Blog

Calculating Equitable Crop Share Leases for Rice in the Mid-South

High input prices in recent years have significantly reduced profit margins for rice producers in the Mid-South. The negative impact of tightening profit margins is felt most acutely by rice producers renting cropland. A significant portion of rice ground in the region is rented using crop share arrangements, and the most common lease used is a net crop share lease. The terms of crop share leases differ by crop and region. Typically for rice in the Mid-South, the landlord supplies the land and pays all below-ground irrigation expenses (well, pump, gearhead fixed expenses) in exchange for a share of the crop. The tenant pays all above-ground irrigation expenses (irrigation power unit fixed expenses, irrigation energy), supplies all machinery, and pays virtually all variable costs. The rice drying cost is the only variable cost shared between the two parties. Other crop share leases exist where specific costs like fertilizer are shared, but these lease types are less common than the net crop share lease.

Net crop shares are very similar throughout the Mid-South. In Eastern Arkansas, the landlord’s share of the rice crop is typically 25%, but 20% crop shares are also common (ASFMRA, 2024). In Northeastern Louisiana, the landlord’s share of the rice crop is typically 20%. Crop share leases are used less frequently in Northwestern Mississippi relative to cash leases, but when a crop share lease is used, the landlord’s share of the rice crop is also typically 20%.

Crop share arrangements tend to change little over time, but increasing crop prices, rising input costs, or new technologies make it occasionally necessary to reevaluate the equitability of crop share arrangements for both parties (NCFMEC, 2011). This article demonstrates the contributions approach as a method to calculate equitable crop and cost shares for rice rental leases. The first step is to calculate the percentage contribution provided by each party in value of non-shared expenses. Remaining shared inputs and income are then shared in the same percentages as the collective non-shared contributions made by both parties.

Table 1 demonstrates how the contributions approach reflects the typical net crop share lease used in the Mid-South. In this example, the only cost item shared is drying costs. All other cost items are contributed solely by the landlord or the tenant. Total non-shared contributions equal $1,311, of which the landlord provides $250 (19.1%) and the tenant provides $1,061 (80.9%). The assumption then would be that drying costs and crop income would appropriately be shared at the same 19.1 / 80.9 percentages, which approaches the 20% landlord, 80% tenant split seen in many net crop share leases in the Mid-South.

Table 2 shows how the contributions approach may be applied to a crop share arrangement where several cost items are shared between the landlord and the tenant. In this table, the two parties share fertilizer, herbicide, and drying costs. The sharing of fertilizer and herbicide costs between the two parties is in accordance with the concept that yield-increasing inputs should be shared in the same percentage as the crop is shared (NCFMEC, 2011). An argument can be made that irrigation energy costs also fall into this yield-increasing input category. However, the cost of items to be shared or not shared in a crop share lease are based on negotiation between the tenant and the landlord.

Note in this example that the landlord’s share of the crop becomes larger when more cost items are shared between the two parties. This result occurs because the total proportion of contributions made by the landlord (particularly the land contribution but also irrigation wells) becomes larger when more costs are shared between the two parties. The equitable crop shares for each party, based on Table 2, are 24.5% of the gross returns for the landlord and 75.5% of the gross returns for the tenant.

