An Evaluation of Alternative Cash, Share, and Flexible Leasing Arrangements for South. Carolina Grain Farms * Todd D. Davis **

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1 An Evaluaton of Alternatve Cash, Share, and Flexble Leasng Arrangements for South Carolna Gran Farms * Todd D. Davs ** Abstract A smulaton model ncorporatng stochastc yelds, prces, and government payments generates returns for landowners and tenants under cash, share, and flexble leases. Corn, soybeans, wheat, cotton, peanuts, and wheat-double crop soybeans crop enterprses are studed. Alternatves are evaluated by mean returns, coeffcent of varaton, and certanty equvalent analyss. * Selected Paper presented at the Southern Agrcultural Economcs Assocaton annual meetngs at Tulsa, OK, February 14-18, ** Todd D. Davs s an Assstant Professor and Extenson Economst n the Department of Appled Economcs and Statstcs, Clemson Unversty, Clemson, SC Copyrght 2004 by Todd D. Davs. All rghts reserved. Readers may make verbatm copes of ths document for non-commercal purposes by any means, provded ths copyrght notce appears on all such copes.

2 An Evaluaton of Alternatve Cash, Share, and Flexble Leasng Arrangements for South Carolna Gran Farms Farm busness managers are contnuously lookng for opportuntes to spread ther fxed costs over addtonal acreage. Leasng land may be the preferred method of expandng the farm busness, as the large nvestment assocated wth purchasng land can be avoded. As tenants bd to rent addtonal land, competton may cause tenants to bd at rates that exceed the economc return to land. Tenants face the problem of determnng an economcal rental bd gven the uncertanty of yelds and prces. Yeld rsk has been evdent n South Carolna from , as the state experenced severe drought condtons each year. Commodty prces have also been below ther ten-year average each year of the drought. Despte below average yelds and prces, cash rental rates have ncreased due, n part, to government program payments. The 2002 Farm bll establshes a three-tered system of payments to reduce revenue rsk (USDA Farm Bll). The drect payment rates are known wth certanty whle the counter-cyclcal payments and loan defcency payments are uncertan. The drect and counter-cyclcal program payments are made to the producers, wth landowners elgble to receve payments only f they share n the busness rsk. Landowners have an ncentve to ncrease cash rental rates to capture the drect and potental counter-cyclcal payments. Smlarly, tenants may ncrease ther rental bd based on ther expectaton of counter-cyclcal payments and loan defcency payments that may not occur. Both landowners and tenants are makng decsons under uncertanty. Tenants have the challenge of determnng the economc return to land when prces, yelds, and government program payments are uncertan. Landowners face smlar uncertanty n determnng a rental rate that generates the largest return that the rental market wll bear. Gven the competton n the rental market, tenants may over-bd for land. Flexble leasng arrangements that adjust the rent based on

3 2 actual prces or yelds may provde ncome stablty to the landowner as well as helpng tenants reduce the rsk from over-bddng for rented land. Lterature Langemeer, Albrght, and Delano dscuss the advantages and dsadvantages of alternatve farmland leases. An advantage of a crop-share lease s that prce and yeld rsk, as well as nput costs, are shared wth the landowner. Another potental advantage of a share lease s that the landowner s nvolved n makng management decsons. Ths could be benefcal for a producer that does not have extensve management experence, lke a begnnng farmer. Of course, jont management decsons may create conflct between the tenant and landowner f they do not agree on management practces. Another dsadvantage s that detaled records must be kept to ensure accurate dvson of costs and producton. Whle downsde rsk s lmted n a share lease, the cash equvalent of a share lease may be sgnfcantly greater than the cash rental rate durng years of above average yelds or prces (Langemeer, Albrght, and Delano). An advantage of cash leases s that the lease s easy to mplement. Detaled record-keepng s not needed to accurately dvde expenses and producton, as the tenant pays all of the expense and receves all of the producton. The landowner does not share the prce or yeld rsk and does not have the responsblty of marketng ther share of the crop. Snce the landowner does not have nput nto management decsons, the potental for landowner/tenant conflct s reduced. A dsadvantage of a cash lease s that the tenant may not make mprovements to the land, such as mantanng fertlty levels. Another dsadvantage of a cash lease s that he tenant has all of the busness rsk and pays all of the producton costs (Langemeer, Albrght, and Delano).

