Abstract
This paper examines the rental rates that tenants can afford to pay given alternative price and yield conditions. Over the last several years, harvest prices and yields have generally tended to be higher than their expected values when rates were negotiated with landlords. The benefits have accrued to the tenants if the farmland rental contract was a fixed, cash rental arrangement. Since the downside risk in net returns is likely greater than the upside risk, the paper also looks at alternative share arrangements that minimize the downside risk to tenants and allow landlords to enjoy an increase in returns if prices move higher than expected.
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