Table 1. Rice Net Crop Share Lease (Only Drying Expenses Shared)
Cost Items	Annual Cost ^a	Landlord Contribution	Tenant Contribution
Non-Shared Items:		$/acre
Land ($5,963/acre * 3.619%) ^b	216	216
Machinery Fixed Expenses	79		79
Machinery Repairs and Maintenance	18		18
Irrigation Fixed Expenses (Well, Pump, Gearhead)	34	34
Irrigation Fixed Expenses (Power Unit)	22		22
Irrigation Repairs and Maintenance	8		8
Survey and Mark Levees	5		5
Labor	55		55
Management (180 bu/ac * $6.75/bu * 7.5%) ^c	91		91
Seed	136		136
Fertilizer	160		160
Herbicides	130		130
Insecticide	9		9
Fungicide	10		10
Fuel	20		20
Irrigation Energy Costs	129		129
Crop Insurance	10		10
Scouting/Consultant Fee	8		8
Operating Interest	35		35
Custom Machinery Hire	87		87
Hauling	49		49
*Total Non-Shared Costs*	*1,311*	*250*	*1,061*
Percent of Specified Costs	100.00%	19.1%	80.9%
Shared Items:		$/acre
Drying	72	14	58
*Total Shared Costs*	72	14	58
*Total Shared and Non-Shared Costs*	*1,383*	*264*	*1,120*
Percent of Specified Costs	100.00%	19.1%	80.9%
*Gross Return (180 bu/ac $6.75/bu)**	1,215	232	983
^aAnnual cost items except Land and Management are rice production costs averaged across 2024 University of Arkansas rice crop enterprise budgets.
^b The land charge is calculated as the average value for irrigated cropland in Eastern Arkansas reported in ASFMRA (2024) ($5,963/acre) multiplied by the rent-to-value ratio for irrigated cropland obtained from USDA NASS Arkansas (2024) ($152/acre cash rent divided by $4,200/acre for irrigated cropland).
^c The management charge is calculated as rice gross return multiplied by the mid-range of charges for professional farm managers (5 to 10%) reported in NCFMEC (2011).

Table 2. Rice Cost Share Lease (Fertilizer, Herbicide, and Drying Costs Shared)
Cost Items	Annual Cost ^a	Landlord Contribution	Tenant Contribution
Non-Shared Items:		$/acre
Land ($5,963/acre * 3.619%) b	216	216
Machinery Fixed Expenses	79		79
Machinery Repairs and Maintenance	18		18
Irrigation Fixed Expenses (Well, Pump, Gearhead)	34	34
Irrigation Fixed Expenses (Power Unit)	22		22
Irrigation Repairs and Maintenance	8		8
Survey and Mark Levees	5		5
Labor	55		55
Management (180 bu/ac * $6.75/bu * 7.5%)	91		91
Seed	136		136
Insecticide	9		9
Fungicide	10		10
Fuel	20		20
Irrigation Energy Costs	129		129
Crop Insurance	10		10
Scouting/Consultant Fee	8		8
Operating Interest	35		35
Custom Machinery Hire	87		87
Hauling	49		49
*Total Non-Shared Costs*	1,021	250	771
Percent of Specified Costs	100.00%	24.5%	75.5%
Shared Items:		$/acre
Fertilizer	160	39	121
Herbicides	130	32	99
Drying	72	18	54
*Total Shared Costs*	362	89	274
*Total Shared and Non-Shared Costs*	1,383	339	1,044
Percent of Specified Costs	100.00%	24.5%	75.5%
*Gross Return (180 bu/ac $6.75/bu)**	1,215	298	917
^a Annual cost items except Land and Management are rice production costs averaged across 2024 University of Arkansas rice crop enterprise budgets.
^b The land charge is calculated as the average value for irrigated cropland in Eastern Arkansas reported in ASFMRA (2024) ($5,963/acre) multiplied by the rent-to-value ratio for irrigated cropland obtained from USDA NASS Arkansas (2024) ($152/acre cash rent divided by $4,200/acre for irrigated cropland).
^c The management charge is calculated as rice gross return multiplied by the mid-range of charges for professional farm managers (5 to 10%) reported in NCFMEC (2011).

References and Resources

ASFMRA (2024). 2024 Mid-South Land Values and Lease Trends Report. American Society of Farm Managers and Rural Appraisers, Mid-South Chapter. https://nationalaglawcenter.org/wp-content/uploads//assets/Conferences/2024-Mid-South-ASFMRA-Land-Values-and-Lease-Trends-Report.pdf

NCFMEC (2011). Crop Share Rental Agreements for Your Farm. North Central Farm Management Extension Committee. NCFMEC-02. https://aglease101.org/wp-content/uploads/2020/10/NCFMEC-01.pdf

