What Should Farmers Pay for Cash Rents

Determining what to pay for cash rental rates is a big problem for most farmers. Typically, crop budgets are used for this decision. However, problems arise from this approach because the average revenue contained in the budget is often not the true marginal revenue. Farm size differences certainly affect the average and thus the marginal revenue. This paper calculates the true marginal revenue per acre so that a better estimate can be made of the cash rental rate. Farm analysis data is used to calculate the total revenue per acre. The first derivative then gives the marginal revenue.