2/3 division of costs and income, except that on some of the more fertile land
a 50-50 division of costs and income is customary.
_ This study indicates that a fair division of costs and income returns is
more likely to be realized where the tenant and landlord estimate the costs that
each one plans to contribute, as a basis for deciding upon division of the pro-
ceeds from the rental unit. The use of rental periods ranging from three to five years
is considered a very important step toward increasing net returns to both landlords
and tenants. Suggestions are included which provide a basis for compensating the
_ tenant for improvement values which lie furnishes, and which may have a residual
value at the termination of his lease.
OBJECTIVES
_ The objectives of this study were to describe and analyze land rental. con-
_ ditions and problems in the Tennessee Valley counties of Western Kentucky, and to
determine methods by which changes in rental agreements can aid in improving
‘ net incomes for both tenants and land owners.

 2. ` 1* — .
The Area Studied _
The area in western Kentucky included in this study consists of Calloway, I
Graves, Livingston, Lyon, McCracken, Marshall, and Trigg counties. Adjacent
to the Tennessee River, they are commonly referred to as the Tennessee Valley
counties. - ·
4~
Table 1.
Land Tenure of Classified Farm Operators, 1949 ,
Economic Area I, Kentucky
Number Percent Total a7 Percent of "
Type of of farm of total acreage total a/ I
tenure operators operators operated acreage Jperated ,, _
Full owners- 4- - ·-   — · - 5,946 58.6 619,497 56.54
Part-owner- — - - -- ·- —· -· 2,136 21.0 274,992 25.10
Livestock - share tenants- ·- 356 3.5 57,215 5.22
Crop — share tenants - — -- I- 736 7.2 69,750 6.36 `
Croppers - - -- - -- - —- - 660 6.5 31,945 2.92 ,
Cash tenants - — - ·——-— · 85 0.8 8,165 .75 _ ’
Share - cash tenants —~—— 35 0.3 4,525 .41 1
Farm managers ——-—~· 35 0.3 12,416 1.13 _
Other and unspecified - - - 166 1.6 17,161 1.57
 
Total - ----- ~— i- —· - 10,155 100 1,095,666 100
Land Tenure in the Area ~
The 10,155 b/commercial farmers in Economic Area I, c / classified accord-
ing to type of tenure, had in 1949 the tenure classification l?sted in Table 1.
Four tenure groups, part-owners, livestock-share, crop-share, and cropper tenants,
were the principal groups of land renters. Combined, they rented 267,699 acres of I
land, which was about 90 percent of the total acreage rented by all farm operators. V
Table 2 shows the relative farm size and gross income of the principal tenure groups.
Table 2.
Average Farm_,Size and Gross Farm—lncome By Type of Tenure d!
Ienure Acres Acres Value of land Gross farm
status owned rented and buildings income Q!
Part-owners 82.8 50.3 $10,854 $3,410
Livestorl;-share ._.-..- 161.8 10,455 I 4,171 ·
Crop-share --—~—»— 96.1 6,203 2,270 _
Croppers -—-— 48.4 4,851 2» 055 .
a7 Total acreages are for commercial farms only.
5/ U. S. Census of Agriculture, 1950, Vol. 1, Part 19. U. S. Govt. Printing Office, 1952. _
F/ Economics Area I includes all the counties west of the Tennessee River and does
_ not include the Tennessee Valley counties of TriBS» Lyon and Livingston, I
d/ U. S. Census of Agriculture, loc, cit.
e/ Gross income is from sale of farm products only.

