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How Much Should You Pay to Lease Pasture?
The reason it's hard to figure out what a pasture lease is worth is there are so many factors contributing to it's value in any given year. Some pastures have better quality forage than other pastures, some are already fenced and have water, and others will require investments of time and money to make them usable. And then there are the dry years when demand for pasture goes up because everyone needs additional pasture to graze and farmers are willing to pay a premium for whatever pasture is available. Adding to the difficulty are different ways you can calculate how to pay for a lease including yearly leases, a monthly fee paid per head, animal unit, or cow-calf pair, or variable rates that depend on pounds of gain.
One way to get a start on figuring out what a pasture my be worth is to check in with the National Agricultural Statistics Service. One of the things this agency does is keep track of what folks are paying in different parts of the country in different years. While this information is only historic, it's a step in the right direction. I've searched their site and found the most up to date information they have so that you can use it.
Let's start with two maps. The first shows the pasture rents paid in 2010. Though that's 5 years ago, it gives you some idea of where things have been. The second map shows you what pasture was valued at in 2014. Since landowners look at the a return on their investment in the land, this map gives you an idea
Kathy.
In Iowa, a good source of both historical rates and formulas for pasture rent, is Iowa State Extension.
http://www.extension.iastate.edu/agdm/wholefarm/html/c2-23.html
Kathy,
I don’t understand the maps, example Oregon 2000 $23.0 Pasture Cash ; 2010 $630 Pasture Value, 1.3%. How do these two relate?
Hi Mark,
The first map shows you what an average pasture rental rate per acre (for the grazing season) was in 2010. That’s helpful because it gives you a kind of starting rate for what things might cost. The second map shows you the average value of an acre of pasture if you own it. That’s valuable because sometimes landowners are looking for a percent rate of return on the land they own, and that adjusts their view of how much rent they would like to charge. We’ve got an article describing more ways to figure pasture rental rates on Tuesday (February 10).
Are these rents monthly amounts? Thanks.
They’re for the grazing season. So you’d pay say $23 in Oregon for one acre, but you’re renting a certain say 500 acres total.
Another complicating factor is to sort out “introduced pasture” from native rangelands. They are very different in how we should manage them and thus worth different rental rates. I get asked this question a great deal Kathy so thanks for tackling it in the logical and tactful way the you always do.
If you know what the average production is in AUM or tons of a pasture, another method is local hay value minus harvest costs minus cost of livestock transportation and frequency of checking on livestock. This sets a maximum one might pay.
The USDA data is what the average local market is (what is actually being paid), not what the value of pasture is. Our county average is $40/acre, the range in value is $10 to over $100.
Both excellent points Gene. The first part (the math) is one of the things I’m hoping to cover in upcoming articles including some kind of spreadsheet to help with the math. If you’ve got something like that we can draw on, let me know. 🙂