USDA-NASS Arkansas (2024). United States Department of Agriculture, National Agricultural Statistics Service, Arkansas Field Office. https://www.nass.usda.gov/Statistics_by_State/Arkansas/index.php

UTIA (2013). Crop-Share Leases. The University of Tennessee Institute of Agriculture. UT Extension PB 1816-E. https://utia.tennessee.edu/publications/wp-content/uploads/sites/269/2023/10/PB1816-C.pdf

Watkins, Brad. “Calculating Equitable Crop Share Leases for Rice in the Mid-South.” Southern Ag Today 5(7.1). February 10, 2025. Permalink

February 10, 2025

Why Grocery Inflation Still Feels High

Since November 2023, grocery inflation (food-at-home, FAH) has slowed to around 1%, following fluctuations in 2021 and 2023 that peaked at 13.5% (US BLS). However, the perception of grocery inflation remains relatively high. Our monthly consumer survey of approximately 500 primary grocery shoppers in the US reveals that a significant share of consumers still perceives grocery inflation as high (Figure 1).^[1] Over 60% of respondents reported high inflation perceptions between July 2023 and May 2024 when the average FAH inflation rate was 1.8%. While this is lower than the peak of 73% in July 2022, it remains well above the pre-high inflationary period average of 33% (January 2017–August 2021). Several factors contribute to the persistently high perception of inflation among consumers.

First, the sustained high inflation perception among consumers is expected because current moderate inflation indicates that prices for many goods and services continue to rise, even after a significant jump during the high inflationary period (Figure 2). Inflation measures the rate at which prices increase over time, calculated by comparing prices in the current period to those from the same period one year earlier. Falling inflation rates do not imply that prices are decreasing; instead, they indicate that prices are rising at a slower pace. This often confuses consumers, who may misinterpret news about decreasing inflation rates as a reduction in overall price levels. Disinflation (i.e., a slowdown in the rate of inflation) should not be confused with deflation, which refers to an actual decrease in general price levels (Marks, 2023).

Second, consumers often compare current prices to those they were accustomed to prior to the period of high inflation, rather than to prices from one year ago as inflation metrics do. For example, comparing the FAH consumer price index (CPI) from May 2024 to May 2020 reveals a substantial cumulative inflation rate of 24.68%, as demonstrated in Figure 3. This tendency could lead to a heightened perception of current inflation.

Third, frequent purchases of essential items like groceries amplify inflation perceptions. As noted by D’Acunto et al. (2021), frequent exposure to necessity purchases heightens inflation awareness. A survey by Balagtas and Bryant (2024) found that consumers were more sensitive to food price increases compared to other goods, despite actual food inflation (2.2%) being relatively low compared to items like housing (4.5%) and auto insurance (22.6%). Understanding what inflation is and how it is calculated is essential for consumers to bridge the gap between actual inflation and their perceived inflation. Historically, grocery prices rarely decrease (US BLS), making it unlikely that inflation perceptions will quickly return to pre-high-inflation levels. However, rising incomes (US BLS) are expected to gradually ease these perceptions over time. Identifying and addressing evidence-based causes of persistent high inflation perception can improve public understanding, boost consumer confidence, and help policymakers to communicate more effectively with consumers about economic conditions.

Figure 1. the Inflation Rate of Food at Home (FAH) Based on Consumer Price Index versus Consumer Inflation Perception of FAH, represented by the Share of Respondents Who Strongly Agreed Noticing an Increase in Grocery Prices

Source: U.S. Bureau of Labor Statistics and a consumer tracker survey managed by the University of Florida’s Florida Agricultural Marketing Research Center (FAMRC).

Figure 2. Food at Home (FAH) Inflation Rate Fluctuations versus FAH Consumer Price Index

Source: U.S. Bureau of Labor Statistics.

Figure 3. Actual Inflation Rate of Food at Home Based on Consumer Price Index versus Consumer Inflation Perception, represented by the Share of Respondents Who Strongly Agreed with the Inflation Statement

Source: U.S. Bureau of Labor Statistics and a consumer tracker survey managed by the University of Florida’s Florida Agricultural Marketing Research Center (FAMRC).

