Title
Sharing financial risk through flexible farm lease agreements
Campus Units
Economics
Document Type
Article
Publication Version
Submitted Manuscript
Publication Date
2015
Journal or Book Title
Journal of the American Society of Farm Managers and Rural Appraisers
Volume
76
Issue
1
First Page or Article ID Number
154
Last Page
166
Abstract
A simulation model representing a north central U.S. corn and soybean farm was used to estimate the degree of financial risk borne by the tenant and the landlord under 10 different types of flexible cash leases. Probability distributions for yields, prices and production costs were incorporated. Measures of risk included standard deviation of profits, probability of loss, and 10th percentile value at risk. A profit sharing lease that included rent adjustments for all three variables shifted the most risk from the tenant to the landowner, and reduced the tenant's probability of incurring an economic loss from 51 percent to 37 percent.
JEL Classification
Q14, Q15
Recommended Citation
edwards, William M. and Hart, Chad, "Sharing financial risk through flexible farm lease agreements" (2015). Economics Publications. 131.
https://lib.dr.iastate.edu/econ_las_pubs/131