Extension Eduction: Grass Leases
Probably one of the most frequent requests I receive is for information on leasing arrangements for grass. Ranchers and landowners often call to inquire on the going price as well as example contracts and information on who pays for what.
In this article I will cover some of the most common questions, but realize that these are individual arrangements and the price also changes with the year.
Price of grass
Just as a ton of hay has a value, so does the grass that a cow grazes.
The rate for grazing on private land is reported each year as part of the Wyoming Agriculture Statistics annual bulletin. The bulletin that came out in 2012 reports the 2011 rate as $20.50 for a cow-calf pair month in Wyoming. 2012 would have certainly been higher given the short supply of forage.
I’ve also noticed that the rate seems to be higher in the east and decrease as one travels west. Around Wheatland, I know that some received as much as $35 per cow-calf month in 2012, but I would guess the average to be closer to $30 per cow-per month in Southeast Wyoming.
There are also a lot of “son-in-law” deals that provide a leasee an opportunity at less than market value for a variety of reasons. It is however safe to say that, at this point, the landowner with grass to lease is certainly in the driver’s seat when it comes to price.
Who does what
The price certainly depends somewhat on the individual situation.
A landowner who provides full care for cattle will be able to demand a higher price than the landowner who just points to the gate lets the cattle owner do the care.
It is critically important to agree prior to cattle arriving exactly who will do what and who will pay for what in writing. Many will wisely consult lawyers and have a formal contract drawn up that details in legal jargon who does what.
However, in my opinion, many people just choose to operate by a verbal agreement. I would strongly encourage these folks to sit down together and at least sketch out an agreement in writing that is clear to both parties. This can be a “T” chart with one side “landowner’s responsibilities” and the other side “cattle owner’s responsibilities.” Things to consider include:
Water development materials/labor, who checks water
Corrals – repairs, materials
Supplemental feed – who buys, who delivers, how often
Death loss – including poisonous plants, predators, etc.
Pasture rotation decisions
Turn in and out dates
This is obviously not an exhaustive list. Each ranch will be a bit different.
Types of leases
There are two primary types of lease agreements for grass – flat cash lease and lease by the animal month.
In the flat cash lease the leasee would agree to pay a certain amount for the pasture for the grazing season. In this arrangement the leasee is assuming all the drought risk but is also positioned to benefit in the wet years. Everyone who has been here very long knows we more frequently have dry years then we have wet years. Usually, with the assumption of risk comes a decrease in price, so when compared straight across the flat cash lease would be less than the per month lease.
In the per month lease agreement, most are for a specific type of animal for a range of months (i.e. cow-calf pairs or yearlings). I encourage you to consider moving to an Animal Unit Month (AUM) rate where one AUM is equal to 1,000 pounds of animal. This provides the livestock owner with additional flexibility in stocking the ranch with the type and kind of animal they choose and compensates the landowner more accurately for the forage being consumed. For example a continental type cow that calved in January will certainly eat more than the small June calving cow.
If the lease agreement is by the month, it is wise to have some minimal number of AUMs or cow-months that will be included and paid for up front. For example, if a ranch is going to lease grass for 250 cow-calf pairs for five months, they may agree that the cattle owner will pay for 2.5 months up front, and even if it is a bad year, there will be enough grass for that time period. The landowner is then guaranteed some income and the cattle owner is guaranteed some grass.
Both landowners and responsible cattle owners will be concerned with the condition of the rangeland and making sure it is not being overgrazed. It is wise to put some monitoring in place that makes an annual assessment of the pasture condition in multiple locations so that the health of the pasture can be tracked over time. It is often wise to involve a third party in this assessment.
Deciding on when grazing should cease on the pasture can be a touchy subject at times. Again, a third party can often be helpful here but livestock owners wanting to maintain a longer term lease will generally err on the side of caution.
There are many resources available to help such as example contracts and other guides. I’ve assembled a list of these under the ag section at plattecountyextension.com.
Please contact me if I can answer questions for you.