What’s a fair rent for a pasture? ‘It depends’

Higher cattle prices and a decline in available pastures putting upward pressure on rental rates

Higher cattle prices have some producers and landowners revisiting their pasture leases.

“Pasture rental rates can be difficult to figure out because there are many factors to consider such as local availability of land and pasture, localized demand, quality of the pasture, condition of the existing fences and water, and bargaining,” said Dean Dyck, a farm business management specialist with the Alberta Ag-Info Centre in Stettler.

“Preliminary indications for 2015 grazing season are that demand for pasture will continue to be strong, even though the recent Statistics Canada cattle inventory shows a decline of beef cows of three per cent and replacement heifers of 2.7 per cent in Alberta,” said Dyck. “Grass cattle numbers are also down due in part to the large price slides seen in the past few years. An expected increase in pasture rent this year can be attributed to the higher prices for calves, the lack of grassers, and the decline in available pasture in the province.”

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Usually variations in rent are small, and have ranged between $18 and $26 per animal unit month since 2005, said Dyck.

A fair rental rate should be a balance between who will be supervising the cattle, how much can the landlord charge, how much the tenant can afford to pay, and the carrying capacity of the pasture, he said.

“The landowner’s goal should be to recover land taxes, the cost of any fence repairs, and a return on land investment,” said Dyck. “Conversely, the tenant should calculate what they could afford to pay based on projected costs and returns. For example, if the rented pasture will be used to graze steers, the tenant should consider the price for feeder cattle in the spring, what the expected selling price will be in the fall, and what some of the costs of pasturing will be, including mineral and salt, medication, and interest on investment in cattle.”

Labour and possible travel costs should be estimated if the home place is far from the cattle, and the quality of pasture and location of the water supply should also be factored in.

“Even though owners and renters want a definitive answer when asking about pasture rental rates, the best answer may be ‘It depends,’” said Dyck. “It should start with a survey of the local market rates, calculating expected return for both parties, negotiating a fair rate, and end with a written agreement.”

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