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Title: Impact of alternative land rental agreements on the profitability of cotton producers across the cotton belt

Author
item Duzy, Leah
item KELTON, JESSICA - Auburn University

Submitted to: National Cotton Council Beltwide Cotton Conference
Publication Type: Proceedings
Publication Acceptance Date: 1/22/2013
Publication Date: 5/1/2014
Citation: Duzy, L.M., Kelton, J. 2014. Impact of alternative land rental agreements on the profitability of cotton producers across the cotton belt. In: Boyd, S., et al (editors). Proceedings of the National Cotton Council Beltwide Cotton Conference, January 7-10, 2013, San Antonio, Texas. p. 919-926.

Interpretive Summary: Across the Cotton Belt, cropland values increased, decreased, or remained constant, depending on the state, from 2007 to 2011. The average increase in cropland values in the Cotton Belt from 2010 to 2011 was 3.6%, modest when compared to increases in the Corn Belt. However, even modest increases in land values translate into rising production costs for producers, either through increased ownership costs or increased rents. With approximately 40% of farmland being rented nationally, land values and methods of securing land are important to profitability. The objective of this research was to evaluate the impact of land values on cotton producer profitability in Arkansas, Georgia, and Texas considering alternative methods of securing land and production systems. The preliminary results suggest that, in general, the cash rent and flexible cash rent scenarios provide the highest net returns over variable costs and the lowest net return variability; however, every farming operation is different and each producer must make an informed decision for their operation.

Technical Abstract: Across the Cotton Belt, cropland values increased, decreased, or remained constant, depending on the state, from 2007 to 2011. The average change in cropland values in the Cotton Belt from 2010 to 2011 was 3.6%, modest when compared to increases in the Corn Belt. However, even modest increases in land values translate into rising production costs for producers, either through increased ownership costs or increased rents. With approximately 40% of farmland being rented nationally, land values and methods of securing land are important to overall profitability of cotton operations. The objective of this research was to evaluate the impact of land values on cotton (Gossypium L.) producer profitability across the Cotton Belt considering alternative methods of securing land and production systems. A cotton production financial simulation model was constructed to evaluate the impact of alternative methods of securing land, considering variable prices and yield, on grower net returns above variable costs considering conventional tillage and conservation tillage systems. Data were gathered from cotton enterprise budgets and historic prices, yields, land values, and rents for Arkansas, Georgia, and Texas. The preliminary results suggest that, in general, the cash rent and flexible cash rent scenarios provide the highest net returns over variable costs and the lowest net return variability; however, every farming operation is different and each producer must make an informed decision for their operation.