^[1] In our study, inflation perception is measured by the statement “I have noticed an increase in grocery prices at my grocery store recently” where survey participants answered on a 7-point Likert scale ranging from strongly disagree (1) to strongly agree (7). We focus on the “strongly agree” category in our discussion on inflation perception as it experienced most significant changes during the inflationary period.

Kim, Ashley Jiyoon, and Sungeun Yoon. “Why Grocery Inflation Still Feels High.” Southern Ag Today 5(6.5). February 7, 2025. Permalink

February 7, 2025
How Do U.S. Tariff Rates Compare to Other WTO Countries?

There has been a lot of talk about trade and tariffs since the new presidential administration was elected last November. It seems like this administration will use tariffs as a negotiation strategy to push their agenda in the international arena. Most economists would agree that, in general, international trade brings positive overall effects and that the lower the tariffs the more products are traded. We have discussed in previous articles the Importance of Agricultural Trade and Why is Trade Freedom Important?. U.S. agriculture is highly dependent on foreign markets as about one-third of U.S. farm income comes from exports. In addition, U.S. consumers have benefited from low import tariffs on food as well as a very robust domestic food production to enjoy the most affordable food in the world. U.S. consumers spend around 6.8 % of their disposable income on food at home which makes it the lowest out of 104 countries.

Now, why would anyone want to disrupt something that seems to be working well for U.S. consumers? A favorite phrase for economists to use to answer complicated questions is “it depends.” This is a time to use those words as it depends on how you are looking at the issue. On the one hand, low tariffs have benefited U.S. consumers overall, on the other hand, other countries have higher import tariffs that may deter U.S. products to reach foreign markets or increase their share in those markets. The figure displays the weighted average Most Favorable Nations (MFN) tariff rates for fellow G20 countries for agricultural and non-agricultural products. This is the most commonly used aggregation method because it considers the relative importance of trade flows. The United States ranks towards the bottom of the list on tariff rates for both agricultural and non-agricultural products with 4.0% and 2.1%, respectively. Canada and Mexico, our largest trading partners have 14.4% and 7.3% respectively for ag products, while China has 13.1%. Our intention is not to justify the usage of tariffs as a strategy to push agendas but rather to present the issue from a different perspective. Regardless of your position on this issue, most would agree that lowering tariffs across the board would be the most beneficial outcome.

(Note: South Korea was left out of the figure as they have the highest weighted average tariff rates for ag products of all the WTO countries at 94.0% and distort the scale of the figure.)

Source

Valdes, Constanza, Jayson Beckman, Yacob Abrehe Zereyesus and Michael E. Johnson. Data on Expenditure on Food and Alcohol, 2023. January 2025. USDA Economic Research Service.

World Trade Organization. WTO Stats. https://stats.wto.org/. Online public database. Accessed January 2025.

Ribera, Luis, and Landyn Young. “How Does U.S. Tariff Rates Compare to Other WTO Countries?” Southern Ag Today 5(6.4). February 6, 2025. Permalink

February 6, 2025
Using 2025 Cost of Production Forecasts to Assist in Marketing Row Crops

Knowing the expected cost of production for a farmer is essential for developing effective risk management and marketing strategies.  At an aggregate level, forecasts of costs provided by the USDA Economic Research Service (ERS) can offer a useful benchmark to help understand the gross revenue and cost of production for commodities at the national or regional level.  These forecasts can be used to determine breakeven prices to inform a risk management and marketing plan.

The ERS’s 2025 national cost of production forecast for major southern row crops (cotton, peanuts, corn, and soybeans) indicates a decline in fertilizer and interest costs, contributing to lower total operating cost for most crops compared to 2024, except cotton. However, rising custom rates, other variable expenses, and allocated overhead costs offset some of these savings, resulting in an expected total cost of production that is effectively the same (within +/- 1%) as the estimated 2024 cost of production.  As shown in Figure 1, peanuts has the highest forecasted total cost per acre ($1,181.84), followed by cotton ($899.96), corn ($871.09), and soybeans ($624.77), highlighting the significant investment in producing southern row crops. It is important to note that these forecasts were released by the ERS in November of 2024, before tariff threats were made, that if implemented may increase costs of some agricultural inputs, notably fertilizer.

