Pasture Rental Rates: Doing the Math Part 1

There are a variety of bases for figuring a pasture lease price and each of them involves its own math.  You can figure by return on investment or annual leases, or figure out a per acre, per head grazed, per month, per Animal Unit Month cost, or share the risk and reward with the landowner by paying a rate based on pounds gained. Lots of people have shared lots of information on how to do the math for the various methods. Here's a condensed version of their recommendations. Return On Investment Last week I showed you this chart of what pasture land was worth, on average, in different states in the U.S. in 2014  Remember, that's just an average. Some pasture will be worth more, other pasture worth less depending on where it's located in the state, the kind of forage it produces, etc. What we can do with this information is plug the numbers into a formula that allows us to figure out how much we'd like to charge for a given pasture so that we get some kind of return on our investment. Here's a sample calculation from a University of Arkansas fact sheet (downloadable here). If the land is assessed at $200 per acre and banks charge 8 percent for loans (or a return of 8 percent on investment is desired), then pasture rent is calculated as follows: ($200) x (8%) = $16/ac per year base cost The problem with this method if you're the person leasing is that it doesn't take into account forage quality or production or whether there is adequate fencing, water and ot

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4 thoughts on “Pasture Rental Rates: Doing the Math Part 1

  1. We can our management of the forage and animals, but what we cannot change greatly, or in a short period of time is the soil in the pasture.

    We cannot take marginal soil and necessarily achieve the ISU forage yields estimates. For a starting point, I’d consider data from the web soil survey and potential forage production based upon soil type within a pasture. On our farm my worst soils are around 1- 1.5 tons/acre with cool season forages, but better soils will yield over 5 tons.

    Interesting because of the low yield I only graze these paddocks 1 or 2x each year. I’ve notice indiangrass volunteering and increasing each season. I’ve not yield measured yield on this yet, but it “looks” like there may be 2-3 x more forage biomass/acre.

    Tables are nice, but your results may be dramatically different, there is more useful data available in figuring out potential forage production and setting a pasture value

    1. Good point Gene. Adding to information about soil quality is the NRCS’s Soil Survey online which shows you what your base soils are. It’s a great resource which is why I keep promoting it. 🙂

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