4 3 An alternatve to cash and share leases are flexble leases that adjust the cash rental rate by the actual harvest prce or yeld. Under flexble leases, landowners share the prce or yeld rsk but stll have a guaranteed base rental rate (Edwards). Muznga, Lns, and Boehlje analyzed the returns to landowners and tenants for cash, share and flexble leases. They found that flexble leases have greater rsk and only slghtly larger mean returns over a cash lease. The concluson s that landowners have lttle ncentves to swtch from a cash lease to a flexble lease (Muznga, Lns, and Boehlje). Held, n an analyss of cash, share, and flexble leases for an Indana corn and soybean farm, found that tenants would prefer a share lease whle landowners would prefer cash leases. Whle flexble leases reduced rsk, purchasng crop nsurance wth cash leases provded greater rsk reducton than the flexble leasng alternatves (Held). Methods A stochastc smulaton model s used to smulate the return to unpad labor, management, and fxed machnery costs for corn, soybeans, wheat, cotton, peanuts, and wheat-double crop soybeans n South Carolna. The stochastc smulaton model ncorporated yeld, prce and government program payment rsks n calculatng the return for commodty (equaton 1). (1) ~ ~ ~ ~ ~ π = PY + DP + C VC R The varables P ~ and Y ~ are the stochastc sales prce and stochastc yeld, respectvely, for commodty (equaton 1). The varables DP and C ~ n equaton 1 represent the drect and counter-cyclcal payments, respectvely, for commodty. The drect payments are constant whle the counter-cyclcal payments are stochastc (equaton 1). The varable cost of producng commodty, based on crop enterprse budgets, s represented by VC (equaton 1). The varable

5 4 cost of producng commodty s held constant n the smulaton model. The varable amount of rent pad for an acre of land to produce commodty. R ~ s the The stochastc yeld and prce for commodty are drawn from a multvarate emprcal dstrbuton based on the procedures outlned n Rchardson, Klose, and Gray. Equaton 2 descrbes the stochastc yeld for commodty : ~ (2) Y = (1 + ~ ε ) Y y ~ ε y ~ multvarate emprcal where Y ~ s the stochastc yeld for commodty. The determnstc yeld, Y, s the state-level average yeld for commodty from The stochastc component, ~ ε y, s calculated as the percent devaton from the average yeld from for commodty. The yeld s made stochastc by multplyng the determnstc yeld component ( Y ) by one plus the stochastcally generated percent devaton from the average yeld ( ~ ε ). The percent error terms are coeffcent of varaton statonary, whch means that the relatve yeld varablty for commodty s constant. However, as the determnstc yeld component ncreases, the absolute yeld varablty ncreases. The stochastc prces are also drawn from multvarate emprcal dstrbutons. Equaton 3 through equaton 6 descrbes how the cash prce and loan defcency payment for commodty are determned. The cash market prce s based on the stochastc futures market prce, descrbed n equaton 3. y ~ fut fut (3) P P (1 + ~ ε ) = p p ε ~ ~ multvarate emprcal where P ~ fut s the stochastc futures market prce for commodty at harvest. The determnstc fut component, P, s the average futures market prce at harvest for commodty from

6 5 The stochastc prce component, ~ ε p, s calculated as the percent devaton from the average futures market prce from The cash prce for commodty s the stochastc futures market prce plus the cash market bass, as descrbed n equaton 4. (4) P ~ = P ~ + B cash fut cash The cash market bass, (Curts). cash B, s the average harvest tme bass for commodty from The marketng loan program n the 2002 Farm Bll reduces prce rsk by provdng loan defcency payments whenever the posted-county prce s below the commodty loan rate. The stochastc posted-county prce and stochastc loan defcency payments are descrbed n equaton 5 and equaton 6, respectvely. (5) P ~ = P ~ + B pcp fut pcp ~ ~ pcp (6) L = Max(0, LoanRate P ) The posted-county prce bass for commodty, pcp B, s the average harvest posted-county prce bass for commodty from (Curts). The loan defcency payment for commodty, L ~, s the larger of zero or the dfference between the loan rate and the stochastc posted-county prce (equaton 6). It s mportant to recognze that the cash bass,, s typcally dfferent than the postedcounty prce bass, cash B pcp B, for grans n the Southeast. Posted-county prces are determned by the cash prce at termnal Mdwestern and Gulf port locatons. They are then adjusted to a partcular county based on fxed and varable dfferentals as determned by USDA. On any gven day local

