Chapter 20 FBM

Which type of lease agreement results in the most price and yield risk for the tenant?

• Flexible cash

• Fixed cash

• Crop share

• Custom farming

When using comparative sales to estimate the value of a tract of farmland, it is important to remember that the sale price of the comparative tract may have been higher than normal because:

• it was an unusually large tract

• it was sold from one close relative to another

• it was sold by a seller financed installment sales contract with a low interest rate

• it was located on a poorly maintained road

Crop share leases are based on the principle that gross income should be shared in the same proportion as:

• total cash costs

• total variable costs

• total economic costs

• total fixed costs

The fact that the supply of farmland in the United States is essentially fixed makes land prices and rental rates less responsive to changes in crop prices and production technology than prices of variable inputs such as pesticides.

• True

• False

A variable or flexible cash rent lease allows the landowner to share in price and/or yield risk without paying any of the cost of seed and fertilizer.

• True

• False

A cash rent lease requires the tenant to provide more operating capital than a crop share lease.

• True

• False

increase in crop prices

• Increase farmland value

• Decrease Farmland Value

increase in production input prices

• Increase farmland value

• Decrease farmland value

increase in long-term interest rates

• Increase farmland value

• Decrease farmland value

increase in the rate of inflation

• Increase farmland value

• Decrease farmland value