A Partial Budget Approach to Estimating Cash Rents

Because of the extra risk, tenants who cash lease land should earn more money than those tenants with share leases. A competitive land market and the need to support bigger and newer machinery can easily lead tenants to pay more than they should for a cash lease. Share leases tend to avoid the overpayment problem as the share percentage is usually relatively fixed. Since share leases are not always available, this paper presents a way for tenants to determine if a cash lease rate is reasonable for the area by using a partial budget approach that compares lease types.