Pasture leases require careful, written agreements to assure fairness, compliance
Always put a pasture lease agreement in writing, advised Jay Jenkins.
The University of Nebraska Extension educator discussed developing pasture lease arrangements during a recent webinar.
“Lease agreements are binding for a producer and their heirs,” he said. “Get legal counsel when developing these types of agreements.”
Land owners with grazing pastures to lease should offer agreements that treat both parties fairly because the lease will have more staying power, Jenkins said.
“They are more likely to be renewed, more likely to be followed and more likely to be enforced if they are fair,” he commented.
“Fair is free from favor toward either or any side,” Jenkins continued. “Fair implies an elimination of personal feelings, interests or prejudices so as to achieve a proper balance of conflict of needs, rights or demands.”
Price is usually the first thing ranchers look at when deciding if a lease agreement is fair. Ranchers are used to relatively transparent markets in regards to price, but it can be a little more difficult to determine a fair price on grazing land since producers can’t look up current prices in a newspaper or hear them on the radio, he said.
To help determine a fair price, Jenkins said most states offer some type of farm and grazing land publication with current rental rates.
The University of Nebraska publishes the Nebraska Farm Real Estate Market Highlights each June. In this guide, the state is divided into eight districts, and a range of land lease prices is given.
The National Agricultural Statistics Service also publishes per acre rent data they gather from their farmer and rancher surveys. This information is broken out by county or district, but it only provides an average rate.
Jenkins said county Extension agents may also have a good idea of the going rate for range leases locally.
Typically, rangeland is leased per acre, which tends to cover the year-around use of a piece of land, or per pair per month, which is essentially the sale of a given amount of grass. This lease typically covers the grazing season and is usually about five months in length.
Per acre leases are most affected by pasture productivity, Jenkins said.
“The more grass a pasture produces, the more valuable it is on a per acre basis. In areas with higher average rainfall, grazing pastures will have higher rental rates,” he noted.
In per pair per month leases, price differences can be attributed to the amount of care provided by the landowner. Grass listed in the higher price range typically has full care provided by the landowner, and grass in the low-cost range is where the lessee does most or all of the work.
Jenkins said landowners need to keep in mind that cow size figures into per pair per month leases.
“Forage intake is directly related to cow body weight,” he explained. “If a cow weighs 20 percent more than average, she will eat 20 percent more, and it should cost 20 percent more.”
Determine a stocking rate
Landowners should determine a stocking rate before leasing out their grazing pasture.
“Stocking rate is a balance between the forage demanded by the animals and the amount of forage grown,” Jenkins said. “It is the most important part of proper grazing management.”
Landowners need to carefully manage their grazing land to ensure future productivity.
“Too much grazing pressure will lead to decreased long-term forage production of the land,” he said. “It is important to recognize economic incentives of both the land owner and cattle owner are different for per acre and per cow per month leases.”
When there are only a few animals in a pasture, animal gain is high because the animals are able to utilize the highest quality feed available for them to eat.
However, when the pasture starts approaching the maximum number of animals that should be grazed, there won’t be enough premium grass to go around. This creates more competition for desirable grasses, and the animals will start eating less desirable forages.
“As we add more animals, we will get more total gain, though each animal is gaining less,” Jenkins explained. “If we add too many animals, performance will eventually suffer, and total gain will be less even though there are more animals.”
Jenkins said conflict can arise in per acre leases because economic pressures push the cattle owner to stock the grass to the point where gain per acre will peak and return to the acre is maximized. However, the landowner would rather see a low stocking rate with less stress on grazing resources because he will earn the same amount of money.
Jenkins said the situation is reversed when a lease is based on per cow per month.
“It is important that the stocking rate be specified in the lease agreement to avoid disagreements,” Jenkins explained. “It also helps the landowner reach his rangeland health goals and gives the cattle owner a chance to reach his production goals.”
Stocking rate can be determined a number of different ways, including average number of animals during a lease period, but Jenkins recommending using animal unit months or animal unit days.
“Whatever way stocking rate is expressed, it should be clearly written in the lease agreement and discussed among the parties involved,” he said.
Other areas that should be addressed in the written lease are on and off dates, residual grass, who does what, who pays for what, subleasing and landowner access and hunting rights.
University of Nebraska Extension Educator Jay Jenkins noted that it is also important to address how grazing pressure will be reduced in case of drought or some other type of natural disaster, such as hail or fire.
Important questions to address include who decides and how will decisions be made, how much notice will be given before a reduction in stocking rate and how will payments be adjusted.
In these cases, Jenkins urges both parties to communicate with one another early and often to avoid conflict.