Considerations for pasture land leases and contracts
Does your agreement address up-front responsibilities, severe weather and hunting rights?
By Tim Christensen and Erika Lundy-Woolfolk
As land values have increased and profitability of row crop declines, more operations may be looking at expanding the cow herd or even returning cows to the farm. With tighter margins, beef producers and landowners are looking for pricing information on pasture or grazing agreements. Even though a quick, easy answer is often desired, every farm comes with a unique set of circumstances.
There are three main pricing structures for pasture leases or agreements. With all, the value of the pasture is widely variable depending on the type and quality of available forage, amount of timber, condition of exterior and interior fences, availability of working facilities, water resources, ease of access and many other variables. Responsibilities of management expenses like weed control, fertility and improvements should also influence cash rent prices. While many universities have a report of annual cash rental rates for pasture, these are meant to be a starting place for determining the rental rate and adjusted according to the previously mentioned factors.
Cash rentThe most common method for pricing is where a tenant pays an annual fee per acre for use of the pasture. Typically, pasture rental rates in the Midwest assume a six-month grazing period while other regions of the country may be longer based on the length of the growing season. The landowner may choose to place some restrictions on dates of use such as a beginning or ending grazing date as well as restrictions on stocking rates, but typically, the tenant would be making day-to-day management.
Per head per dayAnother option for pricing is when the landowner and the tenant agree on a daily charge per animal or per pair rather than the standard price per acre. This might be due to two owners running pairs together for the summer or simply renting a pasture for a few months of the year rather than the whole growing period perhaps due to limited water resources, extreme weather events or cow herd management strategies. This pricing strategy may also apply if the landowner is providing the daily care for the livestock in a custom or contract grazing system. In this situation, both a pasture rental rate and labor are figured into a daily charge.
Per pound of gainPerhaps the least common method is a pricing structure based on animal performance, commonly seen in a stocker scenario. Cattle need to be weighed before turn out on the pasture and weighed again as they are removed to determine pounds gained over the grazing period. The landowner is paid for the pounds gained on the pasture based on what the current cost of gain would be in a grower yard setting.
This type of arrangement is meant to reward the landowner for higher quality, more productive forages while incentivizing the cattle owner for good grazing management. The disadvantage of this setup is increased risk from not knowing the cost until the end of the grazing season and weather impacts on forage production.
With any type of pasture lease agreements, there are some important details to work out in the beginning of the agreement to avoid disputes later. Key considerations to put in writing include who is responsible for fence maintenance, day-to-day care of the animals, input expenses, and anything else that is important to either party.
Defining the stocking rate can also be important as it can be measured in animal units or number of pairs. Many assume an animal unit is equivalent to one cow; however, an animal unit refers to a 1,000 pound beef animal. Mature cows in the current market easily exceed the 1,000 lb. weight, so an adjustment needs to be made (i.e. - 1,300 lb. cow equals 1.3 animal units). Keep this in mind when making an agreement so that one party is not assuming a limit of 100 animal units, while the other assumes 100 mature cows.
After several severe weather patterns in recent years, it may also be a good idea to have a disaster clause written into the contract that specifies the response to drought, floods or other natural disasters, who is responsible for making the decision, and how the decision will be made.
Additionally, with increased competition of pasture acres for hunting ground, it’s becoming more popular to address hunting rights in grazing agreements. This includes if the tenant or landlord has sole hunting rights, who has the authority to give permission to others to hunt the land, and if hunting is restricted until a certain date after which cattle are removed.
Christensen is an Extension farm management Specialist and Lundy-Woolfolk is an Extension beef specialist, both with Iowa State University.
