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Comparing Net Returns for Alternative Leasing Arrangements

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  • Langemeier, Michael

Abstract

Obtaining control of land through leasing has a long history in the United States. Leases on agricultural land are strongly influenced by local custom and tradition. However, in most areas, landowners and operators can choose from several types of lease arrangements. With crop share arrangements, crop production and often government payments and crop insurance indemnity payments are shared between the landowner and operator. These arrangements also involve the sharing of at least a portion of crop expenses. Fixed cash rent arrangements, as the name implies, provide landowners with a fixed payment per year. Flexible cash lease arrangements provide a base cash rent plus a bonus which typically represents a share of gross revenue in excess of a certain base value or threshold. Each leasing arrangement has advantages and disadvantages. These advantages and disadvantages are discussed on the Ag Lease 101 web site (here). Rather than focusing on the advantages and disadvantages of various lease arrangements, this article uses a case farm in west central Indiana to illustrate net returns to land derived from crop share, fixed cash rent, and flexible cash lease arrangements. This article updates an article written by Langemeier (2023).

Suggested Citation

  • Langemeier, Michael, 2025. "Comparing Net Returns for Alternative Leasing Arrangements," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 14(142).
    • Handle: RePEc:ags:illufd:358464
    DOI: 10.22004/ag.econ.358464
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    References listed on IDEAS

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    1. Langemeier, Michael, 2018. "Flexible Cash Lease Comparisons," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 8, October.
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    1. Langemeier, Michael, 2018. "Comparing Net Returns for Alternative Leasing Arrangements," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 8, October.

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