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166: Pasture Rent Strategies That Protect Both Sides · CattleUSA Daily

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  Welcome to the Cattle USA Daily podcast, your go to source for
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  the latest livestock markets, industry insights and the update
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  shaping agriculture today. I'm your host, Lauren Moylan, a
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  passionate advocate for agriculture, here to keep you
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  informed and connected. Now let's dive into today's
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  episode. Pastures play a huge role in
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  keeping cattle operations running.
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  The agreement that you sign does not just decide what you'll pay.
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  It impacts your bottom line, your grazing strategy and even
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  your relationship with the land owners.
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  In today's episode, we are going to be diving in to how pastor
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  rental rates are figured, the different approaches people use
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  and some practical tips for negotiating a lease that works
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  for both sides. So whether you're running cows,
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  stalkers or your custom grazing, all of these principles will
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  apply. Before we get into today's
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  podcast episode, if you guys could take just a second to go
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  like subscribe, rate and review, we would really appreciate it
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  here at the team. So let's dive right in.
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  Why? Why does this even matter in the
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  1st place? The thing is, is pasture land
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  isn't just a static resource. Every season looks different
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  depending on rainfall, forage growth, and stocking pressure
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  that is on that ground. That means that a lease that
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  felt fair last year might not fit this year.
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  A good lease has to account for risk, forage availability, and
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  management responsibilities. And that's what makes this
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  conversation so important. Because if the structure isn't
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  right, it can hurt the cattle, the ground, and the relationship
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  between rancher and landowner. There are several different
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  approaches land owners and tenants use to put a number on
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  pasture rent. None of them are perfect, but
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  here are some of the most common that we see across the industry.
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  The 1st is simply looking at what others are paying locally.
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  Extension surveys or coffee shop talk can give you a ballpark
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  that is really great for the area, but the danger here is
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  assuming that all pastures are equal.
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  A place with good fences, reliable water, and quality
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  grass is not the same as a weedy pasture with no infrastructure
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  #2 Another method that we see is calculating return on the Land's
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  value. If a rancher owns pasture worth
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  $2000 an acre and wants a 2% return, that sets rent around
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  $40.00 an acre. But the trouble with that is
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  that land values move differently than cattle markets
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  or forage production, so this can get out of sync pretty
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  quickly. Probably the most grounded
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  method is to estimate forage production.
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  If a pasture produces 1 ton of hay equivalent per acre, and hay
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  is worth $100 a ton, you just take a fraction, let's say maybe
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  25% for ease of me doing this live, to set rent, and that puts
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  you near $25 per acre. It ties rent to what the cattle
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  are actually eating. Now this one is very common #4IS
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  animal unit months, or AUM. Here you are figuring out how
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  many animal units the pastor can support in a season. 1 AUM
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  equals the forage needed for a cow, calf, pear for one month.
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  If your pastor supports 3 AUM per acre and the going rate is
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  $20 per AUM, that's $60.00 an acre for the season.
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  This method is clear and easy to scale from pasture to pasture.
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  Now #5 we've got performance based or grain based and some
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  grazing situations, especially with stalkers.
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  The lease is tied to animal performance.
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  You might pay based on the pounds of gain your cattle put
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  on while grazing. This makes the landowner share a
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  little bit of that production risk, but it also requires
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  record keeping and trust. Now number six and our final
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  one, you've got flexible or hybrid leases.
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  Some land owners and tenants agree to flex leases.
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  You pay a base rate upfront and then it adjusts depending on
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  forage conditions, cattle prices or rainfall.
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  In tough years, you get relief. In strong years, the landowner
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  shares in the upside. It takes more communication, but
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  can keep a really strong and healthy relationship as time
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  goes on. So once you've got a method in
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  mind that works for you, how do you actually sit down and
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  negotiate a past release? First, remember the fair is
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  honestly just relative. A landlord may think a certain
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  number is fair because of what they've heard down the road,
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  while a tenant is focused on whether it leaves them with
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  anything after expenses. The goal is to land somewhere
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  where both sides can live with. Second is be transparent guys.
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  Bring your numbers to the table. Your cost of grazing your
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  cattle, budget, maybe even an opportunity cost for your land
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  and labor management that you are putting in now #3 Think
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  about your land owners background.
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  If they grew up in ranching they will understand why drought risk
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  matters and if their second or third generation owner with no
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  AG background, you may have to explain why grazing isn't the
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  same every single year. 4th Come prepared with information.
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  Your stocking rates, forage test, or even satellite images
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  can help make your case. Data takes the conversation out
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  of the emotional space and puts it into the practical.
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  And finally, guys, do not overlook the details.
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  Spell out every single thing that you can think of, from who
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  fixes the fence to who maintains water, what happens in a
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  drought, and how you'll handle early removal if grass runs
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  short. Those details save a
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  relationship down the road. At the end of the day, guys,
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  pastor leases are about more than dollars per acre.
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  They're about balancing risk, respecting the land, and
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  building trust between land owners and livestock producers.
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  Not a single one of the examples that I gave you are perfect.
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  Or will they work for every operation?
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  Every single operation is going to do land leases differently,
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  and that is the beauty of agriculture.
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  But the ones that we discussed today are some common ones that
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  we see across the industry that people take.
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  They take them as a base and then they build them off of
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  there with a lawyer, with their team of advisors and everything
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  that you need to put together a good lease that is fair for both
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  the CALO producer and the landowner at the end of the day.
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  So whether you choose to base rent on market surveys, forage
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  value or the AUM, the key is having clear terms and honest
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  conversations. That is what keeps ranch Land
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  productive and our relationships strong across the board.
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  Thank you all so much for listening to another episode of
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  the Cattle USA Daily Podcast. If you enjoyed today's episode,
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  we would love it. If you would like subscribe,
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  rate and review, it means a lot to the team over here.
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  And if you guys enjoyed today's episode, I actually got the
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  inspiration for talking about this from an article that I saw
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  on our Cattle USA Dr. newsletter.
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  This is a newsletter that goes out to our audience every single
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  day, bright and early in the morning.
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  It is the perfect thing for me everyday to start off with
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  because it gives me a great overview of everything that is
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  happening in the cattle industry from markets to weather to news
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  to everything else in between that you may need as a producer
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  and that is important to you. If you like today's episode and
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  liked what we talked about, I got the idea to talk about this
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  from one of the articles that we LinkedIn there that was actually
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  talking about this topic but on a row crop operation, how that
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  works for them. So I was like, hey, let's talk
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  about this for the cattle industry and what it means for
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  you guys. So if that's something you're
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  interested in, I've got that link, link down below it for the
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  Cattle USA Dr. newsletter. So you guys can sign up for that
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  to hit your inboxes every single morning as well.
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  Thank you all so much for listening.
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  God bless and have a great rest of your day.