At the currently forecasted cost of production, the negative returns experienced by row crop producers in 2024 are expected to remain a major concern for all four crops in 2025 if prices do not improve. Figure 1 shows the 2024/25 marketing year estimated gross revenue for each crop based on estimated yields and prices as of January 2025.  The gap between the two bars on each graph illustrates the potential shortfall in revenue needed to cover 2025 production costs if yields and prices are maintained at current 2024/25 marketing year levels.

Whether yields can provide increased revenue is a question for the future, but given national corn yields in 2024/25 being estimated at record levels and soybean yields being estimated at about 2% below record levels, it is more likely that price is going to be the primary driver to increase revenue for these crops. Meanwhile, multiple weather events made a major impact on cotton yields that were about 12% below record levels and peanut yields that were about 11% below record levels.  Therefore, some of the shortfall in revenue for cotton and peanuts could come from higher yields.

The other component of the revenue equation is price.  Determining a breakeven price assists in making informed decisions about the price necessary to cover production costs.  To determine a breakeven price, divide the forecasted cost of production by expected yield.  To help adjust for record yields or significant shortfalls, Table 1 shows the five-year average yield for each crop along with the computed breakeven price. At the current national forecasted cost of production and average yield for the last five years, the breakeven price for corn and peanuts would have to increase 17% over the estimated 2024/25 price.  For soybeans, the price would have to increase 21%, while cotton prices would have to rise 59%.

Ultimately, the actual cost of production varies among individual farms, as it depends on many factors such as economies of size and scope, relationships with input suppliers, and adopted management practices. Actual yields also vary, and thus, producers need to consider their own potential breakeven price. Repeating this exercise for a specific farm can be helpful in planning, making risk management and marketing decisions, and finding potential opportunities to make efficiency improvements to reduce costs for the upcoming crop year.

February 5, 2025
Fewer Cows in 2025

USDA released its Cattle inventory report on Friday, January 31^st.  This report is the benchmark for data on the number of total cattle in the U.S. and estimates of beef and dairy cows, replacement heifers, and stockers on small grain pastures.  The data is the starting point for estimates of beef production and prices in the future.

The big numbers in the report included a January 1, 2025, total cattle inventory of 86.66 million head, down 1 percent from the year before and the fewest since 1951.  Beef cows were down 0.6 percent to 27.86 million head the fewest since 1961.  Heifers for beef cow replacement were down 1 percent to 4.67 million, the fewest since 1949.

One of the interesting components of these statistical reports are revisions.  USDA gathers the surveys and other information from other surveys and data reports and revises the previous year’s data if warranted. Sometimes revisions are important and sometimes they are a non-event.  This report had some revisions that are interesting.  Some states were not reported beginning in this survey due to budget cuts.  While producers were surveyed, their numbers were only included in the total U.S. statistics.

Today’s article includes comments from SAT livestock economist writers to offer a few thoughts on their state and the report across the South.

Matt Fischer, Clemson University:

South Carolina cattle and calves inventory expanded in 2025 from 2024. Total cattle calves inventory on January 31, 2025, was reported 295,000, up 2% from 2024. Cow inventory increased in 2025 by 1%, from 156,000 to 157,000. Unfortunately, USDA did not provide inventory on any other category. Leaving speculation where the missing 4,000 head would be categorized, hopefully in unreported heifer inventory. Regardless, South Carolina reported inventory expansion in 2023 only to follow liquidation trend in 2024.

Will Secor, University of Georgia:

Broadly, the report was in-line with expectations. Georgia’s total cattle inventory and its inventory of beef cows declined by about 2% in 2025 compared to 2024. This confirms that there was no herd rebuilding in Georgia last year. However, these declines are smaller compared to last year despite dry weather struggles throughout much of the year. Additionally, the number of beef cow replacement heifers held steady at 85 thousand head.