7 6 gran supply and demand condtons mght generate a substantal dfference n the cash prce pad locally for gran versus the posted-county prce (Curts). The prce producers receve for corn, soybeans, wheat, cotton, and wheat-double crop soybeans s the stochastc cash prce plus the stochastc loan defcency payment (equaton 7). ~ ~ cash ~ (7) P = P + L Peanuts, however, are assumed to be produced under a producton contract that pays a premum of $25 per ton above the marketng loan rate. The premum of $25 per ton was commonly offered to South Carolna peanut producers n 2003 (Smth). The peanut sales prce s constant n the stochastc smulaton model due to the use of producton contracts. The stochastc smulaton model also ncludes the revenue producers receve from government program payments. The amount receved from drect payments for commodty s descrbed n equaton 8 (USDA Farm Bll). (8) DP = Base Acres x Program Yeld x 85% x Drect Payment Rate where the base acres and program yeld for commodty are calculated on hstorcal producton from the 1980 s. The drect payment rate s defned n the 2002 Farm Bll and s pad on 85% of hstorc producton (equaton 8). In contrast, the counter-cyclcal payments are stochastc as they depend on the U.S. marketng-year average prce for commodty. The counter-cyclcal payments are defned by equaton 9 and 10. ~ (9) C = Base Acres x Program Yeld x 85% x CCP Rate

8 7 where the base acres and program yeld are based on hstorcal producton from ether the 1980 s or (USDA Farm Bll). The counter-cyclcal payment rate s stochastc and defned n equaton 10. (10) CCP Rate = Max (0, Target Prce Drect Payment Rate Max (U.S. MYA Prce, U.S. Loan Rate) The counter-cyclcal payment s the target prce for commodty less the drect payment and the larger of the U.S. marketng-year average prce or U.S. loan rate for commodty (equaton 10). The counter-cyclcal payment s zero when the U.S. marketng-year average prce plus the drect payment rate s greater than the target prce. The maxmum counter-cyclcal payment s made when the U.S. marketng-year average prce s below the U.S. loan rate for commodty. (USDA Farm Bll) Alternatve Leasng Arrangements Ths study evaluates fve leasng alternatves. One leasng alternatve s to pay a fxed, cash rental rate for each acre of cropland. The cash rental rate used n the smulaton model s held constant at $28.50 per acre, whch s the South Carolna state average rental rate for 2002 (South Carolna Agrcultural Statstcs). An alternatve to a cash lease s a share lease where producton and nput expense are shared by the tenant and landowner. The drect and counter-cyclcal payments are also shared by the proporton of the rsk beng shared wth the landowner. A 50%-50% share lease wll be used n ths study wth the landowner sharng the crop seed, fertlzer, chemcal, dryng and storage expense. Three flexble leasng arrangements are also smulated. Equaton 12 descrbes a lease that adjusts the rental rate by the relatonshp between the actual harvest prce for commodty compared to an ndex of harvest-tme prce (Held).

9 8 ~ ~ p cash P (12) R = R p I where cash R s the cash rental rate for commodty, P ~ s the actual harvest-tme cash prce for commodty from the smulaton model, and p I s the fve-year average harvest-tme prce for commodty. The cash rent s ncreased for above-average prces and decreased for below average prces. A flexble lease that adjusts for yeld varablty s descrbed n equaton 13 (Held). ~ ~ y cash Y (13) R = R y I where cash R s the cash rental rate for commodty, Y ~ s the actual harvested yeld for commodty from the smulaton model, and y I s the fve-year average harvested yeld for commodty. The cash rent s ncreased for above-average yelds and decreased for below average yelds. (Held). Equaton 14 defnes a lease that adjusts the rent based on the actual prce and the actual yeld ~ ~ ~ py cash P Y (14) R = R p y I I where the cash rent s adjusted for both prce and yeld varablty. Certanty Equvalent Analyss The leasng alternatves are ranked by ther certanty equvalents to determne the effect of rsk atttudes on the leasng alternatves preferred by the tenant and landowner. The certanty equvalents are calculated for coeffcents of relatve rsk averson rangng from 0 (rsk neutral) to 5 (extremely rsk averse). The power utlty functon, defned n equaton 15, s used to calculate the

