b. Crop share
This is an alternative to cash rent. Crop share is an arrangement between lessor and lessee of farmland where after the crops are harvested and sold, the farmland investor/owner gets a share of the total sales, usually about 30% to 40%.
In most cases, crop share makes more money for the investor/landowner, but it’s also riskier. If the farmer has a bad year for whatever reason (locusts, flooding, etc) then the landlord will share the burden.
Cash rent on the other hand pushes all these risks onto the farmer because the Investor/owner still gets paid no matter what happens to the crop’s performance.
c. Custom farming
If the farmland investors have a background in agriculture they may consider doing something else called custom farming.
This is when the landowner or investor hires a farmer as a contractor to operate the farm. Depending on the agreement the contractor could perform only certain tasks like swathing and transportation, or operate the entire farming process from seeding to harvesting.
The input costs like seeds and machinery is paid by the owner. The contractor just acts as an employee. The benefit of custom farming for land owners is they receive all the income from sales and have control over the entire farming process.
But the disadvantage of custom farming is it puts the financial and management risks completely on the owners.
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