Farming Magazine - May, 2012
Beef: Pasture Rental Rates
We have observed increased interest in farmers renting pasture recently. The cost of buying cattle in current markets and the desire to add valuable weight to cattle that are owned are driving this trend. The question always looms as to what this pasture is worth.
All pastures are not created equal
The first consideration is the value of the pasture being purchased or sold. The purpose the cattle owner has is getting as much weight as possible for their rent. We did a grazing study here at Penn State a few years ago where we measured 14 different forages twice weekly for three years during the growing season. A wide range of forages was included, such as native orchardgrass, annual grasses, oats and alfalfa. What we discovered is that in this region forages do not vary much in energy value. Energy - not protein - is the key nutrient in the pasture for animal growth, so it really didn't matter what forage they were grazing. Using the energy values we got from our samples, we also found the ceiling for growth was about 2.2 pounds per day. This weight would be bone, muscle and fat, and would not include fill in the rumen and digestive track. The key issue is how the pastures were managed. The following are questions to ask about pastures to determine their true value:
- Have these pastures been limed and fertilized regularly?
- Have these pastures been overgrazed regularly?
- Have these pastures been grazed continuously or were they rotationally grazed?
- What is the water source and how good is the water?
- What condition are the fences in?
- Are there working facilities available and how accessible are they from the pasture?
- Who are the neighbors and what influence will they have on possible liability or concern about the cattle?
- Are there wildlife plots and other exclusions in the pasture?
How much does a pasture cost?
The answer depends on whether it's coming from the pasture owner or from the renter. The issue becomes finding common ground that has the potential to benefit both. The following are some common types of pricing pasture rent:
1. Per-day, per-head charge. This seems to be the most common type of pricing. This method is most valuable when the pasture and facilities are in excellent shape. The gain of the cattle and other costs will be more predictable. If feeder cattle are worth over $1.20 per pound when they leave the pasture - a current value - and the pasture will support 1.5 pounds of gain per day, it follows a daily head charge of 75 cents to $1 is certainly in order. For cows and calves, the daily value can be calculated relative to what it would cost to feed stored forage to the cows. For example, high-quality hay worth $200 per ton would result in a daily charge of about $2 to $2.50 per cow per day. Poorer pasture, fences that need repair, the inability to rotationally graze pastures, buying fertilizer, no facilities to handle cattle and other cost factors will reduce the value of the pasture on a daily basis.
2. Per-acre charge. This method of pricing can be tricky. Knowing the productive capacity of a pasture is a must with this method, so some kind of history of animal performance and pasture management will be needed. This information will allow for optimum stocking rate and best returns for this method of pricing. The other issue is the risk of drought and grass availability. Under this method the cattle owner will assume all of this risk and the cost of the pasture will not change.
3. Daily animal gain or total animal gain. The risk of this method shifts to the pasture owner. It is imperative the owner knows what the productive capacity of the cattle is before pricing the pasture, and it could conceivably be different for different cattle owners. What genetic potential do the cattle have for growth? What is their health status? What gains are realistically available on the pasture? These and other similar issues come into play.
A key issue in this method is how and where the cattle are weighed to determine their gain. There is a significant difference in animal weight for cattle that are brought in from a pasture to a scale and weighed immediately compared to cattle that are loaded on a truck and moved 10 miles to a scale. Both parties need to determine the method, time and place of weighing the cattle at both ends of the grazing period before they start grazing.
It serves both parties well to have a written contract in place before starting a pasture rental. An example of a contract can be found at www.das.psu.edu/research-extension/beef. When both parties have signed off on such an agreement it can solve a lot of problems should some sort of incident arise. Liability is another issue to consider. Most lawyers will tell you that the pasture owner is responsible if an animal gets out and causes damage provided negligence is shown. If a car runs through the fence and the cattle get out and cause damage, this is a case where there is no negligence on the owner's part.
Be sure both parties are aware of where the liability lies. Observation and care of the cattle should be clear. Some pasture owners want to be - or should be - involved in watching cattle, treating sick cattle or other activities. Be sure both parties are clear about who has responsibility for daily care. Finally, be sure to agree on how the pasture owner will be paid. Who pays for an animal that dies halfway through the grazing season? Who pays for a water tank or a gate that is destroyed by the cattle? Should there be some form of advance payment? Does the pasture owner have the right to sell cattle when payment is not made to satisfy the debt?
In most cases pasture rental can be a simple affair, but things happen so be prepared.
Dr. John Comerford is associate professor of dairy and animal science at the Pennsylvania State University.