Pasture rental and lease agreements
Pasture rental and lease arrangements enable livestock producers to affordably start or expand their operations and limit financial risk.
When grain prices are high and there’s growing interest in grass-fed beef and dairy, managed productive pastures offer an alternative, affordable way to feed cattle. Sheep and goats traditionally have been fed a mostly forage diet, but managing their pasture will lead to greater profitability.
For landowners, renting out pastures may allow them to generate income while giving a beginning farmer a chance to get established.
Understanding rentals and pasture leases
Pasture lease and rental agreements are often used interchangeably, but they aren’t the same.
Rental agreements are month-to-month, with no set period of residence.
At the end of each 30-day period, both the landowner and the tenant are free to change the rental agreement (subject to rent control laws).
Changes may include increased rent for the pasture, changing the terms of the initial agreement or asking the tenant to vacate the property.
Most states require both landlord and tenant to give 30 days’ notice before making any changes. If your state doesn't require notice, rental agreement changes can be made at the landlord's discretion.
Typically, a rental agreement automatically renews after each 30-day period has elapsed.
There’s no need to give notice about this automatic renewal, as long as both parties are in agreement.
A lease has a set term, such as six months or a year, during which the tenant agrees to rent the property.
During that time – also known as the duration of the lease – the tenant and the landlord must adhere to the agreement. For example, tenants agree to make monthly rent payments and follow any code of conduct or other stipulations in the lease.
Neither party can change any terms of the agreement until the lease expires, unless both parties agree to the change.
A tenant cannot vacate the property without breaking the lease.
If tenants vacate the property, they can be held liable for the rest of the rent due under the lease or be required to find someone else to take over the lease.
Determining fair rental rates
Deciding the appropriate monthly rental rate to charge or pay depends on several factors. The renter must determine expected gains or profits from using the land.
Typically, the rented parcel’s carrying capacity (i.e., animal units per acre) will help determine the fair rental rate for both parties involved.
Managing the pastures can greatly influence stocking rates. For example, pastures managed as a continuously grazed system will have different stocking rates compared to a rotational grazing system comprised of smaller paddocks, while a mob grazing system can support high densities.
Land with the promise of greater gains (i.e., milk, fiber or muscle) will greatly influence rental rates.
Typically, most pastures are rented by the month on a per-acre or per-head basis. An alternative is to consider an amount of gain in a season.
Two very important items that must be agreed on are the maximum number of animals allowed on a unit of land and the animals’ weight. Stocking rates and the weight of the animals will greatly impact the pasture’s stand life and soil that supports the pasture (i.e., soil health).
If you rent on an acre basis, you may overstock to reduce cost per head. If you rent on a per-head basis, you may want to lower your stocking rate to improve rate of gain. These decisions might conflict with the landowner’s expectations.
The devil is in the details, and all details must be discussed and agreed upon by both parties before entering the lease or rental agreement.
The following scenarios illustrate issues to consider when negotiating a pasture lease.
You have a 75-cow beef herd and expect you’ll have 75 cow-calf pairs to put on pasture on May 1. You hear of an available pasture to lease for the year for $15,000 for 100 acres. Is this a fair price?
In the past, you’ve paid $1 per cow-calf unit per day for pasture rental. If we can expect 180 days of pasture growth adequate to support the 75 cow-calf units, that would be $75 per day in pasture costs for 180 days, totalling at $13,500.
If you pay the $15,000, the cost comes out to $83.33 per day or $1.11 per cow-calf unit per day.
In the second case, you have 75 bred, Holstein heifers that you want to gain at least 1.75 pounds per head per day by calving time in the fall.
To achieve this rate of gain, you’ll need to divide the pasture into 30 paddocks with movable electric fencing, which you’ll have to provide. It’ll also require you to move fences and animals on a daily basis.
The alternative is that the landowner offers to custom-raise the heifers for $2.50 per head per day. However, there’s no guarantee of rate of gain.
Questions to ask
What’s the pasture’s forage production potential?
Is it composed of diverse and productive grasses and forbs, or weedy Kentucky bluegrass?
What’s the ground’s fertility status, and who’ll be responsible for the additional fertilizer needed?
What’s the soil type? Is it sandy or rocky with little water-holding capacity?
What’s the water supply and quality in the pasture and the location of the water source?
Will different fencing plans work with the water available?
What happens if the water supply dries up in late summer? Who’s responsible to provide water?
What to include in agreements
Whether it’s a rental agreement or a true lease, put it in writing with the guidance of legal counsel. It should include:
Names of the people involved.
Legal description of the land involved.
Length of the agreement.
All of the other items that have been agreed upon.
It should then be signed and dated.
Reviewed in 2018