| | What is pasture rental in my area?
Similar to other land leasing arrangements, pasture leases reflect local market rates, local demand, quality of the land, access to water, suitability, the contributions of each party, and bargaining. In general, variations in rent from year to year are small.
What is a typical arrangement?
In most pasture lease arrangements, the landlord supplies the pasture land and the tenant supplies the livestock. In an “unsupervised” pasture lease, the tenant pays the landlord a fixed sum each year. The landlord is responsible for fence repairs and the tenant supervises the livestock on the pasture.
With a “supervised” pasture lease, the landlord is responsible for supervising and caring for the livestock in addition to fence repairs. The rates for these leases are typically higher than an unsupervised pasture lease.
How do I value the rental?
There are a number of different methods to quote pasture rental rates.
- Rent per Animal Unit Month (AUM). This method is the most common and is typically based on mature cows. Landlords and tenants will have to reach an agreement on the number of head using the pasture, commonly referred to as the “stocking rate”. Stocking rates effectively relates livestock consumption to forage supply. However, these rates do not reflect the quality of the pasture.
- Rent per acre. This method should reflect land productivity. When pasture is rented by the acre for the season, the tenant will have an incentive to maximize production per acre and may be inclined to stock the pasture more heavily instead of by the head. It will be important for the landlord to include a provision that limits the stocking rate.
- Weight Gain. With this method, pasture rent is based on the added weight the livestock gain while they are on pasture. It is more suited for feeder cattle than beef cows. Cattle must be weighed before they are placed on pasture and after they are taken off of the pasture and adjusted for shrink. Payment is based on an agreed value of gain per pound by the total amount of gain.
What do I consider in calculating the rental?
The landowner’s goal should be to recover land taxes, the cost of any fence repairs, and a return on land investment. Conversely, the tenant should calculate what they could afford to pay based on projected costs and returns. For example, if the rented pasture will be used to graze steers, the tenant should consider the price for feeder cattle in the spring, what the expected selling price will be in the fall, and what some of the costs of pasturing will be including mineral and salt, medication, and interest on investment in cattle. In addition, any labour and possible travel costs should be estimated if the home place is far from the cattle. Based on this information, the maximum amount to pay for pasture can be estimated but should be tempered by the quality of pasture and location relative to the home farm and water supply.
What should I include in a lease agreement?
- The following is a checklist of items that might be included in an effective written agreement.
- Term of the lease, including dates in and out of the pasture.
- Legal description of the pasture.
- Carrying capacity, or the number of AUM’s, to prevent overgrazing of the land.
- Amount of rent, how it is to be calculated and when it will be paid.
- Stated responsibilities of both parties relative to water, fence repairs, salt & minerals, stray animals, veterinarian visits, and rejuvenation.
- Restrictions and responsibilities relating to pasture management and general cattle management, including cattle supervision.
- Responsibilities for death loss and disappearance. Responsibility for these are negotiated between the tenant and landowner subject to overall animal health, temperament and security of pasture facilities.
- Restrictions on the health status of cattle coming into the pasture, as well as right of entry.
- A clause that allows the landowner to give the tenant two weeks’ notice to pull their cattle in order to avoid overgrazing and subsequent long-term damage to the pasture.
- Method of resolving disputes, lease renegotiation terms, right of first refusal, rights of assignment or sublease, and ways and means of lease termination.
Where can I get more information?
Contact the Ag-Info Centre at 310-FARM to discuss pasture rental agreements.
Prepared by Dean Dyck, Ag-Info Centre, Alberta Agriculture and Forestry 310-3276 |
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