Paying or renting pasture

By Gary Sliworsky
OMAFRA Rep.

Many people call about how much they should pay/rent for pasture. OMAF and MRA has a fact sheet outlining some factors to consider.
Determining an appropriate stocking rate of the pasture is very important to both the landlord and tenant. If a pasture rent is based on a per acre basis it gives an incentive to the livestock owner to stock heavily. The landlord, in turn, may desire light stocking rates so as to preserve the pasture. Likewise, pasture leased on a share of gain basis could also lead to overgrazing. Thus, it is in the interest of both parties to discuss the stocking rate issue and develop a lease agreement that achieves maximum economic returns to resources while maintaining the pasture stand and quality.
While both the landlord and tenant should consider their own costs and returns in establishing a rental rate, the market demand will ultimately influence the final rate. The market rate is the going price resulting from negotiations between landlords and livestock owners. Previous year's rates, livestock inventories, price, and weather conditions for the current year all influence the market price.
The value of water, location and landlord services are subjective. However, these items have some value to the livestock owner.
Location: The pasture location is important if the livestock owner is caring for the livestock. The total cost can be computed by estimating the number of trips per season then multiplying by the number of miles, then multiplying again by the cost per mile. The number of trips should consider checking the cattle for count, health, minerals, and water supply as well as hauling or driving the cattle to and from the pasture.
Water: Good quality water in proper locations improves gain. If the water supplies go dry in mid-season, provisions must be made for hauling water or removing the animals. The lease agreement should establish the party responsible for these costs.
Landlord services: Landlord services vary from mere rent collection to taking complete care of the livestock during the pasture season. In most cases, the value of such services is included in the rental rate.
Other factors: Pasture rental rates per acre should reflect productivity. Past stocking rates, weed growth, and moisture affect productivity (stocking rates or carrying capacity).
The landlord's cost and livestock owner's return are two methods that can be used to estimate the cost and returns of the landlord and tenant. These then become a starting point for the negotiation of a fair rental rate. This can be calculated on a per acre or a per head basis. Details on both methods are in the factsheet (link at the end).
Landlord's Cost Basis: In this method, the major task is to establish fair values for the resources and annual use charges to determine the landlord's cost.
Livestock Owner's Returns Basis: A budget format that can be used to determine the livestock owner's returns.