Many producers depend on pasture for a large portion of their livestock feed, so cost of rent needs to be considered carefully. With the start of a new year, now is the time to work on getting agreements in place for the 2018 grazing season.
A tricky thing when answering questions about rent is that there is no hard-and-fast number to give. There are several factors to consider when negotiating pasture rent. These include pasture quality (including type of forage and/or legume), projected grazing value, pasture location and pasture size. When determining rent, it is also important to consider each party’s stance.
The landowner wants to be able to cover the real estate taxes, cost of fence repairs, insurance and interest on their investment. However, since pastureland typically sells for a higher price than its earnings can support, the landowner may be only able to cover their out-of-pocket expenses. The renter should calculate what they could afford to pay for rent. All these guidelines and estimates are just that — guidelines and estimates. The livestock owner needs to know what price they can profitably pay according to their projected budgets and returns.
It’s important to outline what responsibilities fall to each party. Division of responsibilities between the landowner and the livestock owner need to be considered when negotiating rental price. In most cases, the renter is responsible for production activities such as checking the livestock, checking the water supply and providing fly control, salt and minerals. For fence repair, it is typically the responsibility of the renter to repair fences with the landowner providing the necessary materials. Land-related activities such as weed and brush control and fertilizing and reseeding pastures are negotiable and should be clearly outlined in the contract.
With that said, ensure that both parties fully agree on and understand the terms, pricing and payment system. Put the entire agreement in a written contract, complete with signatures. While contracts may seem cumbersome and time-consuming, they are best way to ensure agreements are upheld and established guidelines are followed. If any problems arise, contracts provide something to which to refer back.
For those unsure where to start, AgLease 101 is a great resource at http://www.AgLease101.org. At the top of the page, go to the Document Library and select the “Pasture Rental Agreements for Your Farm” PDF. It will lead to a document with information, worksheets for both the landlord and livestock owner to determine their cost estimates and share of gain and a fill-in-the-blank contract. AgLease 101 helps take the guesswork out of drawing up a contract and allows participants to customize their version to their specifications. After filling it out, the only thing to do is sign, and AgLease 101 recommends having the document notarized, as well. Also consider having an attorney review the agreement.
The following pasture rental rate numbers are simply to be used as a guideline; fair rates need to be negotiated between the landlord and renter. Keep in mind that these numbers are ranges and averages from the state of Minnesota. Pasture values tend to follow corn and cattle prices, but Midwestern livestock producers may keep prices higher than the national average because of high demand for land.
A final thought to consider is how rent is charged, which is another thing that will need to be decided. Options include per acre per month, per cow unit per day or per cow unit per month. In this context, a “cow unit” is a 1,000-pound beef cow.
Some recent price ranges are $12-$90 per acre per month, 20-70 cents per cow unit per day and $8-$21 per cow unit per month. The averages from those ranges are $35 per acre per month, 40-50 cents per cow unit per day and $12-15 per cow unit per month.
Some county-specific data from the National Agricultural Statistics Service shows 2017 average pasture land rent was $22 per acre for Benton County, $20 per acre for Morrison County and $37 per acre for Stearns County, all in Minnesota. Again, keep in mind these are just averages, and there are several factors that will influence the final agreed-upon price. The per-cow unit prices can be adjusted for other classes of livestock. A general rule of thumb is to multiply by 30 percent for a calf age 3-6 months, 50 percent for a calf age 6-12 months, 75 percent for yearlings, 125 percent for a bull or horse and 20 percent for a ewe.
Pasture rent can be a tricky topic, but it doesn’t have to be if the landlord and livestock owner communicate well and reach a fair compromise.