A Straightforward Structure for a Variable Cash Rent

Unlike fixed cash rental arrangements, payments from a variable cash rent arrangements will vary based on prices and yields. Often during times of changing commodity prices, there is a need to renegotiate cash rents. Recent increases in commodity prices suggest that many rents will be re-negotiated this year, likely at higher levels. The use of a variable cash rental arrangement reduces renegotiation pressures. One barrier to the use of variable cash rents is specifying the parameters of variable cash rent. We present one of the most straightforward variable cash rental agreements in this article, with parameters set so that historical rents from the variable cash rent will equal average cash rents.

Schnitkey, G., C. Zulauf, K. Swanson and N. Paulson. "A Straight-Forward Structure for a Variable Cash Rent." farmdoc daily (11):117, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, August 10, 2021.
https://farmdocdaily.illinois.edu/2021/08/a-straight-forward-structure-for-a-variable-cash-rent.html

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