Farmland tenure and transaction costs: Public and collectively owned land vs conventional coordination mechanisms in France

Abstract

To preserve farmland in industrialized countries, public initiatives or initiatives from nongovernmental organizations increasingly rely on Long-term and Full Rights Acquisitions of land (LFRAs). The objective of this article is to help assess whether those actions provide profitable access to land use for lessee farms. We compare the economic implications for farms of this mode of access to land use with the two other main modes: conventional lease arrangements and purchasing transactions. The analysis focuses on the transaction costs relative to the cost of exchange, that is, including purchase/rental price, and to the financial benefits of the transaction. We use original data on costs provided by a survey of farmers within a French region. Our results suggest that the ex ante transaction costs incurred by farmers involved in LFRAs, as a percentage of the exchange cost of accessing land use, are lower than those in purchasing transactions and higher than those in conventional lease arrangements. The difference between the two types of lease arrangements is due to negotiation costs, which are doubled in LFRAs. In conclusion, making the involvement of tenant farmers in the construction of LFRAs more effective would allow these initiatives to better achieve their goals.Dans les pays industrialisés, les initiatives publiques ou émanant d'organisations non gouvernementales visant à préserver les terres agricoles s'appuient de plus en plus sur des acquisitions de pleine propriété à long terme (APPL). L'objectif de cet article est d'aider à déterminer si ces actions offrent un accès rentable à l'utilisation des terres pour les exploitants locataires. Nous comparons les implications économiques pour les exploitations agricoles de ce mode d'accès à l'utilisation des terres avec les deux autres modes principaux: les contrats de location classiques et les transactions d'achat. L'analyse se concentre sur les coûts de transaction par rapport au coût d'échange, c'est-à-dire le prix d'achat/de location et les avantages financiers de la transaction. Nous utilisons des données de coûts provenant d'une enquête auprès d'agriculteurs d'une région française. Nos résultats suggèrent que les coûts de transaction ex ante supportés par les agriculteurs impliqués dans les APPL, en pourcentage du coût d'échange pour accéder à l'utilisation des terres, sont inférieurs à ceux des transactions d'achat et supérieurs à ceux des contrats de location classiques. La différence entre les deux types de contrats de location est due aux coûts de négociation, qui sont doublés dans les APPL. En conclusion, rationaliser l'implication des exploitants-locataires dans le montage des APPL permettrait à ces initiatives de mieux atteindre leurs objectifs.

Toward Agricultural Intersectionality? Farm Intergenerational Transfer at the Fringe. A Comparative Analysis of the Urban-Influenced Ontario's Greenbelt, Canada and Toulouse InterSCoT, France

“…In peri-urban areas, additional sources of uncertainty complicate farmers' decision-making. Temporary land tenure with short leases are commonly implemented due to urbanization (Léger-Bosch, 2019). Agricultural practices may be regulated to solve potential conflicts with non-farming nearby residents (Owen et al, 2000).…”

The Case for Long-Term Land Leasing: A Review of the Empirical Literature

“…Specifically, in the case of land, the lease agreement, which may be written or oral, transfers parts of the bundle of property rights from the landowner to the tenant in exchange for either a fixed rental payment every period (a fixed rent contract) or a predetermined share of the output (share-cropping contract) [2,5,17,22,29]. Land leasing contracts are regulated by a lease agreement which sets out the obligations of the parties involved during the period of the lease and so provides useful legal protection to everyone concerned [1,18,19].…”

“…Short-term letting agreements are considered a barrier to these objectives [46]. Generally, countries with well-developed agricultural systems and strict rental market regulations, such as France and Belgium, tend to have a higher rate of agricultural land under lease [1,2,22,47]. Table 1 gives a summary of the proportion of utilisable agricultural area (UAA) under lease in some selected countries.…”

“…Indeed, land tenure and secure rights in particular have an impact on a farm's profitability by reducing transaction costs relating to land rental renegotiation and through their effect on investment and access to credit. Moreover, by facilitating the reallocation of factors of production, effective land tenure mechanisms maximise allocative efficiency in resource use, allowing for economic diversification and growth [2,52]. For example, a study by Kumari and Nakano [53] in Fiji compared tenure security between three tenure types and found out that that lease tenure insecurity had a significant negative impact on farm productivity and investment.…”

“…Land, as a factor of production, has a vital role within the agricultural sector compared with other sectors [1,2]. Efficiently operating agricultural land markets are critical in determining efficient production systems and structures and in their contribution to wider sustainable development at a societal level [3][4][5][6].…”