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The value of social capital in farmland leasing relationships

Author

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  • Mykel R. Taylor
  • Allen M. Featherstone

Abstract

Purpose - The purpose of this paper is to investigate the impacts of social capital on the rate at which agricultural land is rented between landowners and tenants using data from the state of Kansas. Design/methodology/approach - A survey of tenants provides data on the rental rate of farmland as well as characteristics of the lease, the land, and the landowner. Findings - Results support the hypothesis of a negative impact on rental rates from longer-term leasing relationships. The model estimates a 10.0 percent discount relative to market rates when the leasing relationship increases from 11 to 22 years. At the sample average of $64 per acre, this is a $10 per acre discount. Research limitations/implications - Increased levels of social capital, as measured by the length of the leasing relationship between landowner and tenant, reduce the rental rate. A 10 percent increase in the number of years a parcel of land is leased to the same tenant will decrease the annual rental rate by 1 percent. Originality/value - Research adds to the understanding of informal relationships underlying farmland leases. A large number of farmland tracts may turnover in the coming years. This turnover may affect the rental rates for tenants who have had long-term leasing relationships over time.

Suggested Citation

  • Mykel R. Taylor & Allen M. Featherstone, 2018. "The value of social capital in farmland leasing relationships," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 78(4), pages 489-496, March.
    • Handle: RePEc:eme:afrpps:afr-08-2017-0067
    DOI: 10.1108/AFR-08-2017-0067
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    Citations

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    Cited by:

    1. Jia Chen & Jingwen Xu & Hongxiao Zhang, 2022. "Explanation of the Phenomenon “Different Prices on the Same Land” in the Farmland Transfer Market—Evidence from China’s Farmland Transfer Market," Agriculture, MDPI, vol. 12(12), pages 1-13, December.
    2. Maximilian Humpesch & Stefan Seifert & Alfons Balmann & Silke Hüttel, 2022. "How does tenancy affect farmland prices? Effects of lease status, lease term and buyer type," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 83(2), pages 242-263, September.
    3. Kuethe, Todd H. & Bigelow, Daniel P., 2018. "Bargaining Power in Farmland Rental Markets," 2018 Annual Meeting, August 5-7, Washington, D.C. 274113, Agricultural and Applied Economics Association.
    4. Stefan Seifert & Christoph Kahle & Silke Hüttel, 2021. "Price Dispersion in Farmland Markets: What Is the Role of Asymmetric Information?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1545-1568, August.
    5. Adewale Henry Adenuga & Claire Jack & Ronan McCarry, 2021. "The Case for Long-Term Land Leasing: A Review of the Empirical Literature," Land, MDPI, vol. 10(3), pages 1-21, March.
    6. Chang, Tsaiyu, 2021. "Would Religious Social Capital Affect Farmland Transactions? A Spatial Autoregressive Analysis in Taiwan," 2021 Conference, August 17-31, 2021, Virtual 314975, International Association of Agricultural Economists.
    7. Arnold, Chelsea J. & Taylor, Mykel R. & Tonsor, Glynn T. & Yu, Jisang, 2022. "Impacts of Tenant Experience and Social Capital on Leasing Decisions by Landowners in Kansas," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322468, Agricultural and Applied Economics Association.

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