10 9 expected utlty and certanty equvalents because ths functon has constant relatve rsk averson (Hardaker, Hurne, and Anderson). (15) E[ U X )] = n ( ρ j= 1 j X 1 r, j 1 r where r s the coeffcent of relatve rsk averson and ρ j s the probablty of havng outcome j occurrng. The certanty equvalent s found by nvertng equaton 15, as descrbed n equaton 16. (16) CE = ( 1 r) E[ U ( )] 1 r X 1 Data The summary statstcs of the yeld and prce data used as nputs n the stochastc smulaton model are reported n Table 1. The yeld data are South Carolna state average yelds from (USDA NASS). Cotton yelds averaged 610 pounds per acre from , but the yeld has ranged from 314 pounds to 846 pounds per acre (Table 1). Smlarly, corn yelds have ranged from 40 bushels an acre to 108 bushels an acre over the same tme perod (Table 1). Corn and cotton have larger coeffcents of varaton, 0.30 and 0.26, respectvely, than the other commodtes (Table 1). Peanuts and soybeans have coeffcents of varaton of 0.16, whch are the smallest coeffcents of varaton of all of the commodtes (Table 1). In other words, peanuts and soybeans have the smallest relatve yeld rsk whle corn has the largest relatve yeld rsk. Commodty futures prces have also vared greatly from December corn futures have ranged from $1.93 to $3.20 per bushel at harvest whle December cotton futures have ranged from $0.31 to $0.85 per pound from (Table 1). Cotton and wheat futures have the largest relatve rsk, wth coeffcents of varaton of 0.24 and 0.22, respectvely (Table 1).

11 10 The stochastc counter-cyclcal payments are based on U.S. marketng-year average prces descrbed n Table 1. Cotton prces have ranged from $0.30 to $0.75 per pound whle soybean prces have ranged from $4.38 to $7.35 per bushel (Table 1). The cash market and posted-county prce bass data were collected on a daly bass from The cash market bass used n the smulaton are $0.00, -$0.40, $-0.30, and -$0.035 for corn, soybeans, wheat and cotton, respectvely (Curts). Smlarly, the posted-county prce bass used n the smulatons are -$0.17, -$0.31, -$0.43, and $0.075 for corn, soybeans, wheat, and cotton, respectvely (Curts). The 2002 loan rates used n calculatng the loan defcency payments are for South Carolna covered commodtes and are $2.18, $5.05, $2.45, $0.52, and $353.66, for corn, soybeans, wheat, cotton, and Vrgna peanuts, respectvely (USDA FSA). The loan rate for Vrgna type peanuts s used n the study because ths type of peanut s beng offered a premum of $25 per ton over the loan rate (Smth). The drect and counter-cyclcal payments are calculated usng the rates defned n the 2002 Farm Bll for the 2004 producton year (USDA Farm Bll). The varable costs of producton are from Clemson Unversty crop enterprse budgets for conventonal tllage systems (Ferrera). The varable costs used n the stochastc smulaton model are $172, $90, $138, $382, $431, and $193 per acre for corn, soybeans, wheat, cotton, peanuts, and wheat-double crop soybeans, respectvely (Ferrera). Results Tenants receved the largest average return to unpad labor, management and fxed machnery costs under cash leases for all crops smulated (Table 2 and Table 4). Flexble leases do reduce revenue rsk. but at a trade-off of lower average returns (Table 2). From the tenant s perspectve, the prce-yeld flexble lease has the smallest coeffcent of varaton for corn,

12 11 soybeans, and wheat-double cropped soybeans whle the yeld adjusted lease has the smallest coeffcent of varaton for peanuts (Table 4). In contrast, landowners receved the largest average rent from a crop share lease (Table 3 and Table 4). Based on average returns, landowners would rank cash leases as the least preferred alternatve (Table 5). However, the constant return makes the cash lease preferred by landowners wantng the smallest coeffcent of varaton of return (Table 5). The results suggest that rsk atttudes do not have much effect on the tenant s preferred leasng alternatve. Tenants prefer cash leases for coeffcents of relatve rsk averson from 0 to 3 (Table 6). As tenants become more rsk averse, crop share leases are preferred (Table 6). Rsk atttudes also has lttle effect on landowner s lease preference, as share leases have the largest certanty equvalent for every crop except wheat (Table 6). The prce-yeld flexble lease s preferred by landowners rentng land for wheat producton (Table 6). Summary and Conclusons Ths prelmnary study of flexble leasng arrangements suggest that producers wantng to share prce and yeld rsk should consder share leases. However, a share other than should be consdered, as the cash equvalent of ths lease can be sgnfcantly greater than a cash lease. Ths may not be practcal due to absentee landowners, landowners do not have the producton or marketng sklls to adopt a share lease, or the landowner s desre to keep the lease smple. Future research wll consder a larger cash rent, especally for cotton and peanut producton. The state average rental rate understates the economc return to land for these hgh value commodtes. Future research wll consder the rsk reducng benefts of crop nsurance n reducng revenue rsk.

