Doing the Math on Pasture Rental Rates (Part 1)

This is the second part in a series we first ran in 2014. We've updated it with some new information and input from On Pasture readers. Enjoy! (Here's the first in the series.) 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 a 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

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