“What should I pay for a pasture lease?” is a search that brings lots of readers to On Pasture. It’s also a hard question to answer as there are so many things that factor into a pasture’s value. This was the first in a 4 part series published in 2014 to put together information to consider when you’re approaching a land owner about a lease, or if you’re a landowner trying to find someone to graze your land. We’ll share the rest of the series in future Classics by NatGLC.
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. (You can click on either one to zoom in.) The first map shows you what an average pasture rental rate per acre per month (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 what pasture was valued at in 2014. That’s valuable because sometimes landowners are looking for a percent rate of return on the land they own, and their idea about that adjusts their view of how much rent they would like to charge. The second map shows you the average value of an acre of pasture if you own it. On Pasture reader Gene Schriefer reminds us of something to keep in mind as we look at these numbers. “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 (in Wisconsin) is $40/acre, the range in value is $10 to over $100.”
You can also go to NASS’s quick stats for this topic. Click on the picture below to go to the NASS website to see the break down by state of rent paid for cropland, and pasture. You’ll find stats for 2017 at the top, and as you scroll down, you’ll find the rents paid for previous years.
One more way to figure a lease rate was suggested by reader Gene Schriefer. He said, “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.”
In the second part of the series I’ll share some of the math behind figuring different rates. My goal is to get it in an Xcel spreadsheet for you so all you have to do is plug in some figures and the computer will do the figuring for you. Stay tuned!
Thanks to the National Grazing Lands Coalition for making this article possible. Click on over to see the great work they do for all of us. Thank them for supporting On Pasture by liking their facebook page.
Save the Date! The 7th National Grazing Lands Conference is December 2 – 5, 2018 in Reno. Kathy and Rachel will be there. Join us!