 Sv "' 3·
_ L.ivestock·-share tenants rented the largest farms and realized the largest gross
` income. Part—owners ranked second in both farm·—size and gross farm income. i
· Crop-share tenants operated about twice as large an acreage as croppers, but
their income returns were only slightly larger; however, a larger proportion of
the acreage rented by croppers was used in crop production. As compared to V
·· the rental groups, the owner operators had an average of 104 acres valued at
g $7,020, and an average gross farm income of $2,601.
l Partc-owners rented 107,404 acres, about 40 percent of the total acreage they
operated, which constituted a large portion of the land rented on a field -rental basis.
Because of the prominence of livestock-share, crop»· share, and field renting, primary
emphasis has been given to these three types of rental agreements in this report.
4 Recent Developnnents Affecting Land Renting `
Over a period of the last decade or more,. numerous developments have occurred
to influence land renting in the area. Changes in agricultural 'technology increased
resource requirments for farm operators. Especially significant in this respect
5 were trends toward mechanizaticn and fertilizer use. Increases in land values have
resulted in changes in the importance of the 1andlord`s contributions in rental
operations. The value of farm labor has increased, due to much higher wages
paid in off-farm employment. These changes tended to cause customary or traditional
rental agreements to become outmoded and unsatisfactory.
_ In addition to price and technology changes, industrial development in the area
has had an effect on land renting. County extension agents in the Tennessee Valley
counties estimated in 1953 that from 25 to 65 percent of the farm owners in their
respective counties had off —farm employment of some type. Many of them have
continued to live in their farm residences, but have rented out the acreage
ordinarily used for the production of row crops and small grain on a field -by—
field basis. The increased opportunity for off-farm employment, due in part to
2 increased industrial activity, has resulted in a decrease in the number of available
= tenants and farm laborers. The effect has been a bettering of the bargaining
position of persons renting land relative to that of landowners. Tenants, realizing
the opportunity for alternative employment, are in a position to secure better
rental terms than they were several years ago.
Procedure
During the summer of 1953, landlords, part~owners, and tenants in the
_ Tennessee Valley counties were interviewed in an attempt to determine current
rental practices and problems. Farm rental studies made in other areas were
utilized when the information provided was applicable to western Kentucky con-
ditions. Data were utilized from the 1950 Census of Agriculture to indicate
the prevalence of the various types of renting and the average farm size and
income of the various tenure groups. An attempt has been made in this study
to analyze the rental problems which presented major obstacles to negotiation
of satisfactory rental agreements in the area.
Objectives of a Rental Agreement
Two objectives are considered of primary importance when a tenant and
landlord negotiate a rental agreement, whether it be a livestock—sb.are, crop-share,
field renting, or any other type of rental. agreement.
First, the rental agreement should permit and facilitate organization of the
tenants’ and landlords’ resources in a rnanner which will maximize production

 4.
returns from the rental unit, Limitations to production and operating efficency &
frequently occur due to the length of the rental period, the amount of available
resources, and differences of opinion between the tenant and landlord regarding
production practices, However, joint planning of farm enterprises, cropping
practices, fertilization, etc,, prior to deciding on final rental arrangements, .
will help overcome these difficulties. t
Second, a rental agreement should provide for a fair distribution of A ,
income to the tenant and landlord. A fair or equitable rental agreement is
usually realized when the division of income is in about the same proportion ~-
as the sharing of costs, or contributions, by both parties. For example, if
_ a landlord furnishes only the land, and the interest on his real estate invest—
4 ment, plus real estate taxes, amounts to about one —fourth of total production __
costs, he would receive one fourth. of the income as a rental payment. If the V
landlord is to receive a rental payment based on his share of total contributions,
it is necessary to estinnate the value of the contributions to be furnished by both
parties, Such an estimate is likely to be more accurate if a budget is made of _ ·
the costs of the contribu,ti.ons to be made by each party. A 
9
Types of Rental Agreements and
Suggestions for Improvement 4
The three prevailing types of renting in the area are crop-share,
livestock·-share,. and field renting. In recent years field renting has been in-
creasing, especially among part-owners. Livestocl<——share agreements also have A
been increasing, but cropshare agreements have continued to include the largest —
number of tenants. Other types of rental agreements are relatively few in number
for the area.
In this section an attempt is made to analyze prevailing conditions and to
suggest methods and procedure for improving each of the three principal
types of rental agreements in accordance with objectives previously stated.
Li.vestoc1<;—·Share Agreements
Several factors indicate thatli—restoc1<——share rental agreements usually
afford the best longterm alternative of any rental arrangements for farms in the
area, which are not suitable for intensive row—crop farming. Livestock—share
rental units produced an average gross income of $4,171 in 1949 a/, exceeding the ’
gross income of crop ·share rental units by about 84 percent. Li;/estock—share
tenants utilized land and omldings worth $l0,.455, a value exceeding that of crop-
share tenants by about 69 percent. Farm managernent stu.dies made in the area in
19 51 b/ showed that no appreciable decrease occurred in returns to forage- .
livestdck investments as large as $12,000 to $15,000 as compared to smaller
investments. This indicates that livestocksshare rental units are not likely to become
inefficient by expansion to the lirnits possible with the resources available to most
tenants and landlords,
aj United States Census of Agriculture, 1950. Volume l, Part 19. -
(U. ST Gcvernment Printing Office, 1952),
b/ Glenn L. johnson, Progress Reports l, 2, 4, 9, and 13 Ky. Agri. Expt. Sta. 1952.