13 12 References Curts, C.E. Cash Market Bass and Posted-County Prce Bass Data from for South Carolna. Unpublshed Data. Clemson Unversty, December Edwards, W. Flexble Farm Lease Agreements. Iowa State Unversty Extenson Bulletn. FM 1724, July Ferrera, W. Agronomc Crop Enterprse Budgets for South Carolna Clemson Unversty Cooperatve Extenson Servce, EER 203, Hardaker, J., R. B. M. Hurne, and J. Anderson. Copng wth Rsk n Agrculture. New York, CAB Internatonal Held, N. Evaluaton of the Returns to Share, Cash, and Adjustable Cash Lease Alternatves for Indana Farmland. Thess, Department of Agrcultural Economcs, Purdue Unversty, Langemeer, L., M. Albrght, and F. DeLano. Crop Lease Arrangements on Kansas Farm Management Assocaton Farms. Kansas Agrcultural Experment Staton, Manhattan, KS. Report 757, Muznga, N., D. Lns, and M. Boehlje. Hgher Prces and Hgher Cash Rents: Are Flexble Cash Rents the Answer. Journal of the Amercan Socety of Farm Managers and Rural Apprasers. 1997, Rchardson, J.W., S.L. Klose, and A.W. Gray. An Appled Procedure for Estmatng and Smulaton Multvarate Emprcal Probablty Dstrbutons n Farm Level Rsk Assessment and Polcy Analyss. Journal of Agrcultural and Appled Economcs. Vol. 32 (2), , Smth, N. Extenson Economst, Unversty of Georga. Personal Intervew. December 15, South Carolna Agrcultural Statstcs Servce. Farm Real Estate Values and Cash Rents. Unted States Department of Agrculture Farm Bll Webste. Internet ste. Accessed Nov. 1, 2001.

14 13 Unted States Department of Agrculture Farm Servce Agency. South Carolna Loan Rates Internet Ste. Accessed September 15, Unted States Department of Agrculture Natonal Agrcultural Statstcs Servce. Internet Agrcultural Statstcs Data Base. Accessed September 15, 2002.

15 14 Table 1. Summary Statstcs of Yelds, Futures Market Prces, and Marketng-Year Average Prces Data for the Stochastc Smulaton Model. Standard Average Devaton Maxmum Mnmum C.V. a Corn Yeld b (bushels per acre) Soybean Yeld b (bushels per acre) Wheat Yeld b (bushels per acre) Cotton Yeld b (pounds per acre) Peanut Yeld b (pounds per acre) December Corn Futures Prce c $2.44 $0.40 $3.20 $ November Soybean Futures Prce d $5.77 $0.93 $7.27 $ July Wheat Futures Prce e $3.20 $0.71 $4.97 $ December Cotton Futures Prce f $0.61 $.15 $0.85 $ Corn Marketng-Year Prce g $2.29 $0.41 $3.24 $ Soybean Marketng Year Prce g $5.63 $0.94 $7.35 $ Wheat Marketng Year Prce g $3.17 $0.67 $4.41 $ Cotton Marketng Year Prce g $0.57 $0.13 $0.75 $ Peanut Prce h $0.20 $0.04 $0.31 $ a. The C.V. s the coeffcent of varaton whch s the standard devaton dvded by the average. b. South Carolna State Average Yeld from c. Average closng prce durng September from d. Average closng prce durng November from e. Average closng prce durng June from f. Average closng prce durng October from g. U.S. Marketng year average prce from h. Farm-level prce of peanuts derved from Rotterdam peanut prces from

16 15 Table 2. Average and Standard Devaton of the Tenant s Return to Unpad Labor, Management and Fxed Machnery for Alternatve Leasng Arrangements ($/Acre). Corn Soybeans Wheat Cotton Peanuts Wheat-DC Soybeans Cash b. $ a (81.50) $85.05 (35.46) $19.95 (34.17) $97.49 (110.28) $ (87.86) $ (68.09) Share c (40.75) (17.73) (17.09) (55.14) (55.93) (34.05) Prce d (80.92) (32.74) (31.32) (110.01) (90.12) (65.06) Yeld e (71.79) (30.95) (29.70) (101.78) (83.41) (63.66) Prce-Yeld f (70.51) (25.78) 5.30 (24.49) (100.65) (85.79) (58.42) a. The average return s the top number whle the standard devaton s n parentheses. b. Cash lease. c. A crop share lease. d. Flexble lease adjusted by harvest-tme prce. e. Flexble lease adjusted by harvested yeld. f. Flexble lease adjusted by harvest-tme prce and harvested yeld.

