Pasture Rental Concerns?

Melissa O'Rourke

Ag Decision Maker offers resources to assist landowners and producers with determining fair pasture rent arrangements.

Contributed by Melissa O’Rourke, Iowa State University Extension and Outreach Farm and Agribusiness Management Specialist, morourke@iastate.edu

As cattle producers move cattle off winter feedlots, discussions are taking place regarding pasture rental rates for the grazing season. Iowa State University Extension and Outreach Ag Decision Maker – along with other university extension services – offer guidelines and resources to help Iowa landowners and producers discuss methods to determine appropriate pasture rental arrangements. Especially during these times of increasing land prices and input costs, parties want to be sure that they are having open discussions to arrive at fair agreements for pasture rents.

There is no quick answer to what is the right rent for a given piece of pasture. Parties must discuss and agree on costs and responsibilities such as real estate taxes, maintenance of infrastructure (fence, barns, water), insurance and fertilization. These issues and more are important factors in calculating a fair rental rate.

One key publication is found on the Ag Decision Maker website: Computing a Pasture Rental Rate. When visiting Ag Decision Maker, notice that the publication is available on screen or via download of a PDF document. There is also a Decision Tool spreadsheet that can be used to try out different calculations. The publication starts out by noting:

“Is there a simple and uniform method of figuring a rental rate for pasture and hay land? Probably not, but guidelines are available. There are several methods for computing a pasture rental rate, and several factors that influence the rental rate. Pasture rental rates vary according to the quality of stand, type of forage species, amount of timber, condition of the fences, availability of water, and previous fertility practices on the pasture. A pasture rental rate can be based on [the following]:

current market rates
a return on investment in pastureland
forage value
rent per head per month (AUM)
carrying capacity
– rent per pound of gain”

Colleagues at the Iowa Beef Center post a good discussion of Pasture Rental and Lease Agreements from the Midwest Perennial Forage & Grazing Working Group. Commentary in this discussion explains that the

“right” amount to charge for pasture rent is highly variable: “Both land owners (lessors) and grazers (lessees or renters) need to determine a fair rental or lease rate. What is a fair amount to charge for rent? The answer is always: “It depends”. The devil is in the details and there can be many details to work out.”

Related to the conversation between pasture landowners and tenants is consideration of fertilization alternatives and guidelines. Parties may wish to review information on pasture improvement alternatives (and costs) at two different ISU publications:

Estimated Costs of Crop Production in Iowa (2022): This publication summarizes crop production costs of multiple rotations. In particular, Annual Production Costs for Established Alfalfa or Alfalfa-Grass Hay are provided on page 10; and Annual Costs per Acre to Maintain Grass Pastures are provided on page 11 of the publication.

Fertilizing Pasture: This publication address grass pasture fertilization rates, timing, and soil quality, including: types of nitrogen; nitrogen rates, response, and profits; and phosphorous and potassium (P-K) rates for legume-grass pastures.

Our colleagues at North Carolina State University Extension (NCSU) have a suggested form for a pasture lease agreement. As with all such templates, this is only a suggested form that the parties can use to start conversation and make decisions about responsibilities. This NCSU lease agreement indicates some of the details to be worked out between a landowner and a livestock producer – such as improvements, seeding, fertilizer, repair of fences or buildings (if any) or water supply improvements. There is not a single “right way” to do things.

The 2022 ISU Cash Rental Rate Survey was recently released (May 2022). Landowners and producers should read the first two pages of the publication describing this opinion survey and definitions of terms used within the report. On the last past of the survey data, readers will find (see bottom of page 12) a summary of typical cash rents from survey respondents on rents for pastures by Crop Reporting District. Remember—these are only the responses of those who completed the survey, and the results can be highly variable and dependent on conditions and the agreement on various items between the landowner and the livestock producer. Note that on page one of the survey, there is a list of variables that may justify a higher or lower than average rent – and one of these is “Other services provided by the tenant.” Again, such services can include stewardship practices (weed control, fertilizer) and repairs (e.g., fencing) – depending on what terms are agreed upon by the parties. It is important for a tenant (livestock producer) to keep track of the costs of services and improvements to the pasture (including labor), and provide that information to the landowner – otherwise, the landowner cannot have a good understanding of these costs.

Overall, communication is key to determining a fair pasture rental rate that works for both the producer and the landowner.

These materials are intended to assist landowners and tenants to understand methods and determine a fair rental rate. After reviewing these resources, contact a member of the ISU Extension and Outreach Farm Management Team with questions.

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