 5.
_ A detailed study of rental units in a neighboring area of western
Tennessee in 1947 2/ showed landlords of livestock—share rental units receiving
T a return of 11.4 percent on an average total investment in land and buildings of
$11,600. Landlords of crop-share rental units received a return of 8.2 percent `
on an average investment of $7,098 in land and buildings. The average size of
“ rental units in the Tennessee study was 77.3 acres for crop-share units and 131.5
; acres for livestock-share units.
‘ Although investment returns vary with the prices received for livestock and
livestock products, indications are that over a period of several years livestock-
share rentals afford better income returns and facilitate better farming
` practicesithan do alternative rental agreements.
0 Division of Costs and Returns .
A 50 -50 livestock-share rental agreement is most common in the area and
usually has more imerit than alternative divisions of costs and returns. Mutual
ownership, by the tenant and landlord of a large portion of the production re-
,_ sources, tends to make an equitable rental agreement more easily realized.
The usual 50-50livestock-share rental agreement includes the landlord.
furnishing the land and buildings and bearing the costs of the real estate con-
nected expenses, including taxes, building repairs, and major farm improvements.
In addition, the landlord usually owns half of the livestock and machinery. The
. tenant usually furnishes his labor and owns half of the livestock and machinery.
Expenses such as fertilizer, feed, custom work hired, and other farm operating
expenses are equally shared. Sharing of minor expenses may be adjusted to comply
with individual circumstances.
A budget including the major cost items is presented here for the purpose
_ of illustrating the budgeting procedure. Although the budgeted costs are not for
an actual farm unit, they closely approximate the proportional cost-sharing for
·‘ an actual livestock-share rental unit in the area studied:
Value and Ownership of Resources
- Inventory items Tenant Landlord Total
{ Real estate (150 acres) ---— $ ---- ·· $15,000 $15,000
. Machinery and equipment - - - 1,200 1,200 2,400
1 Livestock:
Hogs ------—--- 225 225 4-50
Dairy cattle -· -···-- 1,900 1,900 3,800
_ Beef cattle ------- 650 650 1,300
Chickens ---- - - - - 40 --- 40
Work animals -------- 75 75 150
Total investment .--- - - - $4,090 $19,050 $23,140
a/ Howard J. Bonser, Some Factors in Farm Organization and Returns to
Tenants and Landlords by Type of Leasing Arrangements -·West Tennessee, 1947,
Bul. 217. Univ. Tenn. Agri. Expt. Sta. june, 1950.

 6. ·. ., .
Table 3
Budget of Costs and Contribution for a 50-50 ‘
Livestock-Share Rental Agreement
 