Hannah Baker, University of Florida:

In Florida, the total number of cattle and calves was unchanged at 1.56 million head. The number of beef cows that calved in 2024 slightly increased by 0.3% (3,000 head) to 865,000 head. Florida is now ranked 10th in beef cattle production (9th last year). Florida’s 2024 calf crop was 1% larger than 2023’s at 770,000 head. The number of beef cow replacements remained unchanged at 115,000 head, unlike last year when we saw a 4% decline. While we don’t see major signs of expansion, we do see signs of stabilization starting in the Florida beef cow herd.

Kenny Burdine, University of Kentucky:

The overall decrease in beef cow numbers was not a surprise. But cow slaughter really pulled back in late 2024 and I do think the decrease in beef cow numbers was smaller than what many expected in the first half of 2024. The 200,000 cow downward revision to 2024 beef cow numbers is also worth noting. My general take on beef cow numbers is that liquidation is slowing, but that is primarily due to reduced culling.

Beef heifer retention was down by about 1% (also after a downward revision to last year), which was largely expected given the number of heifers on feed. The main point here is that we are still not currently retaining enough heifers to grow the beef herd given a reasonable assumption of cow slaughter in 2025.

If weather allows, I think it is very possible that we see more heifer retention during 2025. It’s also good to remind ourselves that the January 1 report is a snapshot of inventory. There are additional heifers in growing programs (grazing, backgrounding, etc.) that could also potentially be bred this year if market and weather conditions remain favorable. And the inverse is also true – not all of those heifers being held for replacement purposes will end up entering the cow herd.

I don’t know what to make of the decrease in cattle grazing small grains. The calf crop was smaller last year, wheat grazing prospects were late to develop, and I also think a lot of calves moved early because it was dry for much of late summer-early fall.

NASS estimated our beef cow herd to be down by 38,000 head. This was consistent with what our county Extension agents had been telling me. Land constraints are real in the Commonwealth. We have lost a lot of pasture ground to row crop and development pressures. High land prices do tend to negatively impact cow numbers, especially for young and beginning farmers. I did not expect to see the increase in the estimated number of heifers held for beef replacements. But there was also an estimated increase in the heavy (> 500 lbs) steer and bull categories. I think this speaks to a gradual shift away from cows and towards growing operations in Kentucky.

Andrew Griffith, University of Tennessee:

I expected a larger decline in the beef cow herd and beef heifers held for replacement given the quantity of heifers that went on feed and the fact that cow slaughter was still a large number. Beef cow slaughter was certainly much lower in 2024 than in 2023, but beef cow slaughter in 2023 was extremely large. Thus, this was a little surprising to me. As far as state of Tennessee, I was surprised that the beef cow herd declined by 9,000 head while the number of heifers remained the same. Somehow, we maintained the same calf crop compared to last year despite having fewer cows. I do have some concerns about the survey response rate over time.

Josh Maples, Mississippi State University:

Total cattle inventory in Mississippi was unchanged at 810,000 head. The calf crop was also reported unchanged at 345,000 head. I was a little surprised the calf crop was not lower in Mississippi. The big adjustment this year was the change in data reported. Mississippi is one of the 19 states that were dropped (due to USDA-NASS budget cuts) from individual state reporting for important categories such as beef cows, replacements, etc. Producers were still surveyed, but their responses were aggregated into the total cattle number presented.

David Anderson, Texas A&M University:The beef cow herd increased about 60,000 head or 1.5% from January 1, 2024.  But, this larger cow herd is the result of a downward revision to last year’s cow herd.  I often think it is helpful to look at the data over a longer period and doing so shows that the herd is smaller than 2 years ago.  So, I don’t think the report is too surprising thinking about it in that context.  Fewer replacement heifers were retained according to the responses.  The 4.075 million beef cows reported are the fewest since 1959 except for the 3.9 million in 2014 following the drought of 2010-2013.

February 4, 2025