FR-8-06

Jeff Fisher, Extension Educator; Agriculture and Natural Resources, Pike County

David Mangione. Extension Educator; Agriculture and Natural Resources, Ross County

Determining Rental Rates

Questions often arise as to what constitutes a fair rental price. Since there is not a commercial market for pasture, determining the price often becomes a matter of bargaining. Supply and demand is probably the most important factor in determining the price. If there is a large quantity of pasture available in a given area and very few farmers needing extra pasture, rents may be low. Likewise, if there were little pasture acreage for rent but many farmers needing extra pasture, rents may be bid higher.

Pasture rental prices are also influenced by alternative land uses. If the same acreage could be planted to corn or soybeans, the price for the pasture would have to be competitive with the rental rate for corn and bean land. If the land is not suited for production of row crops but could produce hay, the return to pasture would also have to be competitive with the return to hay ground.

Livestock facilities and their condition as well as the quality of the pasture and availability of water all have an effect on pasture rental rate.

Division of responsibilities between the landowner and the livestock owner need to be considered when negotiating rental price. In most cases, the renter is responsible for production activities, including checking livestock; providing fly control, salt, and minerals; checking water supply. Land-related activities, such as repairing fence, weed and brush control, and fertilizing and reseeding pastures, are typically negotiable. However, in most cases, it is the responsibility of the renter to repair fences with the landowner providing the necessary materials.

Landowner Considerations

The landowner should cover the real estate taxes, cost of fence repairs, insurance, and interest on his/her investment. However, since pastureland typically sells for a higher price than its earnings can support, the landowner may be only able to cover his out-of-pocket expenses.

Livestock Owner Considerations

The renter should calculate what he/she could afford to pay for rent. All the guidelines and estimates are just that�� guidelines and estimates. The livestock owner needs to know what price he/she can profitably pay according to his/her projected budgets and returns. Additional responsibilities in the rental agreement, such as fixing fences, fertilizing, and mowing, need to be reflected by making the appropriate adjustments to the rent.

Pasture Rental Rate Methods

Several rule-of-thumb formulas have been developed for determining pasture rental rates on an animal-unit-per- month (A.U.M.) basis or on a per-acre basis. Animal Unit Month is defined as the amount of forage or feed required to feed 1,000 pounds of animal weight for 30 days (See Table 1�� Animal Units). Calculating pasture rents on an A.U.M. basis addresses animal consumption requirements and grazing months, based on forage quality and quantity. Pasture rent formulas may be more precise when details on land capability and forage yield can be included. Animal performance may also be used to value pasture based on average daily gain.