Item Tenant Landlord Total
Interest on investment @ 5 percent — -~·~ $ 204.50 $ 952.50 $ 1,157.00 .
Depreciation on buildings and fences ~ - ·— ·— -—·~ 175.00 175.00
Maintenance of buildings and fences ·--— » --— 125.00 125.00 '“
Taxes on real estate --—-———-——- —-— 110.00 11,0.00 ·
Insurance —---·——- -· — ~· -·   - — - 6.00 25.00 31.00 ·
Tenan1;51a_bg;~*& ..... . - -. - .. ~.».. 1, 500.00 .... 1, 500.00 ·‘
Hired labor . ._.. - .- - .- .. .- - -. .... 75.00 75.00 150.00
Depreciation on machinery and equipment - - 120.00 120.00 240.00 _
Custom work hired ——-———~ » — - -- - - 80.00 80.00 160.00 °`
Seed purchased ———-- ·— ~—-- - — — - 75.00 75..00 150.00 `
Feed purchased — ~ · —— ~--· ·- - »—   - - 85.00 85.00 170.00
Fertilizer purchased · — — -~ ·· ~--—-— 115.00 115.00 230.00 .
Ground limestone purch.ased — » - ·— ~--~ ---· 90.00 90.00 , `_
Operating expenses; gas, oil, supplies, etc.- — 240.00 240.00 480.00
Veterinary services and supplies ~-»—-— 15.00 15.00 30.00 ’°
Breeding fees ——-~-—-- —— - · -—-— — 30.00 30.00 60.00 ·
Total costs $2, 545.50 $2,312.50 $4,858.00
Iiercent of total costs 52.4 47.6 100.0 _
If either the landlord or the tenant furnishes all or a major part of the management, .
his contribution of this service should be budgeted as a cost. The sharing of minor con- ’
tribution items should be discussed and settled by mutual agreement of the tenant and ‘
landlord. It is suggested that any adjustments needed to improve the fairness of the rental
agreement be made in the contributions furnished by either party, and that a complete 50-
50 division of returns be retained when possible. It i.s generally not advisable, however,
to make any adjustments in the strategic input i.tems, such as fertilizer or concentrated
feeds purchased. Adjustments in these important items are likely to result in contro~
versies over the rates of fertilization, feeding, or other variable input items. ·
One livestock share tenant, whose main livestock enterprise was dairying, recom-
mended a division of income receipts every two weeks when payment was made for milk
sales, Inaccuracies and controversies in dividing income returns are minirriized by a
frequent settlement, preferably when the more important sales are made.
Compensation for Unused Improvement Values
Improvements are necessary to increase the productivity of a large number of farms
in the area studied. lx/[any farm improvements leave an unused value which the tenant is
justified in being compensated for at the termination of the rental agreement. Some of 1
the farm improvement costs which are likely to be incurred, and a suggested period for
their depreciation are as follows;
Construction of terraces, 5 years
Construction of stock ponds, 5 years
Construction of drainage systems, 5 years
Construction or remodeling of buildings, 10 years or more
Minor building repairs ($250 or less), 3 to 5 years
Renovation of pasture land, 3 to 5 years
  ln addition, the tenant is usually afforded rent free housing and the privilege of
having a garden and other horne produced food supplies.

 * `3 Pro -rating of improvement costs is simplified if a flat—rate depreciation 7‘
schedule is followed. For example, if an improvement cost is to be distributed —
over a 5-year period, 20 percent of the original cost should be depreciated
~ annually.
Fertilizer and limestone costs may be depreciated at their approximate 5
rates of depletion which are estimated in tables 4~6.
Table 4.
‘ Percent of Fertilizer Values Remaining at End of Rotation and
Suggested Percentage Rates for Compensating Tenants
‘ Fer·ti1izer PZ05 Pg05 remain- Suggested
applied supplied ing after r0ta— value after
tion b rotation
Lb Lb  0  0
Phosphate fertilizers applied
per acre during rotation a/
· Calcium metaphosphage (62%) ¤ 100 62 29 20
200 124 65 50
300 186 76 60
Triple superphosphate (43%) -~ — 200 86 49 35
300 129 66 50
500 215 80 60
Fused rock phosphate (28%) ~ — 200 56 21 10
300 84 48 35
500 140 69 50
Superphosphate (20%) —~-»- 300 60 27 20
400 80 45 30
500 100 se 40
Rock phosphate (32%) - — -· - - 900 288 85 80
1500 480 91 85
Table 5.
Percent of Fertilizer Values Remaining at End of First Year and
Suggested Value at End of Each of Three Years
applied supplied ing after lst end of crop ear
- year c/ st nd 3rd
     0  0  0  0
 hosphate fertilizers on corn, _
 bacco, or wheat d/
1 Calciuiri nietaprkspuate (62%} 1i,u 62 70 50 25 0
200 124 85 eo 40 20
Triple superphosphate (43%) — 100 43 57 40 2-0` 0
200 86 78 55 30 10
Fused rock phosphate (28%) -· 100 28 34 25 0 0
200 66 67 50 25 0
Superphosphate (20%) —-—~- » 100 20 8 0 0 0
200 40 54 40 20 0 V
300 60 69 50 25 00
a/ Three-year rotation includes corn, wheat, and lespedeza hay. About 44 lb of PZO5 per
 cre are used by the crops in rotation, assuming crop yields of 50 bu of corn, 20 bu of wheat
 nd 3,000 lb of hay.
b/ No fertilizer loss was attributed to erosion. P205 in all straight phosphate fertilizers
as assumed equally available with the exception of rock phosphate, which becomes available
 ver a longer period,
c/ op cit
T1/Per—crop yields were assumed to be about 50 bu of corn, 1,400 lbs of tobacco or 25 bu
 I _ .