17 16 Table 3. Average and Standard Devaton of the Landowner s Return for Alternatve Leasng Arrangements ($/Acre). Corn Soybeans Wheat Cotton Peanuts Wheat-DC Soybeans Cash b $28.50 a (0.00) $28.50 (0.00) $28.50 (0.00) $28.50 (0.00) $28.50 (0.00) $28.50 (0.00) Share c (40.75) (17.73) (17.09) (55.14) (55.93) (34.05) Prce d (4.53) (5.33) (5.78) (5.06) (5.38) (5.56) Yeld e (10.14) (6.11) (5.96) (9.03) (5.00) (5.85) Prce-Yeld f (11.94) (10.34) (10.19) (11.78) (8.53) (10.13) a. The average return s the top number whle the standard devaton s n parentheses. b. Cash lease. c. A crop share lease. d. Flexble lease adjusted by harvest-tme prce. e. Flexble lease adjusted by harvested yeld. f. Flexble lease adjusted by harvest-tme prce and harvested yeld.

18 17 Table 4. Tenant and Landowner Rankngs of Alternatve Leases Based on Mean Return. Corn Soybeans Wheat Cotton Peanuts Wheat-DC Soybeans Tenant s Rankngs by Mean Return Cash a 1 f Share b Prce c Yeld d Prce-Yeld e Landowner s Rankngs by Mean Return Cash Share Prce Yeld Prce-Yeld a. Cash lease. b. A crop share lease. c. Flexble lease adjusted by harvest-tme prce. d. Flexble lease adjusted by harvested yeld. e. Flexble lease adjusted by harvest-tme prce and harvested yeld. f. A one s the most preferred alternatve and a fve s the least preferred alternatve.

19 18 Table 5. Tenant and Landowner Rankngs of Alternatve Leases by the Coeffcent of Varaton of Returns. Corn Soybeans Wheat Cotton Peanuts Wheat-DC Soybeans Tenant s Rankngs by Coeffcent of Varaton of Returns Cash a f 2 4 Share b Prce c Yeld d Prce-Yeld e Landowner s Rankngs by Coeffcent of Varaton of Returns Cash Share Prce Yeld Prce-Yeld a. Cash lease. b. A crop share lease. c. Flexble lease adjusted by harvest-tme prce. d. Flexble lease adjusted by harvested yeld. e. Flexble lease adjusted by harvest-tme prce and harvested yeld. f. A one s the most preferred alternatve and a fve s the least preferred alternatve.

20 19 Table 6. Tenant and Landowner Certanty Equvalent Maxmzng Leasng Alternatves for Varyng Rsk Preferences. CRRA a Corn Soybeans Wheat Cotton Peanuts Wheat-DC Soybeans Tenant s Certanty Equvalent Maxmzng Lease 0 Cash b Cash Cash Cash Cash Cash 1 Cash Cash Cash Cash Cash Cash 2 Cash Cash Share Yeld Cash Cash 3 Yeld Cash Share Yeld Yeld Cash 4 Yeld Cash Share Share Yeld Cash 5 Yeld Cash Share Share Yeld Cash CRRA Landowner s Certanty Equvalent Maxmzng Lease 0 Share Share Prce-Yeld Share Share Share 1 Share Share Prce-Yeld Share Share Share 2 Share Share Prce-Yeld Share Share Share 3 Share Share Prce-Yeld Share Share Share 4 Share Share Prce-Yeld Share Share Share 5 Share Share Prce-Yeld Prce-Yeld Share Share a. Coeffcent of Relatve Rsk Averson where a zero represents rsk neutral behavor whle a fve represents extremely rsk averse behavor. b. Leasng alternatve that maxmzes the certanty equvalent for the Coeffcent of Relatve Rsk Averson. Cash represents a cash lease, share s a crop-share lease, prce s a flexble lease adjusted by harvest prce, yeld s a flexble lease adjusted by harvested yeld, and prce-yeld s a flexble lease adjusted by harvest prce and yeld.