CLUSTER 13 : Land Management and Profitability Issues for Landlords

tags :

Toronata Tambun Nicholas Sidharta Rr Athalia Putri prasapna Ririn Sahita

Land Lease and Production Sharing System in Agricultural Sector: Definition and Implementation

Land leasing and profit-sharing systems are two commonly used models in agriculture to regulate the relationship between landowners (who oftently we called as the Landlords), and tenants, or cultivators. In both systems, there is a written agreement that regulates the rights and obligations of each party as well as the distribution of crop yields. In some countries, such as Ireland, the system of agricultural land rental agreements have traditionally been informal and short-term in design with few non-price provisions considered (Onofri et al., 2023). The type of farming system also influenced the choice of agreements form, specifically about the land tenure and the duration of agreements.

Land Leasing System

In a land leasing system, the landowner which usually referred as the first party leases or assigns land to the tenant, as the second party to be cultivated for a certain period of time. Generally, the tenant pays a certain amount of rent to the landowner or landlord as compensation for the use of the land.

The advantage of the land lease system is that the landowner earns a steady income from the rent of his land without having to be directly involved in the farming process. On the other hand, the tenant has access to land without having to spend large capital to buy or own their own land. In conclusion, it helps both parties to earning incomes.

Farmland Profit-sharing System

The land profit-sharing system is more like a partnership between landlords and cultivators. In this system, the landowner provides the land and business capital or agricultural inputs such as seeds, fertilizers, and other operational costs, while the cultivator is responsible for managing and working the land.

The harvest from the land is shared between the landowner and the cultivator according to a predetermined agreement. The profit sharing can be based on a certain percentage, for example 70% for the landowner and 30% for the cultivator, or based on other agreements that are considered fair by both parties.

The Benefits and Implementations

There are so many factors about the implementation of these two systems depends on the conditions and needs of each specific region or farm. Some of the benefits that can be obtained from the land lease and land profit-sharing systems include:

1. Diversified Land Management : Landowners can optimize the use of their land without having to directly manage the farming process. It helps in terms of time and effort efficiency.

2. Risk Reduction : For the cultivator, the profit-sharing system reduces financial risk as the burden and returns are shared.

3. Social Inclusion : A profit-sharing system can be a solution to expand people's access to agricultural land and increase social inclusion in the agricultural sector.

Despite their advantages, both systems also have their own challenges, such as clear contractual arrangements, monitoring of the farming process, and handling conflicts in the event of disagreements between landowners and cultivators. Both parties should make a fair agreements, so that there will be no party is disadvantages and left behind.

With a good understanding of the land lease and land profit sharing systems, it is expected that agricultural actors can choose a model that suits their conditions and objectives to achieve better productivity and welfare in the agricultural sector.

Reference :

Onofri, L., Trestini, S., Mamine, F., Loughrey, J. 2023. Understanding agricultural land leasing in Ireland: a transaction cost approach. Journal of Agricultural and Food Economics. 11(17):1-20.

CLUSTER MEMBERS :

Group Leader = Syakirah Nur Hidayah — (23/516961/PN/18422)

Members =

Rr Athalia Putri Prasapna — (23/520985/PN/18671)

Ririn Sahita — (23/521505/PN/18704)