 8.
Table 6., A
Suggested Percent of Value Remaining
at End of Each Crop Year
 
lst 2nd 3rd 4th 5th
ixed fertilizers on any crop a/ --———- 50 Z5 0 0 0
ound limestone on any crop _ ·-—— · — --
Applied in fall -———--~— — —-—— ~·l00 80 60 40 2.0 -
Applied in spring ———- - ---———-— 80 60 40 20 0 ·
Compensation for unused improvements is obviously reduced and frequently made
unnecessary with long--term rental agreements, E _
Length of Tenure '
Several advantages are provided by a li.vestock-share rental agreement in excess T
of one year. lt is unlikel.y that expenditures made for major improvement practices, such `_
as renovating pastures, establishing improved forage stands, building stock ponds, and V
improving dairy herds will be fully compensated for in a period of less than three years. ‘
Furthermore, termination of the rental agreement necessitates the tenants securing other
living quarters and the landlords securing a new tenant. A division, and perhaps liquidation,` _
of machinery and livestock investments will likely prove costly for both parties. Also,
termination of the rental agreement is likely to result in disruption of the land improvement
and crop rotation programs in the process of development. _
A rental agreement of from three to five years duration should be adequate for tenants ’
to undertake improvement practices in anticipation of receiving the income benefits of .
such practices. Landlords, likewise, are more likely to invest in farm improvement
practices if they are relatively certain that these practices will be carried out. For a
long -term lease, provisions may be made for termination of the rental agreement if notice (
is provided, preferably l2 months prior to actual termination. This provision should not
invalidate the benefits derived from a long —term lease, but should rather serve as a means U
by which unsatisfactory rental agreements may be dissolved. ln such cases, compensation
for unused improvement values previously indicated could be used advantageously.
Provisions of the Lease
Oral leases in Kentucky are not legally valid for a period in excess of one year. b./ (
Furthermore, the complexity of livestock-share rental agreements makes a written lease
desirable. Rental provisions are likely to receive a more thorough. discussion and analysis
if these provisions are incorporated in a written lease than if the agreement is oral.
The rental lease should include the following provisions in addition to other items .
considered pertinent by both parties; c/
(l) Date for commencement of the lease
(2) Legal description of the property
(3) Production practices to be employed
al Commercial fertilizer applications were assumed to supply at least 36 lb PZO5
and Z-4 lb of K;O an acre. No remaining value was suggested for nitrogen.
b/ A discdssion of legal aspects of farm rental agreements is provided in Ky. Agri.
Expti Sta. Bul. 418, "Legal Aspects of Farm Tenancy in Kentucky"
c/ A farm lease form which is applicable to livestock—share rental agreements is
U. S,—D, A, Form Agri, l (Revised 1949) Standard Farm Lease which is available at a
county extension agent's office or at the Department of Agricultural Economics, University ·
Kentucky. An annual supplement for this lease form, Agri. 3 (Revised 1949), is also availabl 

 (4) The contributions of each party e
(5) Division of income receipts
(6) Compensation to the tenant for unused improvement values
(7) Period covered by the l.ease ·
(8) Adjustments in the lease with consent of both parties
i' (9) Termination. of the lease
(10) Signature of both parties
Crop -»Share Agreements
_ The average gross income realized from crop»share rental units in Economic
Area I was $2,270 in 1949.a/ The average size of farms rented was 95 acres,
of which about 6l acres were cropped. About 70 percent of the gross income was
realized from the sale of crops and the remaining 30 percent from the sale of
livestock and livestock products, Assuming the usual landlord—1/3, tenant-?./3
division of crop returns, the average gross income would have been $1,740 for
the tenant and $530 for the landlord. With such a gross income, the tenant usually
i ` had to pay for machinery, livestock, and operating expenses in addition to paying
living expenses for his family From agross income of about $530, the landlord had
to pay real estate taxes, building nnaintenance costs, and a portion of fertilizer and
‘ seed costs before receiving a return on an average investment in land and buildings
of $6,200.
It is evident that a primary problem faced by tenants and landlords on crop·share
rental units is that of securing larger resource contributions and utilizing them in a
manner capable of increasing farm. incorne. Field renting of additional cropland is
one means by which income can be increased. It appears, however, that in many
cases income can also be increased by expanding resource use on the present acreage.
Estimates b/ made for the production of crops on Grenada silt loam, one of the
extensive and productive upland soils of the Tennessee Valley counties, show the
_ effects of increased resource inputs including management. These estimates indi-
cate that crop yields may be about doubled by proper choice and rotation of crops; .
use of commercial fertilizer, lirne, manure, and crop residues; and proper tillage
and water management. It is unlikely that any division of income and costs will
prove satisfactory to both tenant and landlord unless there are adequate total income
returns to divider
Division of Costs and Returns
The usual rental payment furnished the landlord for crop-share rental. units in the
A area studied is one ~—third of the income received from the sale of crops. With this
type of rental agreement, the landlord usually furnishes the real estate expenses,
including taxes, insurance, maintenance,. and improvement of buildings. In addition,
costs of rather long·»term land improvements, such as constructing drainage systems
and supplying ground limestone are usually furnished by the landlord. The landlord
usually furnishes 1/3 of the cost of fertilizer and seed and, in most cases, 1/3 of the
cost of custom work hired? ln some cases, however, the tenant pays the full cost of
corn picking. The tenant,   turn furnishes all of the cost of labor, machinery, gas,
oil, etc., and Z/3 of the costs of seed, fertilizer, and custom work hired.
a? U, S. Census of Agriculture 1950. op, cit.
13/; Soil Survey of Graves County, Kentucky, U. S. Govt Printing Office, 1950,
pp. 109-115.

 10. i T
Although the 1andlord—l/3, tenant--2/3 crop-share division is widely
accepted, individual tenants and landlords can determine the applicability
of this rental agreement to their rental unit by budgeting their individual —
total costs and contributions. If the budgeted contributions do not approximate
the 1/3, 2/3 proportion, then minor adjustments may be made in contributions
and a complete l/3, 2/3 division of crop sales be retained. ' i'
If the land1ord°s value of land and buildings for each acre of tillable
land exceeds $100 per acre, but is less th.an $150 per acre, the 1/3 and 2./3
division of crop returns is likely to be the most appropriate. 2/ This does `
not mean, however, that adjustments on the contribution side of the agreement V ‘ _
will not be necessary to obtain a fair and equitable rental agreement. If the land
and buildings are worth. substantially less than $100 per acre, a landlord l/4,
tenant 3/4 division of crop returns may afford a better alternative than the 1/3, .
2/3 division. .
Still other income divisions, such as a landlord 2/5, tenant 3/5 sharing of .
crop returns, may be utilized if the landlord owns a portion of the machinery _
and equipment, or if he furnishes a portion of operating expenses. No two rental ·.
units are identical and, consequently, adjustments in the customary rental agree- u
ment are ofter necessary. In most cases, the tenant is justified in obtaining ` l
rent-free pasture for a few h.ead of cattle if, in turn, he applies the manure on
share-rented tobacco or cornland. .
It is not expected that any division of income returns, decided upon prior E
to the actual incurring of production costs, will. be entirely equitable. This is 1
especially true during periods of changing prices and production techniques; g
however, budgeting anticipated costs will aid in the determination of a fairly
equitable rental agreement. ‘
An illustration of the budgeting procedure that can be used as a basis for . .
determining the division of costs and returns for crop—share rental units is
included in Table 7. This budget represents a farm unit for which the landlord"s
investment in land and buildings is $11,000, and the tenant°s investment consists
of $2,000 worth of machinery and equipment and $150 in work animals
al This is based on variable costs of producing corn, excluding fertilizer,
rangTng from $18 to $22 per acre and similar costs of wheat production, ranging
from $12 to $16 per acre,

 " 'F A ll.
l' Table 7.
Budget of Costs For A Landlord 1/3, Tenant 2/3
Crop ·-Share Rental Agreement _
Item Tenant Farm Input Costs
, Landlsord Total ‘
Interest on real estate   1,0001
@ 5 percent —-—-—-—--———- $ ·---—·— $ 550.00 $ 55000
Taxes on real estate a-—=—~-—- - --—-——— 110.00 110,00
Depreciation on buildings and fences — - · —-—-—-— 90.00 90,00
~ Insurance —-—--—- — ~——»—-— 10.00 30.00 40.00
Building and fence maintenance ———-— — —-—·—- 75_OO 75.00
Interest on investment in machinery and
work stock ($2,150) @ 5 percent -... 107..50 .____ _ 107.50
Depreciation on machinery and equipment — 200.00 -—--—- 200.00
Tenant’s labor —--——-—--~——— 1,200.00 ------ 1,Z00_00
Hired Labor --—-·————·- - — ··- — 80.00 -----— 80,00
Custom work hired: cornpicking, combining
and baling -————--—-~———- 60.00 30.00 90,00
Trucking * —-—-— · ——---- · - - - 24,00 ------ 24_00
Fertilizer purchased —· —----- ~ - — 120.00 60.00 180.00
Limestone purchased —-—- - -—-——— - —-—-— 40,00 40,00
. Seed purchased ———---——----- 110.00 55.,00 165.00
Operating expenses: gas, oil, supplies,
repairs, etc. —----~-~ —- —--— 210.00 .-.... 210.00
Total costs -——----— ~ ——-——— $2,121.50 $1,040.00 $3,161.50
Percent of total costs - — —— ————-—— 67.1 32.9 100.0
 
Farm Improvements
A discussion of the unu.sed improvement values likely to exist at the termination
1 of the lease and suggested rates for their depreciation were included in the previous
section dealing with livestock—share rental agreements. These suggestions are
equally applicable to crop-share rentals. Especially important is a provision for
compensation to the tenant for residual fertilizer values. Failure to provide this
` compensation is likely to result in an unsatisfactory lease, as well as retarding the
use of fertilizer in the most profitable amounts.
The landlord has a substantial. investment in land, and in order to maintain the
. producing capacity of this investment, it is usually profitable for him to contribute
the cost of grass and legume seed, particularly if the tenant has only a short-term
` rental agreement. In return for the landlord’s furnishing the seed, the tenant should
be willing to sow a large enough acreage in grasses and legumes to maintain the soil
fertility. If the tenant is allowed to keep a limited number of livestock, he is more
likely to consent to having a portion of the farm in forage and pasture, and may
provide the landlord with a market for his share of the hay crop, Also, investments
made by the landlord in providing adequate buildings and maintenance of these buil.dings
are likely to be repaid by better farming practices on the part of the tenant.
* The landlord may pay a partti trucking eggs? crops, such as popcorn, are trans-
ported to distant markets.

 1Z."  
Prior to entering into a crop-share rental agreement, the tenant and
landlord should discuss the soil conservation and fertility improvement practices
that are needed, and decide upon th.ose which they plan to carry out. If a long-term .
plan of farm development is discussed prior to the commencement of the lease,
the division of cos